Saturday, January 5, 2008

Predictions 2008

I made just one prediction last year, that IPTV will flounder in 2007, and got it right. So, enthused by that success, I’m taking a bigger gamble this year - a whole bunch of predictions for digital content in India for 2008:

-- Social Networking: The hype around social networking will mean that more and more media companies will eye that space. So expect some niche social networks around brands and content to launch, replacing forums and discussion boards, but integrated with content. Don’t expect social networks to shut shop - they’ll be up for sale - but they’ll continue to decline as Facebook and Orkut grow in prominence. Some social networks launched over the past couple of years will probably be acquired by media companies to reduce time to market, but no big exits.
-- Bluetooth Marketing infrastructure will come up in Consumer Hotspots - in coffee shops and malls, probably integrated with the Digital Signage Networks already in place. So more interactivity there.
-- Cross Media: I expect this to be the biggest trend in 2008 - media publications using online and mobile to supplement TV, Print and Radio, and vice versa. More push for citizen journalism, as content will be gathered online and on mobile, and also some cases of ‘citizen paparazzi’, maybe for the likes of India TV.
-- Big Media Deals: Expect at least one more cross border big media strategic deal of the NBCU-NDTV, Viacom-Network18, Turner-Miditech and Disney-UTV league...if not more.
-- Advergaming and Branded Content: This will be the year for advergaming, both online and mobile. More and more brands, including media companies, will use casual games, branded portals, and niche social networks to connect with their audience. A lot of this mobile content will be distributed via the bluetooth marketing infrastructure.
-- Outsourcing companies look closer to home: it’s already begun, and expect that trend to continue, both in Gaming and Animation. Lower margins for sure, but it’s about ownership of IP, and valuation play.
-- Funding and acquisition of Content Providers: Original IP will be big game - funding and acquisition for digitization. Also established producers will raise money and look for a bigger, global play.
-- WiFi and WiMax: More hotspots, mostly paid. I think some retail chains will take a gamble and offer free WiFi to users. No WiMax for another year.
-- Funding and Acquisitions in Mobile VAS space: Expect consolidation in the Mobile VAS space as a few will raise more capital by either VC funding or IPO. Some of that capital will be used to acquire some of the smaller niche players, struggling for survival.
-- No 3G, no Mobile TV in 2008, IPTV will continue to flounder: Sorry, but that’s the way it goes...the legal and media battle will switch from 2G spectrum to allocation of 3G spectrum and mobile TV licenses. Deployment of infrastructure across the country will take time, so wait till 2009 (at least). I’ll leave the ‘3G will flop’ prediction for next year. IPTV will continue to flounder in 2008, despite Airtel and Reliance launching their services.
-- Regional Content: Creation and aggregation of regional content for distribution to big media will be a big theme for 2008...perhaps in anticipation of big media deals in 2009. 2008 is the year that they build up a content base.
-- Location based services will be launched, but not take off.
-- Newspapers & Magazines: Indian magazines and newspapers will increase their presence online. More international magazines are going to be launched in India in 2008, but they wont target the online space; they’re after the print bounty.
-- Broadband: no miracles here. It’s going to be a long hard fight, until the last mile gets unbundled, or affordable wireless services are launched. No unbundling of the last mile in 2008.
-- Music: Nokia’s (NYSE: NOK) OVI is expected to be a big boost for music downloads, but I don’t think that will happen unless they launch subscription based services (which is unlikely). The ringtone market will decline, and ringback tone market will grow.
-- Mobile Internet: I don’t believe pay-for-view content on the mobile will grow. I expect more WAP sites for existing Internet portals, but don’t think mobile-only portals will work. There needs to be cross media integration. Mobile Advertising will be mainly search based and on established portals.

So enough soothsaying from me...What’s your take?

Online Ad Industry Groups Take Steps To Self-Police

The online ad industry dodged a bullet when the Federal Trade Commission proposed that internet marketers and sites self-police instead of imposing its own rules, as had been feared. Both the Interactive Advertising Bureau and the Network Advertising Initiative are working on guidelines designed to obviate the need for government interference in online advertising.

I spoke with Mike Zaneis Friday, the IAB’s VP for public policy, the day after his 15-member working group held its sixth meeting to discuss the draft on privacy standards. He hopes to submit the guidelines to the FTC on Feb. 22. The IAB’s task force made up of representatives of AOL (NYSE: TWX), MSN, Yahoo (NSDQ: YHOO) as well as ad networks and web publishers. It formed in September, before the FTC held its town hall meeting with advertisers at the end of October. Zaneis described a three-step process, starting with agreement on broad privacy principles followed by deciding how to apply those principles. The third part will cover possible compliance measures, which could range from audits and inspections to seal of approval similar to what’s offered by the Better Business Bureau.

Meanwhile. the NAI, an online marketing organization whose members also include AOL and Yahoo, is focusing strictly on revising its behavioral targeting standards, ClickZ reports. The group is aiming to complete and submit its revision to the FTC within the next six months. At the moment, the NAI is soliciting members’ views. It’s also considering expanding its ranks—Google (NSDQ: GOOG) recently asked to join and its membership is pending.

Friday, January 4, 2008

China Plans To Restrict Online Videos; Effect on Private Companies Still Unclear

It's the age of online content restrictions: Australia, Japan and the evergreen efforts of China. In an effort to further regulate internet content, China's State Administration of Radio, Film and Television (SARFT) and the Ministry of Information Industry (MII) have approved new rules governing videos posted on video sharing sites. Though it wasn't clear how these restrictions would affect local and foreign providers, the government has stipulated that video-hosting web sites must obtain an "Online Audio-Visual Broadcasting License" and be either state-owned or state-controlled. Excerpts of the translated policy can be found here.

Effective Jan. 31, the policy also requires online video broadcasters to delete and report videos that involve national secrets, hurt the country's reputation, disrupt social stability, or promote pornography, reports AP. Those who violate the new rules may receive a warning from broadcasting authorities and be fined up to RMB 30,000 (about $4,100). The rules also say, "Those who provide Internet video services should insist on serving the people, serve socialism… and abide by the moral code of socialism."

A WSJ story here says that executives at many video-sharing sites are taking a wait-and-see approach toward the regulations after they go into effect. Also, it was unclear how the regulations would affect foreign video-sharing sites that are popular in China, such as YouTube.com.

Tuesday, January 1, 2008

We Want Puzzles and Card Games

Looking for where to focus any new casual gaming projects? Then the latest survey (this one from Parks Associates) can help. Bottom line is that the majority of casual gamers are interested in Puzzles and Card Games, some 55%, with word and arcade games at 32% and 33% respectively. This compares to 'portable gamers' (eg the PSP and DS users) who almost equally look for Sports, Action, Driving and First Person Shooters for their kicks.

“In the mobile gaming industry, consumer awareness lags behind technological advancements,” said Yuanzhe (Michael) Cai, Director, Broadband and Gaming, Parks Associates. “New 3D and multiplayer mobile games look great in demos, but casual games are where the money is and will be for the next few years.”

Here's the relevant table, take from their web version of the report

From Parks Assoicates Gaming Report

Miniclip, repsect..

“This is more of a playpen than an office,” says Rob Small as he welcomes us into Miniclip’s headquarters. He’s not joking. The floor of the übertrendy Hoxton office is littered with games consoles, radio-controlled toys, Action Men figures and electric guitars. Taking pride of place in the middle of the office is a pool table.

Small is quick to explain these toys aren’t distractions: they’re market research. “Miniclip has one of the biggest ‘tween’ audiences in the world. If you want to think like a 12-year-old, you have to play like one.”

His dedication is paying off. Miniclip boasts 35 million users, and half of all broadband users in northern Europe have visited the site. “We pump out 100 terabytes a day, half the bandwidth of YouTube,” reveals Small.

The site isn’t exactly Web 2.0. It’s a games site: simple, easy-to-play, hard-to-master games. All the games are played through a browser – simply log on and you’re off. There’s something for everyone: shoot-’em-up fans play Commando and table tennis addicts fl ex their skills on the virtual table. There are more than 350 games, and you can play them all for free.

Small was fresh out of university when he founded the company with Tihan Presbie in 2001. The pair had seen the phenomenal growth in internet businesses and wanted a slice of the pie. The gaming angle presented itself when they stumbled across a nifty program called Macromedia Flash. Small was an avid gamer and saw the potential in creating online games with smaller file sizes that could be easily run through a browser.

The site launched with a bang: Miniclip’s first creation was a dancing game featuring George Bush as a 1970s-style disco dancer. Dancing Bush enabled gamers to put the US president through his paces to the title track from Saturday Night Fever. “I filmed Tihan dancing in the kitchen,” says Small, “opened the Teach Yourself to Code Flash manual at page one, and stuck on George Bush’s head.”

Gamers could choose the dance moves, from a jive boogie to the splits. Small and Presbie sent it to 4,000 users, family, friends, and a few folk who’d signed up to the site out of curiosity. The game spread like wildfire. Within two months, two million people had seen the clip, and Fox News was sniffing around to find out why a 24-year-old Englishman was making satirical games about the US president.

Miniclip primarily targets 10- to 18-year-olds. These tweens are an extremely valuable user-base, with the biggest spending power of any demographic – twice as much as 20- to 30-year-olds. Miniclip makes most of its revenue from advertisers, eager to tug on tweens’ purse strings – or rather, those of their parents.

Advertisers that want to target this audience have increasingly limited opportunities. Kids are spending less time watching TV and more time online, but sites such as MySpace and YouTube, stalwarts of tween traffic, pose a risky proposition for advertisers. A company promoting a new doll will not want the banner to appear next to Goth-babe’s MySpace “Page of Sin”, and certainly not beside footage of a car crash on YouTube.

There is a market squeeze, and Miniclip is doing the squeezing by providing advertising space next to consistently suitable content. And with gamers spending more time on every page while they try to better their high scores, kids are staring at the ads for longer.

Miniclip is a buzz-generator. The Pirates of the Caribbean: Dead Man’s Chest game was released on the site to coincide with its general release. The Chicken Little game had 16 million plays in three weeks. “What better time to connect with your target audience than when they’re having fun?” says Small.

From homepage takeovers to “advergames”, Miniclip has pulled out all the stops to help advertisers part with their cash, totting up a £12m turnover last year, with a profit margin of 32 per cent.

Embrace the pirates

Piracy doesn’t affect the site. Far from it: Small encourages sharing. The games are browser-based, so users can pinch the code for their own webpages or blogs. “We knew that people were going to take content from the site. They were taking music, films etc.

The upshot of this decision was that when users enjoyed a game, and decided to stick it on a webpage, their friends would see it and become Miniclip users themselves. Viral marketing strikes again â“ and Miniclip is a pioneer of this kind of content dissemination. “We were letting users distribute our content way before YouTube was allowing people to copy and paste the little embed code,” says Small. “There are now around 300,000 websites that use our content, from Tommy’s little homepage on Geocities through to FHM.”

Most of Miniclip’s gamers are regulars, coming back several times a month. The challenge, with more than 100 million visits a month, is to keep coming up with new games.

That’s why Small fills the office with kids’ toys; it helps the developers to empathise with their target audience. Miniclip releases a couple of games every week, and each is around three months in the making.

After a quick headcount and some elementary maths, it’s obvious that with 11 staff in the office, the numbers don’t tally. So who’s writing the games? “We only co-ordinate things from here. There’s a vast network of developers across the globe writing games for us, from small companies to bedroom coders,” says Small. “I’ve never met the majority of my employees face to face, we just communicate over instant messenger and I either buy the copyright or license the games from them. This is a modern way to do business.”

Tween rivalry

There are precious few contenders vying directly for supremacy of the tween. The likes of MSN and Yahoo!, with their dedicated gaming channels, pose more of a threat. But Small is disdainful. “Yahoo! and MSN have a large number of users in their games sections, or claim to, because they move users from various other channels on their sites. They are very large destination websites. The majority of traffic comes in to check their mail; the games products are cross-pollinated within that traffic.”

Bandwidth is a far bigger issue for the game boy. “It’s by far our biggest overhead,” Small says. Bandwidth constraints have plagued the company since its inception. “It’s so frustrating when you’ve got content on your website that people want to access, but they can’t. A lot of the hosting companies con you by promising unlimited bandwidth. What they actually mean is ‘you can use a bit of bandwidth but when it becomes too much, we’re going to shut the valve’. And that’s what they do.” To combat the problem, Miniclip now serves the website from two dedicated data centres, in Miami and Madrid, containing hundreds of servers.

Intriguingly, Miniclip is only scratching the surface here. Small forecasts growth from 35 million to 55 million users by December. Will Miniclip turn our youth into antisocial robots? “Rubbish!” says Small. “I think the games encourage more interaction. In fact, networking and gaming are gradually merging into one. Some of our users got together and organised a convention in Las Vegas not long ago. Kids in school talk about the games they’ve played. The games on Miniclip are casual, they’re not like World of Warcraft where people will sit for ten hours a day playing frantically.”

Plane sailing

Opportunities abound for the company. In fact, the sky’s the limit. Literally. “The games you get on planes are diabolical,” sniffs Small. “The system is a glorified PC under your seat. They cost millions of pounds to fit and they’re out of date within a few years. We’re hoping to have our games embedded into a handheld device that can be easily updated, Nintendo DS-style.”

Small has also been trying his hand at educational games. He’s been spurred on by the popularity of Anagramatic, an anagram-solving game. “Kids are playing our games anyway, so they might as well learn something at the same time.”

If Miniclip, already popular with pupils, gets further endorsement from teachers for its learning games, thousands more schools will catch the bug. “Once a kid in school sees the site, the next thing you know, the whole school’s playing on it. Our challenge is to attract that one kid.”

Since his dalliances with George Bush â“ Dancing Bush was swiftly followed by Bush Shoot-Out and Bush Aerobics â“ Small has hung up his coding manual to concentrate on running the company. Not that he is complaining: “This job is a boy’s dream. I have friends who are bankers, solicitors... they dread going into the office every day. Sunday-night blues is not something I’ve ever had â“ I look forward to Monday morning.”

His love for the company has made him skittish about outside investment â“ “I didn’t want investors dragging on our coat-tails asking us why we’re doing stuff” â“ and Miniclip is one of the few remaining top websites under private ownership.

It’s hard to imagine the polished, articulate Small at a loss about anything. He airs his opinions with conviction: there definitely won’t be another dotcom crash, conference addicts who gas on podiums about their companies generally protest too much. This is the attitude required to keep an online business going for six years â“ “we’re old hands in this industry” â“ especially when your target audience keeps growing up.

Small looks strangely ageless, as though his passion for games will keep him eternally young. His favourite is Golf Ace, but there’s little chance of practising his swing in real life â“ “I’m permanently strapped to my laptop”.

We take one last look at the gaming paradise and Small sends us on our way with his potted history of online trends: “A couple of years ago, it was the year of social networking. Last year, with the YouTube deal, it was the year of video.” No prizes for guessing the Big Woo for 2007: “It’s all about online gaming.”

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