Thursday, October 8, 2009

Mochi + Flash Portals, Part 2

This is the second of a two-part series about Mochi and Flash portals. I decided to write these posts after reading an interesting discussion on fncgamesblog.com. In that discussion, the original poster complained about MochiCoins and MochiLeaderboards. So Part 1 was about micro-transactions, and now this will address his (and other publisher's) issues with Mochi's services: loss of traffic.

I can see where they're coming from. They earn their money from advertising, and ads pay according to traffic. Less traffic means less money. No one wants less money. So they conclude that any service or practice that "steals traffic" should be done away with. They think Mochi is trying to steal their traffic by letting players share their scores on Facebook and also to create a MochiCoins account to access premium game features, both of which require the players to leave the portal's site.

I hope that accurately reflects their view of the issue, because my counter argument has nothing to do with the validity of their fear that Mochi's services are causing players to leave the portals and not go back. Mochi's services might be "stealing traffic," and if they are, then they are decreasing revenue from those players.

Download portals forbid services like that and go even further. They forbid developers from putting links to their own site anywhere in the game. Of course, players can always open a browser and search for the game or developer to find community features, additional content, or otherwise communicate directly with the developer. But the portal doesn't let the developer make that process as easy as it could be with current technology.

In this post I want to respond to the issue of portals and traffic in general, not just Flash portals.

Middlemen

A middleman is anyone who collects a product from one party (the source) and delivers it to another (the customer). The middleman doesn't create any products, but he provides a service. The value of the service varies according to the difficulty of the customer's obtaining the product from the source himself. A middleman's customer may be another middleman.

The more middlemen involved in delivering a product from the original producer to the end consumer, the higher the price for the end consumer. The higher the costs the middlemen incur to deliver the product, the higher their fees, and so the higher the price for the consumer. The British East India Company had a fleet of ships to physically transport goods from the East to Europe. Its costs were huge, but its mark-up of the goods was larger still. It created nothing, but provided a valuable service for the end consumers in Europe and made a lot of money as a result.

What do portals contribute?

Developers (the source) make the games and players (the end consumers) play the games. Portals act as middlemen. The cost to deliver the actual bits that make up a game is approximately zero. Unlike middlemen in the physical world, middlemen on the internet do not create value through delivery.

The amount of information on the internet is vast, and it's increasing every second. Because the internet has solved the problem of delivery, it has created a new problem: information overload. The problem is no longer how to get product X, but how to find product X among the vast cloud of information at our fingertips. For the internet to be useful at all, we need a way to filter the information. Information needs to be organized, searched, indexed, and not just delivered.

From the player's perspective, portals find games, organize them, and make them easy to find and enjoy. From the developer's perspective, portals sift through all the many users on the internet and find just the ones that are looking for games. Portals connect the source with the end consumer, a valuable and necessary service.[1]

Threats to portals

Like all middlemen, portals can only stay in business if their customers would rather pay them [2] than do the work of obtaining the product from the source directly. If the player can easily find and communicate with the developer directly, then the portal is not needed for anything.

This explains why Flash portals pay developers to rebrand the game with their own logo. This explains why download portals require developers to remove all external links. The portals have an interest in building a wall between developers and players with one gate that they control.

The Costs

Whether through advertising or direct sales, the money in the game industry ultimately comes from players. The happier players are, the more they pay, the more they recruit their friends, and the bigger and faster the market grows.

What is best for the player?
  1. Developers get a larger cut so they are more likely to be able to keep making games and to take more time to make better games.
  2. Easily find other games by the same developer. If they like one, they are likely to appreciate the others.
  3. Establish a relationship with the developer to make his desires known, so that the developer can satisfy them more effectively.
The current policies of game portals stifle those. Building a wall and keeping the gate gets them a bigger piece of the pie, but it's limiting the size of the pie and the rate of growth.

What does this have to do with MochiLeaderboards and stealing traffic?

Portals are obsessed with traffic. They are scrambling to quash threats like Mochi's services that facilitate direct developer-player exchange. Yes, those services are breaking holes in the wall portals have built. If players can establish a relationship with a developer directly, then that player doesn't have to go back to the portal to play or buy the developer's other games. The developer makes more money, and the player gets more and better games.

The portals think they've lost something if that happens. They haven't for 2 reasons.

First, because the developer and player both benefit from direct exchange, the market grows. That means over time, more and better games on the portal's site and more players to play and buy them.

Second, especially in the casual and Flash markets, players consume games much faster than developers can make them. The player can play through the developer's other games, give them some feedback, and sign up to be notified when new content is released. A week later, the developer hasn't released anything new, and the player is ready to play another game. So where does he go? To a portal. And why does he go to a portal? Because it will help him filter the vast amount of information on the internet to find new games he might like.

Conclusion

The real value a portal provides is not delivery, but filtering information[3]. Efforts to solidify its position to deliver (i.e. building a wall to separate developers from players) hurts the market as a whole, which hurts the portal too in the long run. Rather than being obsessed with traffic and delivery and trying to suppress technology that reduces need for their service[4], portals should be obsessed with helping players find the best games. A player doesn't go to portal X because it's the only way he knows to play games. He goes because he thinks it will help him find the best games to play.

For proof of what I'm talking about, visit this portal. Almost every link takes the user away from the site. They recognize that they are in the information filtering business, and by focusing on making that service the best, they are the most popular portal on the internet.[5]


- NOTES -

[1] There are portals that develop games, and developers that have created portals for their games. However, the work done to create a game and the work done to connect games with players are separate endeavors and are usually performed by different entities. So I treat them separately.

[2] In the case of Flash portals, players don't pay anything directly. But advertisers do, and the reason they do is because the players buy the goods advertised. It's indirect, but the money eventually comes from the players. If that weren't the case, then companies wouldn't pay Flash portals to show their ads.

[3] There are many portals that offer additional services (such as DRM and payment processing, highscore APIs, etc.), and offering additional services is one way for a portal to set itself apart from other portals.

[4] The music and film industries are fighting the same battle to suppress technology. How is a portal's requirement to remove external links from a game progress? It's not. It's short-sighted and self-defeating. It's not good for the player, developer, nor even the portal.

[5] All the biggest sites focus on filtering information. Facebook shows you only information about your friends and what they think is interesting. Digg helps you find things that are popular. Amazon has thousands of products in their store, but everytime I log in, I see a handful of items that are personalized for me....and it works, because every time I look over the list I think, "Ooooooh.....I want that!" Netflix has a recommendation system too. Ebay and craigslist help you quickly find information about good deals on things you want.