Posts Tagged ‘tencent’

Former EA exec calls company’s strategy “All wrong”. EA fires back.

Monday, January 18th, 2010

Late last week, former senior EA executive Mitch Lasky, who sold his Jamdat Mobile service to the company in 2005 for $680 million called EA’s current business model “wrong”. Lasky thinks that the EA’s move away from boxed titles to monetization via virtual goods and currency isn’t the wisest move for the games giant.

mitch-laskyOn his blog, titled Bizpunk, Lasky writes, “EA is in the wrong business, with the wrong cost structure and the wrong team, but somehow they seem to think that it is going to be a smooth, two-year transition from packaged goods to digital. Think again.”

Lasky’s comments aren’t just coming out of thin air. His article is a response to EA’s CFO Eric Brown announcement that 2010 will see revenues and earnings down (again for EA) from previous years (and quarters). This news comes just on the heels of EA laying off 1500 employees, a move that company CEO John Riccitiello expects to save costs. Riccitiello also points to the layoff as a way for EA to, “cut cost in targeted areas and invest[ing] more in our biggest games and digitial businesses.”

It’s fair to say that any large corporation has it’s fans and detractors. Those that are not happy with the way things are being run have every right to express their opinion, but it’s not to often that a major corporation will address such complaints, at least not publically. It seems as though Mr. Lasky’s opinion is one that EA will publically address. Lasky published his article at 8:41 PM (presumably PST) on Monday, January 11th. It took EA three days to decide to address the issue or not, and on Friday, they made a public statement.

Before we get to this statement, it’s important to consider where things are coming from. While Lasky was at EA, he had a very valid shot at becoming the next CEO after then man-in-charge Larry Probst stepped down. Instead of Lasky, Riccitiello got the job.

EA’s response to Lasky: “Mitch needs to try de-caf. It’s never easy being turned down for a job, but most people don’t spend three years obsessing about it. Since Mitch left EA, Apple invested the iPhone, Facebook evolved to include a gaming platform and EAMobile became a world leader.” Lasky, incidentally, points out in his article that it’s exactly thee years to date since Riccitiello assumed the reigns at EA.

Lasky continues his titrate on EA by pointing out that over the course of Riccitiello’s three year reign, the company has lost over $11 billion in market value, and now has a valuation below $4 billion. He argues that this value, combined with a myriad of what he sees as internal problems at EA makes them a target for potential acquisition. Specifically Lasky sites Disney as a potential buyer, as well as Chinese online service Tencent having the ability to “swallow EA whole.”

Mitch Lasky is a partner at Benchmark Capital. Investors include online properties such as Friendster, Gaia Interactive, and Riot Games. If only by association, Lasky isn’t opposed to the model, just the way EA is going about it.


Friendster to be bought by month’s end

Friday, December 4th, 2009

A recent report by TechCrunch indicates that first on the scene social network Friendster will most probably be sold by month’s end. While the deal is yet concrete, inside sources have indicated that the company will be sold to an unnamed Asian buyer for at least $100 million.

new_friendsterTo say that Friendster’s had a long and winding road might be the understatement of the decade. Founded in 2002, the original social network ruled the internets for a short while, but was quickly taken over by MySpace and Facebook. At least in the U.S. market – as Friendster ended up finding a home in the most unlikely of places, Asia. Currently, while numbers are paltry in the U.S., Friendster enjoys 50 + million users in the Asian market (over half the networks total number of users).

TechCrunch put a valuation of $210 million on Friendster back in July, which doesn’t account for Friendsters refocusing of their monetization strategy which they launched at the end of this past October. Instead of relying on advertising revenues, the social network made the shift to revenues coming from microtransaction purchases. A move that’s apparently been working well for hi5, with an admission that hi5 is now more gaming focused than social networking focused. However, that’s not to say that Friendster doesn’t have the same potential. Especially when you look at where their highest market concentration is, who’s buying them, and what market they’re operating in: Asia.

In hindsight, it looks like this deal has been in the works for quite a long time. Last year, Friendster brought now CEO Richard Kimber on board. Prior to Friendster, Kimber headed up Sales and Operations in the South East Asia region for Google. This past summer, Friendster opened itself up on the ‘for sale’ block, and as stated above, this past October they initiated a major shift in monetization from advertising to microtransaction reliance.

Again, no buyer has been named, but the inside source indicated that China’s Tencent Holdings was amongst the short listed buyers. Facebook also showed interest, but was turned away due to competition and IP issues. My guess is that Facebook could really care less about the actual mechanism of Friendster itself, but would love to get their hands on the 5 U.S. patents that Friendster currently holds with the U.S. Patents and Trademarks Office.


Ohai seeks to make social gaming platform not so casual

Thursday, November 12th, 2009

Game developers Ohai have been working on an unnamed project for quite a while now, and yesterday they announced the official title: City of Eternals. A vampire inspired free-to-play title that incorporates social gaming elements, Twitter and Facebook logins, for example, City of Eternals has been in a closed beta for the past two months, and has seen some pretty impressive figures. On average, beta testers, all 10,000 of them play around 65 minutes per day, and log in approximately 10 times per day.

cityofeternalsSo far, the project sounds like any number of popular Facebook games. However, where Ohai seeks to separate itself from the pack is through synchronous play (something that EA recently started exploring with Spore Islands, as well as Tencent’s ‘market research’ project via synchronous gaming). The goal of Ohai is to create a “real” MMORPG within a social gaming platform read:Facebook in a 2D virtual world where users interact via avatars. Sounds like a “real” MMORPG thus far – only the platform has changed.

Set in the Pacific Northwest, and possibly tapping into the current Vampire driven market – i.e. Twilight, Underworld, True Blood, etc., city of New Valencia, the complex storyline currently features over 20 unique missions for players to engage in. As with any MMORPG, players create their characters, customizing looks and clothing. Battles take place in combat zones, and players level up and gain virtual goods through these battles and quest completions. Check off the “real” MMORPG tenets, and enter the social side. Grabbing elements from other popular social games, City of Eternals also incorporates players’ home base, which of course can be decorated with any number of purchaseable virtual items. Players may also grow items to keep or sell, specialize in a trade, and become a member of one of four vampire houses – aka clans. Another social feature adaptation – players may also recruit their real life friends to join their fight and become a member of the main player’s vampire army.

Due to the recent shakeup of virtual goods offers being a scam, Ohai CEO Susan Wu stated in a TechCrunch interview that City of Eternals will not be incorporating ad offers, but will offer a strict ‘cash-only’ virtual currency purchase plan. Something female gamers might not take to. While Ohais, the company’s proprietary virtual currency, may be purchased while playing directly at the City of Eternals website, since the game in build in Flash, it’s possible to embed the game practically anywhere else on the web, thereby opening the door for potential virtual currency sales from just about anywhere. City of Eternals’ current virtual goods catalogue prices range anywhere from $.02 right through to $20.

While the games does not yet have an official Facebook page, Ohai states that it’s on it’s way very soon. They’ve also stated that an iPhone version of the game is currently in the works. While it won’t be “exactly the same”, Ohai states that the iPhone version will still allow users to interact with other players.

Build over the course of only 9 months with a staff of approximately 12 (including only 3 engineers), City of Eternals has the potential to be a true resounding success story, considering the title’s breakneck speed development, and limited resources. And they’ve already got a lot going for them – tapping into the once highly popular vampire genre of Facebook games, exploring the synchronous gaming method that has recently piqued the interest of two gaming giants, as well as creating a genre that seems to have found a place in recent pop culture.


EA moves Spore to Facebook

Monday, November 9th, 2009

Late last week, EA launched the Facebook component of it’s popular Spore franchise. A slimed down version of the full game, Spore Islands is a free-to-play social game that monetizes through the sale of in-game currency, ‘DNA Points’.


DNA points can be used to modify the appearance or stats of a users’ created creature(s). As with many if not all social games, users are not required to purchase in-game currency, as they can earn DNA Points over time as they play the game. However, those that do decide to buy in, can purchase special customizations such as hats, seasonal and holiday themed looks, and other virtual goods.

Staying close to the social gaming premise, Spore Islands gameplay revolves around groups of Facebook friends competing in a “survival of the fittest” battle on individual islands. Users create their creatures, and then release them on an island inhabited by other users’ (within the group) creations. The strongest creations will be the only ones left standing, and thereby winning the round. The ultimate goal of Spore Islands is to release your creations onto as many islands and possible and dominate them all.

Developed by EA Maxis, the creators of the original PC and Mac version of the game, Spore Islands is testing the waters of real-time social gaming, something that Chinese games giant Tencent has recently started investigating. Islands within this version of Spore are persistent, allowing a never ending series of battles, even while the creator/user is not logged into Facebook. Overall status of players creations are tracked based on the creatures performance, as well has reach – how many islands it’s been deployed to.

Since it’s inception, Spore has had a social gaming element in mind, and the transition to a social networking platform was a logical step. And while doing well as a stand alone title, it will be interesting to see how EA fairs in the relatively uncharted waters of social gaming on the worlds largest social network. The stand alone version of Spore has it’s own unique set of competitors, with EA having already established it’s position in this marketplace. Within the Facebook marketplace, EA is now facing stiff competition from players that have already been around the block a few times and have gleaned their own experience. Can EA do the same, even if they are a bit late to the party?


Virtual Goods Summit standout – Asian VG Market worth ~$7 billion

Monday, November 2nd, 2009

While last week’s Virtual Goods Summit in San Francisco had a wide range of facts, figures, details, and knowledge shared, the standout from this conference was +8 CEO Benjamin Joffe’s presentation on the Asian virtual goods market, and how it’s achieved a massive $7 billion valuation.

According to Joffe’s research, the nine largest publically traded online gaming companies have a valuation of $52 million. Conversely, the top four North American and European companies in the same group come in $30 million less, at $22 million.

Not only looking at just the numbers, Joffe went on to put a bit of history and development behind the figured. As duly noted, the virtual goods market and business model had it’s beginnings in Asia, primarily as a way to ward off game piracy. Recognizing the potential in the market, South Korea’s Nexon was one of the very first on the scene with virtual goods sales. 92 million registered users later, Nexon’s MapleStory is still generating revenues through virtual goods sales. Just a bit further to the north China’s Tencent is looking at $1.5 – $2 billion in sales from it’s popular QQ chat service which features a heavy online gaming influence. The bulk of these revenues are derived from virtual goods sales. According to Joffe, China’s total market could top $5 billion in revenue this year alone. Likewise, the lesser heard of Japanese virtual goods market shouldn’t be underestimated. Raking in over $1 billion a year, Japan’s top three social networks monetize manly through mobile games and their associated services. Perhaps one of the more extreme examples in the Japanese virtual goods marketplace, due to their rarity, Joffe reports that some virtual items have a real world market value of over $1,000, however, again, this is in extremely rare cases.

Joffe’s 127 slide powerpoint presentation from the Virtual Goods Summit:


Tencent tests the Facebook waters

Friday, October 30th, 2009

Building upon their financial success as well as investment in free-to-play gaming development studios, Chinese megalith Tencent has recently started testing the waters of Facebook gaming. Perhaps appropriately titled “Treasure Hunter”, Tencent execs say that this is not a full fledged move into the Facebook space, but rather a “market research” project.

The game itself is not entirely new to the North American market, as Tencent released the game last year funneled through AOL’s AIM instant messenger service, a method that’s proven extremely successful for the company in the domestic market via their QQ messenger product. According to Eric Eldon from, Tencent’s US representatives, Leon Kitain and Brad Bao state that the move to Facebook is a preliminary one; one that will study the dynamics of gaming within the popular social network. Both commented that Treasure Hunter is a market research product, simply because the company can “only learn so much from reading about what other people are doing on the platform.”


However, the Treasure Hunter project will focus on a slightly different, method of social gaming: synchronous gaming. Most of the popular games within the Facebook offerings are turn based player vs. player, or player vs. environment titles in combat titles, or generally involve raising and nurturing virtual pets, or the highly popular farming games. Snychonous gaming on the other hand, involves two or more players playing against in each in real time. The most successful of this genre thus far might be Zynga’s Texas Hold’em Poker.

This in itself is quite interesting. As Tencent clearly isn’t short on cash, they’ve got all the time in the world to sit back and really dig deep into not only collecting data, but analyzing it, making appropriate changes, and then rinsing and repeating the process until they’ve really nailed what just might be the next ‘big thing’ in social gaming. Is it synchronous gaming? Perhaps, but we’ll not really know until others start investigating the possibilities, and it looks like Tencent is already on point with that one. And since Treasure Hunter isn’t a ‘specifically developed for Facebook’ application, Tencent always has the option of bringing over a whole host of their other games (aka it’s AOL offerings).


Q2 sees China’s Online Game Revenue jump 40 percent to $906 million

Wednesday, October 14th, 2009

Perhaps it’s just simply a matter of timing, but recent figures from research firm Analysys International arrive hot on the heels of the Chinese Government’s announcement that they’re banning foreign investment, or ‘influence’ in the domestic online gaming market. Their recent report indicates that the Chinese online gaming market grew 39.5 percent year over year in Q2 2009 to a massive 6.18 billion yuan, or approximately $906 million.

W020090123324470898658Coming out on top was popular online messaging platform Tencent Holdings. While the company’s QQ messenger is still the primary driver for Tencent, they also operate a number of free-to-play games in the Chinese domestic market. In this Q2 report, Tencent managed to carve out 20.2 percent of market revenues totaling 1.24 billion yuan (~$182 million).

Taking the number 2 Q2 spot was Shanda Games, the recent spinoff from Shanda Interactive Entertainment, which pulled down 20 percent of market revenues with a revenue total of 1.23 billion yuan (~$180 million).

Rounding out the top three,, the recent winners of the highly lucrative Blizzard/Activision World of Warcraft operators license in China managed a healthy 12.7 percent of Chinese domestic market share. While only culling 780 million yuan (~$114 million), in Q2, it’s important to remember that has been through the ringer with Chinese regulators regarding the support levels that Blizzard would fill in the contract.

If these Q2 numbers are any indication, it seems like Niko Partners, who made projections and put some numbers to the page back in May of this year, are right on track. Their report indicates that by 2013, the Chinese online gaming market should reach an annual revenue number value of $8.9 billion. While the market shows no signs of slowing, in fact these numbers clearly indicate a continued growth, it will be interesting to see how the governments’ recent decision to pull the plug on foreign investments in the domestic gaming will effect this growth, and associated revenue streams, if at all.


Riot Games secures an additional $8 million in funding

Thursday, September 10th, 2009

Los Angeles based Riot Games has recently secured an additional $8 million in funding. The funding comes from Chinese online services company Tencent, most known for their QQ instant messenger client, Benchmark Capital and FirstMark Capital. Tencent will also be publishing Riot’s upcoming League of Legends game in China.

Riot Games, a fatfoogoo client, is now in the closed beta stage with their League of Legends fighter. Currently, 50,000 players are engaged in the testing phase, and Riot plans on an October official launch date. The free-to-play title is loosely based on a popular Warcraft III mod, Defense of the Ancients, and builds upon the popular peer-vs.-peer form of play. Up to six players can battle on one side, where they play as “summoners” that conjure up a wide variety of champions that fight in a myriad of varied battlegrounds. Riot states that the title is not an MMORPG, but contains a number of persistent game elements that are in the spirit of an MMORPG. “That is to say, while a large aspect of the game will be session-based battles, there will also be persistent elements, such as the Summoner, abilities, and levels that exist continuously throughout the game.”

Again, League of Legends is a free-to-play title, however if players want to customize their characters, or purchase time-saving features, a full featured in-game, microtransaction based in-game item shop is available. Riot has provided two types of available currency: one that can me earned through experience, or, one that can be purchased through real money transactions. Through this monetization option, Riot is preventing the pay-to-pwn stigma, and in the eyes of most gamers, provides a better balanced/fair play form of in-game spending.

In an interview with Dean Takahashi of VentureBeat, Benchmark partner Mitch Lasky said, “that the investment was attractive because the company had created an addictive game that players could revisit again and again with endless variety. The risk is that players might get bored with this kind of repetitive game play.” He also added, “They [Riot Games] nailed a model where you combined the game play of a hardcore game with the monetization of casual online games. When you go after serious gamers who pay $60 for a game, you have to realize that they have a certain expectation for game quality. The deal with Tencent validates the progress the company has made toward this goal.”

With Riot’s staff of core members hailing from a number of former hits including, Ulitma Online, Dungeon Siege, Jak & Dakter, Heroes of Might & Magic, Neverwinter Nights 2, Sly Cooper and Total Annihilation, it’s a fair bet to say that Riot can and will deliver on a console quality experience at a free-to-play price. Naturally, we’re a little biased, but from what we’ve seen thus far, let’s just put it this way: prepare for all your preconceptions about what a free-to-play is and what the quality standards are, to be shattered.

League of Legends has a projected October release date. More information and beta signups are available at


Tencent again on track to post record profits – attributes success to online gaming

Monday, August 17th, 2009

If you’ll remember, Chinese web portal, IM provider, and MMO operator Tencent made some pretty big waves last spring when the news broke that they’d surpassed the $1 billion mark in revenues. Well, if Tencent’s Q2 revenue numbers report is any indication of what’s to come, they are well on track for a repeat performance.

tencent-logoReporting RMB 2,878.4 or roughly $421.3 million in total revenues for Q2 2009, ending June 30th, Tencent saw a 14.9 percent increase over the previous quarter, and a sizable 79.9 percent increase in revenues year-over-year. This now brings the company’s first half of 2009 revenues to $787.9 million, a 77.5 percent increase over the first half of 2008.

Admittedly, the lions share of revenues are derived from the company’s IM services, but with virtual goods and currency sales a close second, Tencent is reporting a gross profit of $284.5 million. This number represents a 13.1 percent increase over Q1 2009, and a 69.5 percent increase y-o-y from 2008’s numbers.

Operating popular free-to-play MMO’s Dungeon Fighter and Cross Fire (both Nexon products), as well as gaming client QQ games has significantly helped lined the coffers at Tencent. The company saw a 17 percent increase over the previous quarter, and a significant, yet unnamed, year-over-year increase to $183 million.

Mr. Ma Huateng, Chairman and CEO of Tencent, said, “For the second quarter of 2009, we delivered solid growth in our operating and financial results as we strengthened our online platforms and increased monetization on our Internet value-added services, especially online games.”

However, while the Tencent camp has something to cheer about, things may not be quite as rosy as the surface view would indicate. Tencent representatives indicated that decreased revenues in “more mature MMO’s” including QQ Fantasy, QQ SanGuo, and QQ Huaxia must be considered in the overall revenue picture. To this end, Tencent has halted the launch date of two planned MMO’s. These titles were expected to hit the airwaves around the turn of the year. One prior to New Years, and the other was expected in early 2010.

To this end, Huateng comments, “For our online advertising business, the industry environment remained challenging although activities picked up modestly this quarter. We believe advertisers are still cautious on ad spend for 2009 until the global economy recovers in a more concrete and sustained manner.”