Editor’s note: Today’s guest post comes to us from Jan Beckers, co-founder and CEO of HitFox, an incubator focused on investing in and acquiring game distribution and user acquisition startups. This article will be the first in a five-part series of articles analyzing game platforms and the patterns that historically repeat itself.
In the middle of the first decade of the new millennium, the browser materialized as an important new gaming platform. Shortly afterward, Facebook, and other social networks, emerged as the crucial gaming platforms of the time. At the start of the current decade, mobile systems, iOS and Android in particular, moved to the center of attention, revolutionizing global communication and the games market along the way.
These are also the three distinctive eras of the gaming industry that I experienced as an entrepreneur. Going through these phases there was something that became very apparent: each time a new gaming platform emerges, the evolution of the platform and the related business opportunities and traps follow the same basic patterns. Knowing these patterns provides market participants with the ability to anticipate certain developments and make the right business decisions today and be ahead of the competition tomorrow.
In this five-part series, I will provide insight into the most important patterns.
Before we dive deeper into these patterns you should be aware of the following analogy:
A country or a society is just like a platform — without an underlying technology
Both have a set of rules and regulations established and enforced by those in power, the owners. Citizens have to abide by the laws of their country and users have to abide by the terms and policies of a platform such as Facebook. Both platforms and countries can be governed democratically or dictatorially. The open web can be considered governed democratically, make your own judgment about the ways Google, Facebook or Apple run their respective platforms.
Countries and gaming platforms see periods of growth and decline, for instance, in terms of economy, territory and inhabitants. And as the inhabitants of a country flow, so do the users of a platform. At the same time, the platform owners might enter or leave market-areas, adjusting their territory.
Countries and game platforms both have competition, not only within but also across each other. Facebook and Google struggle for domination of the web just as China and the U.S. are up against each other in the global economy right now.
And last but not least: taxes have to be paid in order to maintain the infrastructure. In countries you pay usually 10 to 20 percent value-added tax — on Facebook and Apple you pay 30 percent Facebook or Apple tax.
In any case one thing remains clear:
It’s not only the history of countries and societies, that repeats itself, but also the history of gaming platforms
Platforms are not simple, one-dimensional systems. Whenever a new platform emerges and reaches a certain scale, a complex ecosystem develops around it.
Each new platform has unique technology standards of its own. The new technology requires specialized knowledge, new assets and new tools for application developers. A new platform also comes with its own policies and rules. And the audience will be newly composed and show unprecedented usage patterns (for instance, the Facebook audience has very different usage patterns than the browser audience). In consequence to all these changes, specific knowledge is required to be successful on the new platform. Since mature organizations tend to be inflexible, they often have problems coping with such changes. This is the entry chance for start-ups and other new organizations. Innovative blogs and media organizations emerge, new conferences and people networks come into existence. A new ecosystem has been created.
Being aware of the relevancy of platform-related ecosystems and the analogy to countries, we can turn to the most important platform patterns.
With each new digital gaming platform the timespan from growth to consolidation becomes shorter
Pattern 1 : Acceleration
Browser games saw almost five years of fast growth before the space became crowded. With social games, the same happened in roughly three years. And the mobile games market was already crowded in 2012.
One of the reasons for this rapid acceleration in recent years is the fact that the browser gaming ecosystem was novel in many ways and different to the traditional “boxed” systems before. Many of the foundational processes were completely different (e.g. in terms of marketing, production, and monetization). It took incumbents such as Electronic Arts a few years to realize the opportunity of the moment, adapt to the new circumstances and become competitive.
Social gaming was the second gaming platform in line with the browser. Despite still being different to browser gaming in many respects, those differences were much smaller than the ones the industry had to face in the previous shift. For existing players, this meant a much easier market transition from browser to social, than that from boxed to browser.
On top of that, everyone who went through the browser era entered the social market with many experiences that were transferable to the new environment. These accelerative factors resulted in faster growth, which in consequence also meant quicker consolidation. Hence, the whole platform-cycle becomes shorter.
This development continues into the mobile market, the third generation in that series of connected, online-ecosystems. Again, this new environment is close to the ones preceding it. Only this time, there was a longer period for learning, plus the experience from a comparable shift before. The result: the acceleration increases even more. For many companies, it is the third new platform they adapt to, which makes the adjustment relatively easy. Additionally, within the mobile space there are several well-connected sub-ecosystems, such as Android and iOS, with low entry barriers between each other.
Now the classic gaming companies, initial browser and social gaming companies and new mobile start-ups all fight for their share. In consequence, the competition on mobile heats up faster than ever before.