A lot has happened since I last posted here.  We had one major project slowly grind to a halt, abandoned by the publisher. Not a fun story, even if we did learn a lot.  And we had another flash briefly, just long enough to prove out the design and technology, if not long enough to make back its production costs.

Social games have continued their astonishing fast-forward pace.  The game industry changes faster than any I know of, and I have never seen things change this fast.  One of my new mottos is

If you don’t have whiplash, you’re not paying attention.

What was a wide open blue-ocean part of the games industry a year ago is quickly consolidating and stratifying into Huge Players, Big Players, and Everyone Else.  There are good games and money to be made at each level, but on different scales and with different difficulties. And game designs or production practices that worked less than a year ago have to be discarded now to stay current with the market.

For myself and my company, Online Alchemy, the latest blows we endured were too much.  I’ve rebooted the company before — after a triple-play debacle in 2007 (DARPA project killed by world events, development contract pulled at the last moment, and the long-lamented demise of the Firefly MMO at the hands of Fox and Universal), so I know how to do it.  And I have an amazing team of people to work with.  But the costs of rebooting again now seemed too high and too risky.

So, time for a pivot: I have joined Kabam as an Executive Producer.  This is a terrific company with a clear focus and top-notch talent all around. I’ve been very impressed with the blend of agility and process I’ve found there. I can’t yet say what I’m working on, but as with everything in this part of the industry, all will be clear soon enough.

Online Alchemy will be sticking around, but will be returning to its focus on “social AI” research and development.  This is definitely an area for research, building on the company’s existing work in artificial emotions, relationships, and reputation, but as yet no real consumer market has appeared for such AI.  I still believe one will, but it may be ten or twenty years before it happens.  I’m content to be patient, and persistent.

So, what’s next?

“Emotions are easily recognized by humans, but computers must be part of that, said Schell. “Once we can do that we can sense your emotions,” said Schell, developers can create “a game where you actually have to act, or feel emotions. A game where someone tells you where there dog just died and if you can’t manage to cry then no, you’re not getting to the next level!”" (as covered by Gamasutra)

First, I appreciate Jesse stepping up with concrete predictions and other musings — as he says, this is a great way to predict (and create) the future.  That said, this one is exactly backwards: the emotional connection with virtual characters doesn’t come because we emote effectively, but because the characters themselves have and display emotions that we then relate to.  Their emotions make them more real to us, and allow us to feel something similar.

Think of it this way: we don’t miss on the climax of a movie if we aren’t actually crying.  We want the actors to emote as their characters — they have to lead us, so we can follow.  This is as much about mirror neurons as feeling like it’s okay and appropriate to feel an emotional release in a particular situation.  When the characters and situations in fiction and art (including games) provide an authentic emotional context, we also experience it. Doing so deepens our engagement and our relationship with those characters.  Requiring that we first feel and display an emotion puts the onus in the wrong place.

So what we need here is characters that can feel and show emotions appropriate to a situation and relationship, so that we can feel free to feel them too.  This requires that virtual characters not just understand our emotions, but that they provide authentic, subtle, layered, conflicting emotional responses just as humans do.  Only then will virtual characters be real enough to us to warrant our interest and our relationship, which makes a lot of other things possible.

For example, Jesse mentions possibilities like talking to your avatar in a game — in effect, taking on more the role of the director working with an autonomous actor than being the character yourself.  I can see this happening (in fact I have a whole design predicated on the idea of influencing rather than driving characters in a game.)

Other examples include a virtual character being an assistant, concierge, tutor, or continuous virtual presence across games, purchases, email, and other experiences. All make a great deal of sense.  However, as these experiences expand from the merely utilitarian (a shopkeeper with whom you interact in only a narrow domain) to the more relational (coach, concierge, assistant), an emotional connection becomes more vital.

While virtual characters need to be able to read human emotional responses (via voice stress, facial expression, etc.), it is at least as important that they be able to maintain and display authentic emotions themselves.  Otherwise their responses to us will always seem oddly flat in a way that subverts any connection between a person and a virtual character.

On the other hand, I believe that as virtual characters begin to display authentic emotions — not limited to a small palette of canned emotional states — we will see greater connections between us and virtual characters.  This relationship connection will, I believe, be the doorway to seeing virtual characters becoming much more prevalent in our lives in many different contexts.

I’m not even sure what that means now.  What does it mean to say your game or app is “in beta” these days?

It used to be that “beta” meant “not quite ready for a full launch” or “we’re still working out the bugs” or even “we’re not taking your money for this yet” or “this may change a lot.”  Somewhere along the line though, the meaning morphed into something much more ambiguous.   Major companies (Google, et al) now have products that are in beta for so long people forget about it and it becomes essentially meaningless.

So, is there any purpose in slapping a “Beta!” tag onto your product?  Has this just become meaningless (if somewhat self-defensive) marketing hype, or is there some kernel of meaning left to it?

When do you put something into — and more significantly, take it out of — beta?

In the meantime, have a look at this terrific image from an upcoming app of ours, or read this very insightful article by Trip Hawkins, CEO of Digital Chocolate, about using the wealth of publicly available information we have to assess the health of social games and social games companies.

We really do live in a time of unprecedented change in the games industry: faster development cycles, much closer relationship with the customers, much more resilient revenue models, incredible metrics and marketing tools, and — I hope — the ability to create new kinds of games on that foundation.

Two recent great examples of this kind of communication came from the CEO of Woot and the crafty pastamancers behind Kingdom of Loathing.

These releases show a lot of style, a huge amount of spot-on humor, and generally were just bright spots in the otherwise dull world of press releases. They were also true to their respective brands without being stuffy or obsequious (“For Woot, our vision remains the same: somehow earning a living on snarky commentary and junk”).

Personally, I don’t think I’m funny enough to carry something like that off.  We have a lot of fun on our team, but (for me anyway) there’s a serious side to what we do too, even if it is games.  But communicating this way isn’t about being funny; it’s really about being true to whatever and whomever your company is.  Speaking with a clear true voice is a powerful thing.  I hope we’re able to do that, and I hope more others are as well.

And despite my tone here sometimes, I hope we don’t take ourselves too seriously in doing so.

In a recent post entitled “A New Way of Looking at Healing and Death,” Jon Peters, a designer on GW2, talks extensively about how they approached combat, healing, dying, and in general what actions you can take to bring combat beyond simple button-mashing.  It’s a refreshing read.  It’s nice to see designers thinking seriously about the experience they’re trying to provide, not just about the mechanics — and not just falling back on well-worn mechanics because they’re traditional.

They’ve done a good job of taking what’s typically a frustrating failure state — being whacked hard enough that your character has no more health — and turned into another bit of gameplay.  Instead of having the traditional situation where once you start losing you’re unlikely to turn the tables, characters in GW2 have a set of options that open up to them when they’re “down.”  So if you’ve lost all your hit points, you can try a last-ditch move, and if you’re successful, you “rally” and are able to keep on fighting.  This reminds me a lot of the popular and effective “second wind” that similarly allowed you to dramatically claw your way back from the edge of defeat — a great feeling and thus a great bit of gameplay.  I think this is going to be a very popular aspect of combat in GW2, with many close shaves shared as stories between players.

Moreover, if you do die, GW2 lets you come right back into the game again.  Grognards will say this is “easy button” gameplay, comparing it to the olden days of text MUDs where death meant you lost an entire level — in some of them, half your levels.  The claim was that this makes for a disincentive to die in the game, but guess what? Players already have this disincentive, as it’s inevitably viewed as a failure state.  Why should a game rub salt in the wounds?

The designers on this game have also taken a hard look at what’s fun and what’s not fun about combat and, in trying to break out of the shell of the “holy trinity” of tank/dps/healing, have effectively come up with their own softer trilogy of damage, support, and control.  But in re-imagining combat this way, they have opened up important but usually secondary roles like support to be much more than just healing (to the point that they have no dedicated healing class), and damage to be more than just standing there and absorbing damage as in traditional “tanking.”

I’m really glad to see this evolution — even if it is only evolution and not revolution.  MMO combat has become fairly staid over the past ten-plus years, without a lot of innovation.  I’ve long wanted to try some of these changes myself.  In past games I worked on we tried introducing multi-player tactics (e.g., Phalanx, an auto-buff that requires at least three fighters to do), failure-state reversals (last ditch shot, like second wind or “downed” abilities), and some of my favorites, “noble death” tactics — such as a very powerful attack that might well save the rest of the party, but will take out your character in the process, potentially permanently (yes, perma-death, but only opt-in). One idea we had was that if you managed to save others by this kind of sacrifice, you could get a bonus to your next character.  We were never able to try these ideas — too radical for the time — so it’s great to see Guild Wars breaking (out of) the mold.

Maybe there’s life in fantasy MMOs yet.

There are some lessons people in online businesses persistently don’t learn.  A lot of these are grouped into the area of “social concerns are just as real as technical ones” or “social issues do not have technical solutions.”

Recently a couple of major players in the online space have shown a stunning lack of regard for social concerns in ways that have long-term effects and that can safely be filed under “Lessons Learned.”

Facebook CEO Mark Zuckerberg apparently believes  that no one needs to moderate how others see them.  He has famously been quoted as emphasizing that “you have one identity.”  To him, a desire to separate your life into public and private, professional and personal, is a clear “example of a lack of integrity.”   From this point of view, your colleagues at work, your friends from your hobby, your mom, your friends from your church, and the people you work with politically should all be equally exposed to you and each other.

This is like saying having more than one room in your house is unnecessary and shows a lack of integrity: bedroom, bathroom, kitchen, front porch — there shouldn’t be any difference.

I’ve seen this attitude crop up a lot in online startups over the years — mostly among the more socially clueless young unmarried white males who maybe just haven’t had enough life experience, or who aren’t yet socially aware enough to understand how benighted such a view is.

So, as frustratingly parochial as Zuckerberg’s view is, I was stunned to see a major company like Blizzard make a significant step in the same direction with their recent RealID policy.  Soon, when you play any of their games with an online component, you have the option to be seen by your real name by your real friends.  Not a bad idea, except for one thing: you can also be seen by your friends’ friends too, and you have no control over this or any way to shield yourself.

Much worse than this though, Blizzard announced that anyone who posts on their forums will have their real name exposed to everyone else there.  This was intended to cut down on the trolling and abusive behavior enabled by the anonymity of hiding behind a screen name — a well-known issue to anyone who has dealt with online community management.  Their “opt-out” policy is essentially if you don’t like it, don’t post.  In other words: Go Away.

Moreover the company showed a truly stunning lack of understanding of how someone’s real name can easily be used in our highly connected age.  I’m guessing that no one in the chain of people who approved this decision is

• a woman
• someone not wanting an abusive ex-spouse to find them
• concerned about a potential employer checking out their online presence

or any of a number of other easily imagined scenarios.  What makes me think that Blizzard operated with such disregard?  Because one of their own employees (a man, not a woman) was dismissive enough of these concerns to post his own real name on the forums, only to see his home address, phone number, photos of him and his family, and a lot of other personal information surface there within minutes.

Not surprisingly, Blizzard removed the information from their forum.  So they seem to get that that level of personal invasion is a problem, but not that their own policy will lead to this eleven million times over — or however many of their customers are foolish enough to actually post in their forums.

So why is this a big deal?

Both of these are signals about how large online companies think about your privacy.  The point is, it’s your privacy, not theirs.  We need to reinforce or take back the notion that your identity is yours — it does not belong to a bank, a mailing list reseller, a social network, or an online game provider.  And they should not feel empowered to do what they will with it, deciding for you how you handle your social connections.

If you’re a developer working online, consider investing in some time from someone who is not involved in coding, marketing, art, or design.  You might want to chat with those who bring a social, community perspective to the online space — because your users are certainly going to come with their own social context.  And as we’ve seen with people leaving Facebook or changing their personal info on it (Zuckerberg ending up looking like a rich but clueless young guy) and the firestorm engulfing Blizzard’s formerly evangelically devoted fan base, when there’s what you might consider a “minor mismatch” between your expectations and theirs, the users win.

But on the other end — the nearer end, the one you have to get through to be able to worry about an elder game — things are heating up too.

As more social games come out and as the quality of gameplay and art in them gradually inches up, it’s becoming more and more vital to have a great early game experience .  This may not sound like rocket science, but it’s surprising how many games really don’t impel the player forward and miss opportunities to convert mildly interested visitors into evangelical fans.

A lot of social games walk the player through the first few actions of the game very carefully, with now-ubiquitous big green arrows pointing at what you should click on next.  While these sometimes get in the way of getting to enjoy a game quickly, they appear to work: Inside Social Games recently reported on some results from Mixpanel, saying that if you can get someone started on a tutorial, there’s better than a 90% chance that they’ll go to the next step — each step having that kind of conversion rate (which means you need to keep your tutorials short and sweet too!).

While I think tutorials are vital, I wonder about other ways to improve the early experience.  For example, on one project (upcoming!), we tried even making the typically boring “loading bar” more interesting and playful, adding to the feel of the game.  It seems to have worked well.

This is another area ripe for growth and innovation in social games.  Given that the success of these games — where there is as little friction as possible to pick up the game, but also little friction in dropping it again if it’s boring or daunting — social games need to have a killer entrance, to grab the player right away: make them feel comfortable, engaged, intrigued, and excited all at the same time.  Even more difficult, these games need to not try to hang onto the player forever: with short play sessions you have to let them go — but in a way that will keep that first-time visitor coming back.

What are the best examples of early gameplay in social gameplay that you’ve seen?  What are some ways you think we can improve?

The geese in this scenario are of course all the developers running apps (mainly games) on Facebook, reportedly driving Facebook’s revenues to over a billion dollars this year.  The lion’s share of this revenue comes from advertising — much (most?) of which is paid for by game publishers trying to attract new players to their games.

But as reported today over on Inside Facebook (in a clearly written article, well worth reading), a lot of developers are worried not only about the already high 30% cut of revenue that Facebook takes for using its Credits, but the additional, hidden, and/or uncertain costs above that.   By some estimates — estimate that seem fairly reasonable to me — these could mount to a real cost of over 50% of revenue, and in some cases may present an almost unbounded downside for Facebook to take back revenue based on unused Credits.

The case for using FB Credits with its 30% cut is that developers will see a higher monetization rate due to lower friction for customers: it will create an umbrella for them that makes buying easier, and so more prevalent.  Thus while a developer might pay less per purchase to another ecommerce provider, they will see more monetization traffic if they allow users to pay via FB Credits.  As Inside Facebook reports, FB says that using Credits will provide “better security, more payment options, a simpler user interface, and a range of smaller incentives and promotions.”

Hmm, maybe.  None of these seem like particular points of pain that aren’t already addressed by Paypal, Social Gold, Offerpal, Gambit, or any of the many other ecommerce/virtual currency providers out there.  All provide just those benefits — and some perhaps better than Facebook can.  In addition, their costs are typically far below Facebook’s 30% take-it-or-leave-it level, driven there by competition.

And competition is where things might really begin to rub.  Facebook’s CEO Mark Zuckerberg has said that eventually its Credits will be the only virtual currency available to games on Facebook.  If Facebook exiles all other forms of payment (in a move that effectively removes all competition by fiat), developers who wish to have their game on Facebook will have no choice but to pay whatever costs Facebook demands.

At this point, whether that will happen is still speculation — but it seems reasonably within Facebook’s method of operations to date.  If Facebook chooses to make the use of its Credits mandatory, or even exclusive, this will be Zuckerberg’s hand closing around the throat of all those golden goose developers who have helped bring his company hundreds of millions of dollars in revenue.

Some would comply, I’m sure, with such a policy, and might even do well under it.  Many others however would take this as a sign that Facebook is no longer the place to be, with its viral channels largely cut off and a mandatory usurious payment scheme in place, and would escape to other social networking sites, game sites, and the web itself. Fortunes might be more variable by going elsewhere, but for many developers this will be worth it to escape a near-certain death by strangulation by these policies.

We don’t yet know how Facebook will complete its rollout of its Credits.  But no matter how this unfolds, it will have a dramatic impact on the continuing development and growth of the social games market.

But recently, some of the shine seems to have come off this area. This is most clearly seen in the dropping MAU and DAU in the top social games — Farmville for example has dropped from a high of about 83M MAU in March to 66M today.   66M is still a number that no one else can touch, but it’s also a huge drop in a game that had been rising steadily.

And it’s not just Farmville.  If you look at the graphs for the top games that have been around for a while, rising continually (e.g., Texas HoldEm, Cafe World, Pet Society), each shows a peak and a subsequent fall-off.   Notably, this isn’t just due to the age of the game: some more recent games like Treasure Isle and Hotel City show the same dangerous curve at around the same time, even though they haven’t been around as long.  Some like Nightclub City show a rising MAU curve — but a daily users curve that has peaked, indicating that the trailing MAU indicator will show this soon too.  Still others, despite strong PR-backed launches in what seemed like good areas, have fared much worse from the start (indicating among other things how critical repeat play is to the success of these games).

So other than the fact that simply putting out a social game isn’t a license to print money, what does this mean?

Causes for the Curve

There are likely a number of causes for this peaking.  There has been a lot of discussion of Facebook’s policies and how they have made it more difficult for games to publish updates and the like, reducing the ad-like nature of these updates, and thus reducing the games’ virality.  Surely that’s had an effect on the growth of these games — but to the extent Facebook’s policy and UI changes are responsible, that might indicate a degree of over-reliance on that one avenue of attracting users on the part of these games.

The age of the games definitely plays a part too; since the first successes of games like Farmtown (which has also seen this same peak-and-fall, sitting now at about 6.5M MAU, off its high of just over 18M) people have been waiting to see what the lifespan of these social games would be.   We may have found the answer to that question — at least for the first generation of social games.

That brings us to the next probable cause, and one that I think bears greater examination: players may simply be tiring of these games as their expectations mature.  Early on, with games like Mafia Wars, little in the way of traditional art or animation was required, and players flocked to the game (which sits now at a respectable 20M MAU, off its high of 27M MAU late in 2009, though with a DAU ratio that’s dropping fast too).  The next generation of games like Restaurant City, Cafe World, and Farmville all hit success with borderline art and gameplay, and really little in the way of anything “social” about them.  These games polished up ideas like “appointment gameplay,” which may have worn out their welcome with players, at least as a main reason to continue playing.

In effect, the players may be rotating off of these existing games because there is little innovation in them: once you get past the skins and a few of the gameplay gimmicks, most of these games employ the same basic underlying game engine — and both the developers and the players know it.

Looking Ahead

What does this mean for the future?  Well, the good news is we know there is a huge market hungry for free-to-play, browser-accessible online games.  The not so good news — if you’re a developer or investor whose plan is to reap the rewards of yet-another-reskinned-farming-clone — is that players may well have had their fill of the current generation of games.  The “farming mechanic” is so well known and has been so well explored by this point that it may not be realistic to assume players will jump at the next game that comes along with a slight variation on this overly cloned mechanic.

What this says to me is that it’s time to innovate again.  This doesn’t mean that the money-making engine has broken down, only that it needs new fuel.  Designing new gameplay instead of cloning existing play is riskier and takes more time, both of which drive up the costs of development — you can’t just turn the crank and pop out a game in a few months and expect it to do well.  It seems increasingly clear that what has worked well for the past couple of years will not sustain the growing market over the next few years.  We need to find new sweet spots and new forms of gameplay while keeping the games accessible to casual players, meeting rising expectations for art and fun, and creating new longevity and depth in what have been pretty shallow games.

In other words, we’ve seen that Social Games work in a commercial sense.  We have a market that has grown from nothing to nearly a billion dollars in just a few years, and is poised to grow to $7B in the next five years — if we keep feeding it what it wants.

Time to get ready for Social Games 2.0.

And may they truly be social this time around.