Tobold's Blog
Friday, December 14, 2007
 
Oh, forget about market share!

One of the first things you learn when you occupy yourself with graphical display of data and statistics is that such displays can always be tweaked to show what you want them to show, whether it is real or not. And recently I've seen so many misleading graphs on MMO market share that I'm starting to wonder whether these people are so naive, or whether they are trying to mislead. Look at the graphs for example on Raph Koster's website, or the market share graph on VOIG MMOGdata. Raph shows WoW as one among many players between Club Penguin and Habo Hotel. VOIG shows WoW on top, but closely followed by Second Life. But what exactly are these graphs comparing? Club Penguin or Second Life have a share of what?

One thing that is for certain is that it isn't "market share" in the classic sense of share of the dollar value of the market. We now know that WoW is making over $500 million profit a year on $1.1 billion of revenue in 2007. Habbo Hotel was reported to have $77 million of revenue in 2006, just 7% of that of WoW. Second life is "barely profitable". Club Penguin makes $35m of profit on $65m of revenue. In financial terms World of Warcraft is the whale among the minnows, and none of the competitors comes anywhere close.

So Raph is talking about competition for "eyeballs". But again you need to cheat somewhat when counting those eyeballs. Yes, Second Life has over 11 million registered users ... but only 52,000 peak concurrent users. For every Second Life user actually online at prime time, there are over 200 that are not. Most of these users are only still in the system because signing up was free, and Linden Lab never removes people from that database, even if they only ever played for 5 minutes once. The 9.3 million subscribers from World of Warcraft are *active* subscribers, and not counting people who cancelled their account. You can't compare numbers of free accounts with numbers of paid subscriptions!

Talking of eyeballs, which is a term from advertising lingo, of course it is very important of how long that eyeball rests on the message. The average time a Second Life user spends in the game was reported to be 12 minutes per month. Meanwhile players spend over 17 hours per week in World of Warcraft, over 300 times more. I don't know how the numbers look for Habo Hotel and Club Penguin, but as "casual games" they certainly take a lot less hours per week than WoW.

In summary, if somebody talks to you about MMO market share, you better double-check what numbers he is comparing. Mattel might be selling more Hot Wheels cars than Ford is selling real cars, but putting the two numbers on a graph saying "car sales market share" just wouldn't make any sense. Virtual world sandboxes like Second Life or casual virtual social spaces like Club Penguin certainly are interesting market trends. But trying to draw attention towards them by fiddling with the data is only going to backfire, as it already did for Second Life, where the press reporting has turned quite negative this year.
Comments:
I love these stats but like you I am disappointed in the attempts to compare apples with oranges. I was delighted to see Guild Wars still growing strongly on the mmogdata website but then I thought "How do they measure this"? If it is just everyone who ever bought a guild wars game then of course it can only ever grow.
 
My graph compares "people who actually logged in last month." And WoW is geneorusly given 50% of its userbase as being in North America and Europe and the assumption that ALL of them logged in last month.
 
My graph compares "people who actually logged in last month."

Which basically states that a player who pays $15 a month to play 17 hours a week of WoW is equal on your graph to the kid who plays half an hour for free on Club Penguin. I'm not saying you made up your data, or that it is impossible to find criteria which make other games *look* as important as WoW. I'm saying that in the end business people are more interested in actual profits, and players are more interested in actual time spend in game, and counting "eyeballs" isn't really relevant.
 
If the graphs count only those "who actually logged in last month", it measures only the amount of visits rather than the quality (immersion) of the visits. I wonder which counts more...

And answer that it depends on the point of view: if an advertiser gets an add to Club Penquin, her/his ad is going to be seen by pretty vast audience (but hey, so is Hellgate: London's, but by a much more focused audience!). If, however, the game relies on subscription, however, the quality is what counts, as that ensures the immersion of the customer and her/his more probable renewal of the subscription.

Somehow I found the presentation a hit disturbing, as it dismissed all but one view as valid. The movie didn't exclude the book from which it was made, nor does one game or genre make the movie defunct: they are just different types of the same entertainment, each with different depth of immersion.

Copra
 
I'm saying that in the end business people are more interested in actual profits, and players are more interested in actual time spend in game, and counting "eyeballs" isn't really relevant.

It might be not relevant for this discussion, but all of those Club Penguins and Habbo Hotels, play a market that, right now is measuring its value, only by the size of the community, rather by the actual profits. Call if web 2.0 or whatever, but those ridiculous amounts for the Facebooks of this world, always get boiled down to the overall userbase. Now we all know that Raph is cooking something up right now, something wich is more within the market that values a single only registered user, the same as an active one.

chrismue
 
Hmm, I don't think you are actually thinking of the whole picture. It isn't just "eyeballs" that do not generate revenue. It's time to market, cost to get to market, ROI, margins, opportunity cost, etc.

In terms of sheer business sense, it's great to have a WoW. But basically, only one company can have one. And the barrier to entry is insanely high. And you could have made literally 20 Club Penguins or Sherwood Dungeons in the meantime, in markets different enough that they wouldn't necessarily cannibalize each other. Yes, revenue per head is much lower. The overall business equation actually makes much more sense, however. PS, Club Penguin and Habbo Hotel are nicely profitable.

Copra, the presentation is intended to be disturbing -- it was delivered, and intended, as a splash of cold water to videogame executives.
 
In terms of sheer business sense, it's great to have a WoW. But basically, only one company can have one.

That is like saying only one company can have Titanic the movie. True, but another company can have Spiderman the movie. And a handful of other companies can have other blockbuster movies. Yes, the barrier to entry is insanely high. But what is $50 or even $100m of barrier of entry compared to $500m of annual profit? Most companies would kill for that sort of ROI.

I'm totally convinced that Club Penguin and Habbo Hotel are nicely profitable to the tune of $40m per year. But I don't think videogame executives should automatically go for the low risk option in the hope of gaining $40m if they have a company which could potentially pull of the $500m job, or something in between.
 
I have to make some time to look at the Activision Blizzard documents to see exactly how it breaks down, but isn't the payment model for WoW different in parts of Asia (metered hourly) than it is Europe and the US (all-you-can-play monthly)? If so, then treating WoW 9.3m customers as a homogenous whole might result in some misleading conclusions. For example, I'd be interested to see if it turns out if WoW's profits come primarily from it's monthly customers and the Asian customers just add to their bragging rights or if the hourly usage generates a comparable amount of profits.
 
There have been several reports that asian customers only generate a dollar or so a month.

I think The9 made 7 million dollars profit the first quarter and that included guildwars and the other games on top of 5 million or so chinese customers.

My numbers are probably a little off but you can go the9's website and look at thier quarterly earnings.

They show that the asian customers are definitely less income per subscriber. So while the Asian market is a good long term place to be currently it just doesn't generate the cash EU, US and australia do.
 
As Mark Twain says, "there are three kinds of lies: lies, damned lies and statistics."

What's most disturbing about this entire discussion about "eyeballs" is that it is evidencing a shift simply to a valuation proxy for a player's exposure to a game-- effectively a CPM (cost per thousand impression) concept applicable to advertising.

"Players" are becoming the product that the companies are selling to advertisers and service providers. The "game" aka the service the "Players" are consuming is simply the cost of goods sold/cost of revenue/Cost of Sale for a advertising based revenue model.

WoW doesn't make more if I log in for $50 hour a week or not at all. At least yet as I'm not yet victimized by anything other than the occasional goldseller's advertising impression.

If you are evaluating the "success" of a game, you can only really look at total revenue, gross margin and ROI and then decide whether many small, highly profitable quick to market games are a better strategy than attempting to build the next WoW.

If, however, you are trying to build a virtual shopping mall where narcissistic users can hang out and ogle each other all day while being inundated by advertising, then how much time people spend there becomes relevant (with the exception time in game would be relevant for a metered access model game with respect to revenue).
 
I think Raph is at least slightly galled that the overwhelming blockbuster of the MMO market was a game that embraces very few of his design principles of community and world systems design.

My totally uninformed and biased opinion is that it's trendy for developers/designers/producers to dislike WoW in the same manner that it's trendy for the tech community to loathe Bill Gates and Microsoft.
 
<3 the Hot Wheels analogy.
 
The profit/revenue quoted for World of Warcraft is actually all of Blizzard merchandise including Battlechest sales, licensing off teeshirts, toys, TCG, etc.

They have one of the healthiest back catalogues of PC games on the market.

WoW is the largest revenue stream from Blizzard, but it's hard to say how profitable it is from those numbers.
 
That is like saying only one company can have Titanic the movie.

No, it isn't, because Titanic does not stop people from going to other movies for nine months, and WoW (or any MMO, really) DOES. Joining an MMO is a lot more like choosing an operating system than it is like going to a movie. It's a fairly exclusive relationship.

Yes, the barrier to entry is insanely high. But what is $50 or even $100m of barrier of entry compared to $500m of annual profit? Most companies would kill for that sort of ROI.

The answer, for the entire videogame industry, is "not feasible." Do the math. That's double to quadruple the cost of an AAA videogame. 9 out of 10 AAA videogames do not make their money back. In MMO land, only one of out 100 even ships. And as you yourself point out, WoW is a total outlier. You cannot say "what's 50m to 500m in profit?" when in point of fact it's on average more likely to be zero profit.

And that's just development. A truly massive component of WoW's success is the brand, the marketing, the loyal built-in audience earned with a decade of stellar products. That's a huge leg up in initial acquisition. There's literally only two or three studios in the whole world who could deliver that.

Again, do the math, and look realistically at the market.

I'm totally convinced that Club Penguin and Habbo Hotel are nicely profitable to the tune of $40m per year. But I don't think videogame executives should automatically go for the low risk option in the hope of gaining $40m if they have a company which could potentially pull of the $500m job, or something in between.

Think about what you are saying. "I don't think Company X should automatically go for 10 projects at $n each, with a likely net rate of return of 20% overall, instead of 1 project with 10x the budget which has only 1% chance of returning revenue -- after all, if it does return revenue, the rewards are great."

Of course, if it doesn't, the company is GONE. Does anyone remember that Blizzard was for SALE before they managed to ship WoW? WoW could have literally erased Blizzard had it not hit.

BTW, keep in mind that given multiple millions of active users on a monthly basis, it should be entirely possible to monetize at a far higher rate. Club Penguin, for example, has done no marketing. Now they have been bought by Disney. Want to bet we'll see Club Penguin plushies, ads on the Disney Channel, perhaps a Club Penguin attraction at a theme park, a cartoon, a movie? THAT is monetization, and on a broader and more transmedia scale than WoW.

WoW doesn't make more if I log in for $50 hour a week or not at all. At least yet as I'm not yet victimized by anything other than the occasional goldseller's advertising impression.

In fact, I would be stunned if the typical WoW player in Europe and NA wasn't earning them more than $15. Multiboxing is very very very common, and it's not crazy to see the *average* player holding two accounts just because high-end multiboxers hold so many. That would make average spend per player $30. (As someone commented, the revenues from China are more on the order of $1 a person). Usually, I see multiboxing averages of higher than 2. That right there suggests that the actual price tolerance threshold for users of MMOs is between $30 and $45, not $15. And at the high end, it's in the thousands. Even WoW has not yet begun to monetize.

I think Raph is at least slightly galled that the overwhelming blockbuster of the MMO market was a game that embraces very few of his design principles of community and world systems design.

Pshaw. WoW has dancing. WoW has full PvP servers. WoW's PvE servers aren't actually PvE -- they have an enemy flagging system straight out of UO and SWG. Sure, it's Yet Another Diku in most of its mechanics, but there's plenty of things that they do which seem just fine to me.

My totally uninformed and biased opinion is that it's trendy for developers/designers/producers to dislike WoW in the same manner that it's trendy for the tech community to loathe Bill Gates and Microsoft.

The lead producer of WoW is someone that is not only a friend, but who worked with me on Privateer Online and SWG. :P I am not saying this stuff out of animosity towards WoW or the people who worked on it.

I would argue that the reverse accusation is equally possible: that lots of folks who love WoW *as a game* let that blind them to the overall industry situation simply because it doesn't have a lot more WoWs in it.
 
I would argue that the reverse accusation is equally possible: that lots of folks who love WoW *as a game* let that blind them to the overall industry situation simply because it doesn't have a lot more WoWs in it.

I'd slightly rephrase that. Most people who love WoW as a game simply do not want a future in which we only have various versions of Second Life and Club Penguin, for the simple reason that we wouldn't play those.

Yes, there is a market for casual social spaces. But the users of those usually aren't very committed, they spend a lot less time and money on them as the average WoW player spends on WoW. Saying "the future is casual social spaces" disregards these people who not only can but *want to* spend $15+ and 60+ hours a month on their virtual world.

And we don't even know how many of them there are. Just before WoW came out a serious study estimated the number of potential MMO players in Europe to be 280,000. WoW sold 380,000 copies on the first day there. Your "lets not risk anything, lets go for the cheap and safe option" is exactly what the players and gaming press is always accusing the gaming industry of. You probably would have advised Blizzard not to make WoW but go for another RTS instead.
 
I'd slightly rephrase that. Most people who love WoW as a game simply do not want a future in which we only have various versions of Second Life and Club Penguin, for the simple reason that we wouldn't play those.

I've made that very same point MANY times before. I am not *advocating* this future. I am just pointing out the trends.

Not wanting a given future doesn't mean it isn't coming. I LIKE AAA MMOs and AAA console games. Don't kill the messenger.

Yes, there is a market for casual social spaces. But the users of those usually aren't very committed, they spend a lot less time and money on them as the average WoW player spends on WoW. Saying "the future is casual social spaces" disregards these people who not only can but *want to* spend $15+ and 60+ hours a month on their virtual world.

I am not saying that the high-end games are going to go away completely either. For precisely the reason you describe, they will remain. They probably mostly cannot reach the heights of WoW either in content or design or presentation, however, and therefore likely not in revenue either.

And we don't even know how many of them there are. Just before WoW came out a serious study estimated the number of potential MMO players in Europe to be 280,000. WoW sold 380,000 copies on the first day there.

That's part of what I was getting at regarding the power of the brand.

But to some degree it doesn't matter how many there are. Relative to the opportunity cost of doing something else, spending $100m on a single game just isn't going to be in most anyone's game plan.

Your "lets not risk anything, lets go for the cheap and safe option" is exactly what the players and gaming press is always accusing the gaming industry of. You probably would have advised Blizzard not to make WoW but go for another RTS instead.

That's completely out of left field, and totally inaccurate. :P It's not like I myself am known for going the cheap and safe option on anything I have done, am I? I am not talking about ME, I am talking about the choices publishers make -- the people who fund these things based on business logic.

Look, here's the bottom line. Publishers are feeling the pinch at $30m titles, much less double that. Almost nobody can afford to take 5 years and 60m, 100m, whatever. Those who can can afford it only because they are in highly privileged positions in the industry in terms of track record and publisher status (e.g., they have enough clout to tell a publisher to just wait for a three year overrun). That list is miniscule.

And the thing you need to realize is that this is now *the basic price of playing at all*, not even the price of "playing to win."

The best hope of getting more WoWs is for the cost of development to fall by an order of magnitude. I spent a few years on trying to solve that problem. I made some progress. But it's not progress likely to be adopted on a wide scale, alas. Instead, most people are trying to push the envelope further on costs with the Unreal engine and 8 maps per poly.
 
No, it isn't, because Titanic does not stop people from going to other movies for nine months, and WoW (or any MMO, really) DOES. Joining an MMO is a lot more like choosing an operating system than it is like going to a movie. It's a fairly exclusive relationship.

Do you have data to back this up, sir? It seems VERY peculiar a fact to say, especially when you say, in the same post, that dual boxing is popular, and people will even triple box. In my personal experience, the exact opposite is true; I once payed for 2 MMOs at the same time, and at my height I was playing 4 of them at the same time. I hardly see it as a large commitment, much less one on the scale of an OS, and likewise see dual-boxing as a complete waste that I would never personally do as you get MUCH less return from 2xWoW than, say, 1x WoW, 1x FFXI.

Then again, my sample size is "me and some friends which, in total, add up to less than 15 people", but I just wanted to ask if you have numbers for that, or if it was an assumption you had.
 
"The best hope of getting more WoWs is for the cost of development to fall by an order of magnitude. I spent a few years on trying to solve that problem. I made some progress. But it's not progress likely to be adopted on a wide scale, alas. Instead, most people are trying to push the envelope further on costs with the Unreal engine and 8 maps per poly."

While I agree with that statement, It needs to be qualified that reduceing the cost of development can't reduce the quality of the game. I appears to me that the industry is floundering trying to release the same old model of 3/4 finished games that are incomplete in many ways and hoping the players will pay them to finish the game and not hold it against them.
The casual players that are the cash cow of WOW will never go for that. The games that will steal them will have to have the same level of polish, lore and total world experience.

Skimp on any of those 3 things and it'll never be a big player.
 
In fact, I would be stunned if the typical WoW player in Europe and NA wasn't earning them more than $15. Multiboxing is very very very common, and it's not crazy to see the *average* player holding two accounts just because high-end multiboxers hold so many

Is dual boxing in WoW really common ? Tbh I have never heard of anyone doing this, except the occasional player that uses his wifes' account. On the other hand in Eve, just about everyone in my corp has an alt ;).
 
Do you have data to back this [that people tend to play one MMO exclusively] up, sir?

Sure. But even without the data I have, it's not hard to get a glimpse of it from outside. For example, even in WoW we see that the average user spends the classic 20 hours or so a week. That right there is a sizable chunk of all leisure time for the week.

The phenomenon that people tend to "marry" one MMO at a time has been consistently observed by operators for years.

While I agree with that statement, It needs to be qualified that reduceing the cost of development can't reduce the quality of the game.

Broadly speaking, yes. Though audiences do seem to be tolerant of cool cost-lowering stuff in one direction and outright removal of stuff from other areas (e.g., no avatars in EvE, traded for a single enormous world that is basically procedural in nature).

Is dual boxing in WoW really common ? Tbh I have never heard of anyone doing this, except the occasional player that uses his wifes' account. On the other hand in Eve, just about everyone in my corp has an alt ;).

All those gray market sold accounts are going to somebody. ;)

Seriously -- I do not have any solid figures on it for WoW. But WoW has yet to show any significant play pattern deviations from other Dikuish MMOs -- meaning, users tend to use WoW much like they used EQ, AC, DAoC, etc. Similar hours spent, similar grouping patterns, similar most everything. So I would be very surprised if this common pattern had changed.

Remember, I commented that much of it is driven by high-end players. Do you really not know any guild officers who hold "guild accounts" used for raiding for example?

That said, I would expect the percentage to be lower than in say, EQ, because WoW reaches a more casual audience.
 
I agree most dual boxing is probably Hard core raiders. PVP'rs trying to work the system and farmers. I'll agree there are probably a lot of dual boxers but I suspect they are a very small percentage of the total WOW player base. In a game with this many people it's really easy to forget that even if you've played for 3 years you may not have interacted with a good representative cross-section of the player base.
Because people gravitate to like minded people and tend not to spread out much from there.
 
So in other games, it was also a relatively small percentage. But the high end compensated. So 1% of users would own 10% of the accounts, that sort of thing.
 
I left WoW to play my 10 year old UO account. I'm all for virtual spaces, as long as I can PK the person in the space next to mine.
 
Second life seems to survive on hype. Tried it once and guess they registered me as a 'statistic' on it, though I've never gone back.
 
Post a Comment

Links to this post:

Create a Link



<< Home
Newer›  ‹Older

  Powered by Blogger   Free Page Rank Tool