Talk in

1. Asians are virtual already
How long before we are too?
Benjamin Joffe | CEO, Plus Eight Star Ltd.
Virtual World Conference| Second Life, 2010.09

2. The Challenges
• "Who would pay for things that don't exist?"
• "Asians are not like us"
• "Online friends are not real"

3. “Love Plus” by Konami

4. Just Married In Guam
(Nov. 2009)
Fiancée

5. Gartner’s Hype Cycle
Are we here?

6. Second Life’s Second Life
Past the Trough of Disillusionment

7. Why me?
• SL: Limited flight hours
• Avatar provided
• Asia? Not Asian
• East time in San Francisco :-)

8. However…
4 years 1 year 5 years
@benjaminjoffe

9. What I do
• CEO, Plus Eight Star | www.plus8star.com
• Digital Strategy & “Innovation Arbitrage”
• Best practices from Asia’s web and mobile world
• Partner, Cmune | www.cmune.com
• Online gaming company
• First 3D FPS on Facebook, MySpace and Apple.com
• Founder | Mobile Monday Beijing
• Monthly forum for mobile professionals
• 36 events, 130 speakers, 3,000 participants
• Angel Investor, Advisor, Keynote Speaker

11. The future is already here –
it is just unevenly distributed
William Gibson
Science Fiction Writer

12. INNOVATION
& DIGITAL
CULTURES

13. Social Aspects of Technology
“When a technology
becomes boring, that's
when the social effects
become interesting.”
Clay Shirky, Professor, NYU
Author, Here Comes Everybody

14. Today
• Half-way through the valley of disillusion
• Nothing better than SL since 2003?!
• Business issues getting sorted thanks to games

15. Understanding Online Behavior

16. 20+ years of research…
Howard Rheingold Habitat (Lucasfilm, 1986)

17. Not new!

18. Plan
1. Learning from Asia
2. Semantic prisons
3. Learning from offline behavior
4. Some ideas about the future, and our role

19. Chapter 1.
Learning from Asia

20. Digital Goods Market for 2009
Asia $7 bln
USA $1 bln
Sources: www.plus8star.com (Asia) - Inside Virtual Goods, Oct 2009 (US)

21. Virtual Worlds?
• Most virtual worlds have failed
• Online games make millions
• Social games too, and grow fast

22. Quiz

23. Answers
World’s #3 largest
Internet company
after Google and
Amazon
#2 youngest self-
made billionaire
in the world after
Mark Zuckerberg
of Facebook
Pony Ma, CEO, Tencent Yoshikazu Tanaka, CEO, GREE

24. Market Caps (May 2010)
$35.3B
$4.2B
$2.5B
$900M

25. QQ IM & QZone

26. More on Tencent
• Revenue 2009 $1.8B
• Net Profit Margin 40%
• Revenue from Digital Goods 90%
– Digital currency
– Multiple payment methods
– Purchase, rental, subscriptions…

27. 11:30
Shin Takamiya
Advertising
Gree Home Advertising &
Affiliates | 25%
Avatars & items
B2C virtual
Games goods | 75%
60% avatars
40% games

30. Mobile App Platform since Oct.09
(330 apps as of February 2010)
City Building Harvest Moon Shopkeeper Furauni
By Liveware By Liveware By Geisha Tokyo By Konami

31. Online Games in China
• 2009: $3.75B
• 105 million game users
– SNS games = 87.7% (92 mln)
– MMOs = 22.7% (24 mln)
– Single-player PC games = 36.1% (38 mln)

32. Is Asia’s success unique?
Two major shifts
1. Business shift
2. Mindset shift

33. Business shift
• Packaged software legacy
• Online business models
– Subscription
– Digital goods
• Obvious in Facebook and IMVU
• Second Life “pivoting”

34. Chinese Online Games Companies
• Listed on NASDAQ
• NETEASE NTES $3.93B
• SHANDA SNDA $2.65B
• SHANDA GAMES GAME $1.56B
• PERFECT WORLD PWRD $1.20B
• CHANGYOU CYOU $1.49B
• GIANT INTERACTIVE GA $1.64B
• Listed on HKSE
• TENCENT 0700 $30.6B
• NET DRAGON 0777 $250M
• KINGSOFT 3888 $595M
Data as of: 21 June 2010

35. Total Market Cap
• And the total is…
• 8 Gaming Companies $13.3B
• TENCENT $30.6B
• TOTAL $43.9B
• Comparables
• ACTIVISION BLIZZARD $14.27B
• ELECTRONICS ARTS $5.28B
• TAKE TWO INTERACTIVE $853M
• UBISOFT $817M
• ATARI Delisted from NASDAQ
• TOTAL $21.2B
Data as of: 21 June 2010

36. More Comparables
• Korea
• NHN (Naver, Hangame) $7.6B
• NC SOFT $3.8B
• NEXON Private ($6B offer?)
• Japan
• SEGA SAMMY $4.1B
• KONAMI $2.5B
• SQUARE ENIX $2.3B
• NAMCO BANDAI $2.2B
• CAPCOM $1.2B
• (NINTENDO $44.2B)
Data as of: 21 June 2010

37. Virtual Worlds
• Strengths
– Exploration
– Creativity
– Online Economy
• Weaknesses
– No social graph
– No fun!
• IMVU, Second Life “pivoting”

38. (from Web 2.0 Conference, 2010.05)
• Revenue 2009: $22 million (x2)
– Became profitable & cash flow positive
• Revenue 2010: $44 million? (x2)
• Begin pivot… Virtual World to Social Entertainment
– “From Dress Up to Level Up”
– Game Mechanics
– 2D and 3D Games

39. Pigg
(by CyberAgent)

40. Pigg
(by CyberAgent)
• 1Q2010 Revenue >$7M
– 3M+ users (2010.04)
– TV ads!
• Paying Users
– 80% are 20 to 40y.o.
– 70% female
• Payment
– 68% Mobile, 20% Webmoney, 12% Credit Card

41. Proven Models Spreading
• Asian companies expanding
– Bring online & social games overseas
– Acquire IP from Japan, US, Europe?
• Huge opportunities in emerging markets
– “Tencents” of… Russia, Brazil, Vietnam, Indonesia…
• Globalization of dev & publishing abilities

42. Remaining Barriers in the West
• Semantic prisons
• Payment infrastructure
– Getting better, but still far off
• Industry legacy
– Content production & operation

43. Chapter 2.
Semantic Prisons

44. Mindset Shift: Semantic Prisons

45. “There are plenty of semantic prisons
which do not permit us to think straight”
Aldous Huxley, The Human Situation

46. Cell 1: Virtual (Goods)

47. Virtual???
• Connotations
– “Not real”
– Valueless
– “Who would be stupid enough to pay for that!”
• Opposite of Real = Imaginary

48. The reality
• It’s Digital but it’s Real
• Pure symbolic value

49. Virtual Goods = Digital FMCG?
• “Virtual Goods are Consumer Products”
– Cary Rosenzweig, CEO, IMVU Inc.
– 7 years at P&G!

50. Already buying virtual goods?

51. Field Research: Halloween
(San Francisco)

52. Field Research: Santa Con
(London)

53. Analog vs. Digital Experiences
World Cup! Concerts, Travels, Encounters…

54. Cell 2: (Video) Games

55. Video Games
• Connotations
– Childish
– Waste of time
• Adults don’t play games!
• Updated terminology
– Video = Digital (is this needed?)
– Games = Entertainment

56. Benefits of games
• Great way to learn
• Games already sell digital goods
– Three quarters of digital goods sold in Asia
– Main revenue maker for games on Facebook
• Spending to have fun / a better experience

57. Field Research: My Aunt
(Mountain View)

59. Conclusion
(Get out of Jail Free Card)
• “Virtual” terrible term. Call it “digital”.
• “Game” is “entertainment”
• “Virtual Goods are Consumer Goods”
– Cary Rosenzweig, CEO, IMVU

60. Chapter 3.
Offline Behavior

61. Let’s look into
• Social Psychology
• Zoology
• Anthropology
• Social Dynamics

62. Sociology
(esp. Social Psychology)
Stanley Milgram (1933-1984)
“Small world experiment” / 6 degrees (1967)
“Behavioral Study of Obedience” (1963)

63. Sociology
(esp. Social Psychology)
Philip Zimbardo (1933~)
Stanford Prison Experiment (1971)
The Lucifer Effect (2007)

64. Learning 1
People’s behavior
shaped by their environment

65. Zoology
Desmond Morris (1928~)
“The Naked Ape” (1967)
“The Human Zoo” (1969)

66. Learning 2
Behavior guided by
mammal instincts

67. Anthropology
Robin Dunbar (1947~)
(Dunbar Number)

68. Learning 3
Socialization (“strong ties”)
limited by brain structure

69. Social Dynamics
Erik von Markovik “Mystery” (1971~)
“Mystery Method”

70. Learning 4
Attraction mechanisms
exist online just as well

71. Chapter 4.
Possible Future

72. Obama Outfitted With
238 Motion Capture Sensors
For 3-D Record Of Presidency

73. …or not.

75. Help fix what is broken
in offline socialization
• Engagement & Disengagement
• Multi-tasking
• Social skills & Social dynamics
• Virtual worlds as additional physicality: The
concept of digital third place

76. Toward the digital third place

77. The hope with games
• Path of least resistance: nothing to explain!
• Game = 3D world with rules, fun and targets
• Games as excuses for social interactions
• Games drive revenues

78. Paradise Paintball | World’s First Social FPS!
www.cmune.com
www.facebook.com/paradisepaintball

79. Online Socialization
=
Necessary skill for the future?

80. Business is online
=
Online identity & reputation

81. Increase awareness
of the risks to avoid them

82. Celebrate
the benefits

83. Thanks!
www.plus8star.com
benjamin@plus8star.com
+81 | Japan
benjamin0123 +82 | Korea
+86 | China
http://twitter.com/benjaminjoffe
Telecom & Internet
www.linkedin.com/in/benjaminjoffe + Added Value
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