Raja Jasti’s Blog - Renaissance Thinking

December 30, 2009

Virtual Goods + Social = $$$

Filed under: Entertainment, Internet, Trends — Raja @ 10:53 am

BBC profiles the huge money predictions for virtual goods market.

Virtual goods such as weapons or digital bottles of champagne traded in the US could be worth up to $5bn in the next five years, experts predict.

playfish
Paying real money for products that do not exist is big business

Virtual goods such as weapons or digital bottles of champagne traded in the US could be worth up to $5bn in the next five years, experts predict.

In Asia, sales are already around the $5bn mark and rapidly growing.

For many, virtual goods are one of the hottest trends in technology and are fuelling huge growth in the social gaming sector.

“This is just an exploding part of the gaming business right now, said venture capitalist Jeremy Liew.

“It is the most exciting area in gaming,” he said.

Mr Liew, whose firm Lightspeed Venture Partners has invested $10m in virtual goods companies, said the rapid growth of the sector was unprecedented.

“We have seen companies go from nothing in the last 18-24 months to tens and hundreds of millions of dollars in revenue.”

Revenue model

Playfish is a social gaming company that started two years ago. Today it has 11 online games and more than 61 million people who play those games worldwide.

Playfish
Playfish believes virtual goods will continue to lead to more riches

Crucial to its success is the sale of virtual goods, ranging from furniture for your pet to menu items for your own restaurant in games like Pet Society and Restaurant City.

“Virtual items within the Playfish games are the centre point of the way in which Playfish derives its revenue,” Tom Sarris of the firm told BBC News.

“We have two different revenue models. The primary is the sale of virtual goods and the second is in-game advertising, but that is a very minor aspect at this stage.”

Mr Sarris would not reveal how much Playfish makes from the sale of virtual goods, but admitted that it accounts for the lion’s share of the company’s revenue.

That, according to Mr Liew is fairly typical.

“Virtual goods is the whole story in the world of social games. It accounts for 90-95% of revenue for a lot of these social game developers.”

Speaking of virtual goods Mark Pincus, CEO of Zynga was on Charlie Rose.

December 26, 2009

Glimpse of future of books

Filed under: Media, Trends — Raja @ 3:49 pm

Here is an interesting tidbit. Amazon sold more kindle e-books than physical books this Christmas.

jeffbezos screaming tbi

Amazon’s Kindle hit an important and startling milestone yesterday: On Christmas, the company sold more Kindle books than physical books.

 Yes, this is obviously the result of everyone who got a Kindle for Christmas (lots of folks) firing it up and ordering a bunch of eBooks on a day in which most physical-book readers weren’t shopping.  But it’s still important and impressive.

The Kindle’s economics are still lousy for Amazon: The company loses money on new releases and makes only a modest amount on older titles, thus losing an estimated $1 per Kindle book. 

That said, Amazon’s strategy is clearly to drive “ubiquity,” and based on stats like those above, it is succeeding.  The more Kindle books Amazon sells, the more leverage it will have over publishers when it tries to force them to cut wholesale prices.  If Amazon’s Kindle momentum continues, the day publishers have to capitulate will come sooner rather than later.

And, despite publishers’ cries, this is not necessarily bad for publishers: If publishers cut wholesale prices, Amazon will be able to cut retail prices.  If the retail prices are cut to nominal levels–$2.99 or $3.99 per copy–sales velocity should soar.  Publishers and writers will make less per unit, but the increased volume should make up a lot of the difference.

December 25, 2009

Role of influencers on the tipping point

Filed under: Business, general — Raja @ 10:59 am

One of Malcolm Gladwell’s famous books is the tipping point where he writes about the importance of the influencers in spreading ideas. Duncan watts disagrees.

Don’t get Duncan Watts started on the Hush Puppies. “Oh, God,” he groans when the subject comes up. “Not them.” The Hush Puppies in question are the ones that kick off The Tipping Point, Malcolm Gladwell’s best-seller about how trends work. As Gladwell tells it, the fuzzy footwear was a dying brand by late 1994–until a few New York hipsters brought it back from the brink. Other fashionistas followed suit, whereupon the cool kids copied them, the less-cool kids copied them, and so on, until, voilà! Within two years, sales of Hush Puppies had exploded by a stunning 5,000%, without a penny spent on advertising. All because, as Gladwell puts it, a tiny number of superinfluential types (”Twenty? Fifty? One hundred–at the most?”) began wearing the shoes.

These tastemakers, Gladwell concluded, are the spark behind any successful trend. “What we are really saying,” he writes, “is that in a given process or system, some people matter more than others.” In modern marketing, this idea–that a tiny cadre of connected people triggers trends–is enormously seductive. It is the very premise of viral and word-of-mouth campaigns: Reach those rare, all-powerful folks, and you’ll reach everyone else through them, basically for free. Loosely, this is referred to as the Influentials theory, and while it has been a marketing touchstone for 50 years, it has recently reentered the mainstream imagination via thousands of marketing studies and a host of best-selling books. In addition to The Tipping Point, there was The Influentials, by marketing gurus Ed Keller and Jon Berry, as well as the gospel according to PR firms such as Burson-Marsteller, which claims “E-Fluentials” can “make or break a brand.” According to MarketingVOX, an online marketing news journal, more than $1 billion is spent a year on word-of-mouth campaigns targeting Influentials, an amount growing at 36% a year, faster than any other part of marketing and advertising. That’s on top of billions more in PR and ads leveled at the cognoscenti.

Yet, if you believe Watts, all that money and effort is being wasted. Because according to him, Influentials have no such effect. Indeed, they have no special role in trends at all.

In the past few years, Watts–a network-theory scientist who recently took a sabbatical from Columbia University and is now working for Yahoo –has performed a series of controversial, barn-burning experiments challenging the whole Influentials thesis. He has analyzed email patterns and found that highly connected people are not, in fact, crucial social hubs. He has written computer models of rumor spreading and found that your average slob is just as likely as a well-connected person to start a huge new trend. And last year, Watts demonstrated that even the breakout success of a hot new pop band might be nearly random. Any attempt to engineer success through Influentials, he argues, is almost certainly doomed to failure.

“It just doesn’t work,” Watts says, when I meet him at his gray cubicle at Yahoo Research in midtown Manhattan, which is unadorned except for a whiteboard crammed with equations. “A rare bunch of cool people just don’t have that power. And when you test the way marketers say the world works, it falls apart. There’s no there there.”

December 22, 2009

Secret History of Silicon Valley

Filed under: Entrepreneurship — Raja @ 3:10 pm

as told by Steve Blank, a great story teller. This is long video so watch at your leisure.

Amazon’s Netflix play

Filed under: Business, Entertainment, Internet, Media — Raja @ 2:10 pm

There are a handful of companies I consider innovative and well positioned to dominate the new digital era: Google, Apple, and Amazon are my picks. Cisco can be such a company but I don’t see enough innivation from them to join the big boys.

As a big movie fan I love Netflix. It is s a perfect fit for Amazon to buy them. If I am running Amazon I would have bought them a while ago.

It seems that Jeff Bezos is thinking along the same lines.

Netflix (NFLX) option activity is jumping as scuttlebutt says the company could be a takeover target.

Earlier today, Reuters reporter Anupreeta Das tweetedNetflix-Amazon rumor doing rounds of options market again.”

While we read on Fly On The Wall, the rumor mill/financial news aggregator, “Netflix calls active on renewed takeover chatter.”

The January $55 and $60 call options have had larger than normal trading volume. For the day, Netflix’s stock is only up 0.98% to $54.49.

In July, Netflix’s stock had a 6.6% one day jump as rumors spread that Amazon (AMZN) would buy the company.

Update: Om Malik has a good post on why it makes so much sense for Amazon to buy Netflix.

AMZN vs NFLX in 2009

 

 

 

 

 

 

 

The benefits of a merger are clear. The companies are simpatico: Earnings and revenue growth rates are comparable; and corporate cultures are similar — innovative and centered on a positive consumer experience. Amazon finally gets an online-video business that consumers flock to. As Netflix moves from DVDs by mail to video over IP, it can tap into Amazon’s vast computing platform. And integrating Netflix recommendations with IMDB’s inelegant but indispensable movie database could produce the premier search-and-discovery engine for film lovers.

December 17, 2009

Using video to show a concept

Filed under: Internet, Media — Tags: — Raja @ 5:22 pm

I love the use of video to communicate ideas because of its high bandwidth of information transfer. Here is a beautifully produced concept video for a future digital magazine called mag+.

Mag+ from Bonnier on Vimeo.

Post a Short Film on YouTube and Get a Movie Deal

Filed under: Entertainment, Media — Tags: , — Raja @ 4:03 pm

That is the amazing story of Fede Alvarez.

A producer from Uruguay who uploaded a short film to YouTube in November 2009 has been offered a $30m (£18.6m) contract to make a Hollywood film.

The movie will be sponsored by director Sam Raimi, whose credits include the Spiderman and Evil Dead films.

Fede Alvarez’s short film “Ataque de Panico!” (Panic Attack!) featured giant robots invading and destroying Montevideo, the capital of Uruguay.

It is 4 mins 48 seconds long and was made on a budget of $300 (£186).

So far it has had more than 1.5 million views on YouTube.

“I uploaded (Panic Attack!) on a Thursday and on Monday my inbox was totally full of e-mails from Hollywood studios,” he told the BBC’s Latin American service BBC Mundo.

“It was amazing, we were all shocked.”

The movie Mr Alvarez has been asked to produce is a sci-fi film to be shot in Uruguay and Argentina. He says he intends to start from scratch and develop a new story for the project.

“If some director from some country can achieve this just uploading a video to YouTube, it obviously means that anyone could do it,” he added.

Here is the short film that lead to the movie deal:

The qaulity of the short film is quite amazing for a budget of $300. No wonder it got the attention of so many Hollywood producers. Here is the thing. You need to have the talent to get recognition. If you don’t have the talent no Youtube or Twitter can help you. But if you do have it then it doesn’t matter where you live. You can get internatinal recognition within a matter of days thanks to platforms such as Youtube.

December 16, 2009

Mobile internet to be twice as big as desktop market

Filed under: Internet, Mobile, Trends — Raja @ 9:47 am

via readwriteweb:

Perhaps the most remarkable statement in the report is that the Mobile Internet market will be “at least 2x size of Desktop Internet,” which Morgan Stanley bases on analysis comparing Internet users with mobile subscribers.

The Mobile Internet Report

The Mobile Internet Report - Key Themes

December 15, 2009

Paramount to sell movie clips online

Filed under: Entertainment, Internet, Media — Tags: , — Raja @ 1:26 pm

Via NYT:

Paramount Pictures is creating an online service where it sells short movie clips.

 

LOS ANGELES — Paramount Pictures, looking for new ways to turn its old movies into cash, especially as DVD sales continue to decline, is creating an online video clip service that will allow users to search hundreds of feature films on a frame-by-frame basis.

Feeling “the need for speed,” as Tom Cruise put it in “Top Gun”? Log on to ParamountClips.com, search for the exact video snippet you want and press the checkout button. Within minutes — with the price depending on the type of licensing use you have in mind — Paramount will electronically deliver the selection in the format and resolution desired. Most scenes are available in multiple languages.

The site, to be introduced on Tuesday, is powered by VideoSense, an automated indexing tool developed by the technology company Digitalsmiths. Using proprietary video interpretation systems, Digitalsmiths allows films to be quickly searched by specific actor, line of dialogue, location, genre or product, among other criteria.

Paramount will initially restrict use to business customers — advertising agencies, mobile carriers, foreign broadcasters — that want to license pieces of films for commercial use. The plan is to ultimately open the site to consumers. People wanting to embed a specific scene from “The Godfather” on their blog could go to ParamountClips.com and buy it.

December 14, 2009

Commoditization of Content

Filed under: Internet, Media, Trends — Raja @ 2:35 pm

Tradiaitional media laments that the internet commoditizes their content and they point their finger squarely at google. They also say google is living off of their content and therefore should pay them. While I don’t agree with their second claim, there is a lot of truth to the first one.

Google decides what content is important and what is not. They do this alogrithmically using machine intelligence. Their grading system is the now famous Page Rank. Well since it is computed by machines the system can be gamed. This spawned a whole new industries called search engine optimzation (SEO) and content farms. This has resulted in a whole lot of crap on the internet.

Mike Arrington writes about the end of hand crafted content.

But as one of the innovators in the last go round, I think there’s a much bigger problem lurking on the horizon than a bunch of blogs and aggregators disrupting old media business models that needed disrupting anyway. The rise of fast food content is upon us, and it’s going to get ugly.

On one end you have AOL and their Toyota Strategy of building thousand of niche content sites via the work of cast-offs from old media. That leads to a whole lot of really, really crappy content being highlighted right on the massive AOL home page.

On the other end you have Demand Media and companies like it. See Wired’s “Demand Media and the Fast, Disposable, and Profitable as Hell Media Model.” The company is paying bottom dollar to create “4,000 videos and articles” a day, based only on what’s hot on search engines. They push SEO juice to this content, which is made as quickly and cheaply as possible, and pray for traffic. It works like a charm, apparently.

These models create a race to the bottom situation, where anyone who spends time and effort on their content is pushed out of business.

Richard McManus writes about how content farms threaten the media industry and google.

The bottom line is that the quality of content produced by these ‘content farms’ is dubious, which has an impact on both publishers and readers.

So is the Web becoming awash with low-quality content produced by content farms like Demand Media, Answers.com and now AOL? Yes it is.

Given the impact that content farms are having right now, how can producers of ‘quality’ content survive?

Chris Ahearn from Thomson Reuters claims that journalism will “do more than survive the Internet Age, it will thrive.” Ahearn notes that Reuters makes the “vast majority of its revenues” from subscription-based business models targeted to “vertical and niche markets.” Plus Reuters, he says, provides “valuable services - not just content.”

Right now ‘quantity’ still rules on the Web, ‘quality’ is hard to find. Perhaps that’s why Reuters is betting on the subscription model - it hopes that consumers will just subscribe to quality content, thereby removing the need to search for it. I think there’s something to that, which if true implies that Google will become less relevant in the future. Should Google be worried about that? Yes; and they are.

I can only hope that Google and other search engines find betters ways to surface quality content, for its own sake as well as ours. Because right now Google is being infiltrated on a vast scale by content farms.

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