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February 24, 2006
Games as the Real Social Software
As I mentioned in my earlier post, I've started actively playing World of Warcraft (WoW), a massively-multiplayer online game (MMOG). It has been a rewarding experience, going far beyond the entertainment value.
Now, I'm not kidding myself. I play Warcraft because it's fun. It's taking time away from watching TV, reading books, and other entertainment pursuits. But I'm also playing because I believe MMOGs will be one of the primary forms of social software for the next decade. Defined broadly, they may become the dominant form of social software. And you can't understand games without experiencing them first-hand.
World of Warcraft, the first break-out MMOG in the West, has over 5 million paying members. (That's $50 for the game, plus $10-$15 per month, for a revenue run-rate well over half a billion dollars annually.) And that's nothing compared to Asia, where one game, Lineage, counts 1/12 of all South Koreans as paying users. In other words, MMOGs are at least as big a phenomenon, in terms of real usage, as the Internet was when I first started using it in the early 1990s.
Like the early Internet, MMOGs are dismissed, not inaccurately, as the pursuit of a narrow sub-segment of the population. While it's fair to assume MMOGs will never be adopted as broadly as the Net -- they are, after all, games -- I see no reason for them to become at least as significant a part of our culture as other major entertainment forms like movies. Particularly significant in this regard is the growth of "social" MMOGs like Second Life and Habbo Hotel, in which hanging out, rather than killing monsters, is the primary objective. Those games will skew to a different demographic than the "sword and sorcery" MMOGs. And even though development costs for a top-flight MMOG are roughly $30 million, the economic potential is so great that I expect a wide range of sophisticated options coming on the market in the next few years.
As an observer of technology trends, though, what gets me excited about MMOGs is the way they represent the embodiment of so many things I'm following. An MMOG is dependent on the collaborative activity of its participants. It's the epitome of software for groups. In WoW, for example, I'm part of two "guilds" of 20-50 players. One of them, "We Know," was started by my friend and inveterate tech connector, Joi Ito. It recently got some press. We Know is filled with Internet entrepreneurs, including Ross Mayfield, CEO of Socialtext, a wiki company for which I'm an advisory . The other guild is very different -- it's composed primarily of academics and other thinkers who study and write about virtual worlds. (The irony of playing a game with people who study games professionally isn't lost on me....)
Joining a guild transforms the experience of playing a game like WoW. The guild becomes the reference point for your in-game experience, and group activities -- planning raids, exchanging information, sharing resources, chatting -- become as much a focal point as the content created by the game developers. Within WoW, there are various mechanisms for group interaction, including chat. Outside the game itself, both of my guilds use various social software tools, such as Wikis, email lists, and group collaboration hubs, to coordinate their activities. All if this stuff is pretty rudimentary for where it needs to go. What the game does is provide an incentive for people to develop new software and ideas for collaborative production. Many of those ideas will translate to other group activities, including those within the business world. I think MMOGs will be, at a minimum, a significant testbed for these new technologies, because users see a direct benefit and are willing to experiment with new things.
Another fascinating aspect of MMOGs is the economic activity developing around them. Already, there is a market of several hundred million dollars annually for buying and selling virtual objects (gold, weapons, etc.) to use in games like WoW and Everquest. That's only going to grow and become more sophisticated. Companies like IGE have build significant businesses facilitating such trades, even if many gamers object to the "farming" used to build up in-game wealth for later sale. Much of the farming is apparently done by people in low-wage countries like China. My Wharton colleague Dan Hunter (who, unlike me, is a real expert on this stuff), calls these new work systems for virtual asset trading an example of the globalization of services. It's the same pattern that caused semiconductor production to move from the US to places like China and Taiwan, only now we're talking about the intellectual assets where the West is supposed to retain an advantage.
Finally (for this post!), MMOGs are pushing the limits of technology. WoW is a "sharded" world, meaning that you can only interact with other players on your server. Each server has an identical copy of the world, and can support around 10,000 simultaneous players. (With over 5 million registered users, there are several hundred WoW servers worldwide.) That's less than ideal, because it means you can't play with people on a different server, and because as servers get close to the limit, performance slows down. New technologies based on grid computing proimise to overcome some of these limitations, although they have been promising that for a few years already. Scaling virtual worlds is a truly hard problem, especially as these worlds become larger and richer, and incorporate audio and video as well as rendered graphics.
What I come to, though, is the fact that you just have to play to understand. There are those who can read about Skype's millions of users, and those who "get" Skype because they use it. And there are those who scratch their heads at MySpace generating more pageviews each month than Google, and those who grok the way today's young people interact. WoW and MMOGs generally are the same thing. It's sort of like what I felt about 15 years ago, when I was actively using proprietary online services and starting to dicover the Internet. A few yearss after that, I remember how excited I was when I first saw a URL on a billboard -- it meant the Internet was something mainstream companies thought mainstream users understood. I'm eagerly awaiting that transition for virtual worlds.
Posted by Kevin Werbach at 11:15 AM
Advice for Lucent
Yesterday, I helped judge the Wharton business case competition. This is a program put on by the Wharton Technology Club, in which MBA students analyze a business problem presented by a real company. This year's sponsor was Lucent, which asked the students to recommend a strategic initiative for the company. Several Lucent executives also served as judges.
It was fascinating to hear what the studentss came up with, and how the Lucent folks reacted. One of the challenges in a fast-changing industry like telecom is that it's relatively easy to identify high-level trends (the move to voice over IP, wireless substitution, convergence, etc.), but hard to pinpoint how an established company can realign itself to catch those trends. Lucent has tremendous assets, including relationships with most of the largest telecom carriers, but they are coming out of a rocky period following the dizzying heights of the telecom bubble. They realize they must reposition themselves as the market shifts. It was refreshing to listen to a series of proposals that wrestled with the challenges Lucent faces.
Interestingly, two of the teams came up with the same recommendation -- acquiring a particular technology company in the unlicensed wireless space. I don't think I'm allowed to reveal details, but it helped clarify my own thinking about how the telecom equipment world could evolve with the growth of WiFi, WiMax, and other unlicensed wireless technologies.
Posted by Kevin Werbach at 10:41 AM
February 23, 2006
Why telcos should be afraid
This won't just happen in Europe.
Posted by Kevin Werbach at 8:25 AM
Syndication in action
Marc Canter reports that 45% of eBay's listings come through its APIs.
eBay, Amazon, and Google: three mega-success stories of the dotcom era. What do they have in common? All of them aggressively open up their technical interfaces, allowing other sites to plug into them, or projecting themselves out to the rest of the Web. This supports the argument I outlined seven years ago in a Harvard Business Review article -- the new paradigm of commerce and business relationships is syndication. Open up your core assets and turn them into a platform; don't hide behind high walls and expect everyone to come to you.
Posted by Kevin Werbach at 8:18 AM | Comments (1)
February 19, 2006
Boom Times
On Friday, I attended the 5th TechCrunch meetup and Naked Conversations launch party in Silicon Valley. It was a pretty crazy scene: 200-300 Internet entrepreneurs stuffed into the back yard and living room of Mike Arrington's house.
I was pretty thrilled when we partnered with Mike and TechCrunch for this year's Supernova. We're already getting good submissions for the Connected Innovators showcase, and I expect plenty more before the April deadline. (The Website has full details.) I knew TechCrunch had become the nexus for the "web 2.0" crowd. Seeing all those innovators at Mike's house, though, confirmed for me that it's not just a news site, but an active facilitators of the next wave of Internet innovation.
I experienced the dotcom bubble from pretty close up. This isn't like that... at least, not yet. But the fun is back in Silicon Valley. People are willing to dream crazy dreams, and dare to think they can change the world. Most of them won't, but a few just might. That's part of what gets me so jazzed about doing Supernova.
Posted by Kevin Werbach at 4:40 PM
February 14, 2006
Reminder -- Supernova party on Thursday!
This Thursday night, I'm hosting a pre-pre-Supernova party in San Francisco.
Come hang out and network with a collection of technology innovators, entrepreneurs, investors, thinkers, and others. It will be at Cha-Am Thai, near the Moscone Center in San Francisco. Full details and RSVP information are at:
http://www.socialtext.net/snparty
Feel free to invite friends. However, we do have a cap on space. So if you'd like to come, please be sure to RSVP either on the page above, or by email to (party@supernovagroup.net).
Posted by Kevin Werbach at 3:31 PM | Comments (0)
Slow year
I just noticed that I sent 5959 outbound email messages in 2005. That's down about 7% from the year before, and substantially below my all-time high of 7300+ in 2001. This is just personal messages typed into my email client, not broadcast invitations or promotional announcements.
Funny, I don't think I'm cutting down on my email actitivity. Although I wonder if the proliferation of spam, and the growth of other communications channels (such as Skype messaging) are reducing my email traffic. I did manage to break my one-day record last year, cranking out 120 emails in one flurry of pre-Supernova 2005 activity. I guess that gives me something to shoot for in 2006....
Posted by Kevin Werbach at 7:52 AM | Comments (0)
February 9, 2006
Net Neutrality Hearing
The US Senate held a hearing yesterday on network neutrality. As expected, most Senators supported the idea in theory, but there is little sentiment for any legislation that significantly restricts broadband operators' flexibility. I still maintain that, although we academics still have some things left to say, as a political matter, the real battle is over.
Posted by Kevin Werbach at 10:06 AM | Comments (0)
Vonage IPO
So Vonage, the leading hardware-based consumer VOIP company, is going public. Not a surprise whatsoever -- it was just a question of when Vonage would file.
It will be very interesting to see how the IPO does. Vonage has been raising and spending money like a drunken sailor, hell-bent on growing its customer base. It's a classic Web 1.0 land-grab play. There is no doubt that Vonage has a real business; the question is whether it's a really big business. Especially in a world with Skype's tens of millions of software-based VOIP users on one side, and facilities-based cable and telco VOIP offerings on the other.
I'm skeptical that Vonage can sustain the kind of valuation its investors must be contemplating. At some point, you have to stop spending money in order to make money. The appeal of Skype, for example, is that its cost structure is radically low, which gives it a great deal of flexibility that Vonage doesn't have.
So, the Vonage IPO will be a test of the market's appetite for speculative tech plays. By the standards of 1999, it should be a home run. By the standards of 2003, it should never have gone public. This will be a good test of which period 2006 is closer to.
Posted by Kevin Werbach at 9:54 AM | Comments (0)
February 7, 2006
Backwards spectrum policy
President Bush's new budget proposal includes a provision authorizing the FCC to impose "user fees" on unlicensed wireless. This is a dangerous idea, clearly pushed by incumbent licensed wireless operators to dampen competition from innovative new approaches.
The goal of spectrum policy should be to make spectrum cheap, because that will mean capacity is abundant. Making spectrum more expensive just reinforces the notion that spectrum is an inherently scarce resource. As I've argued in great detail, there is no discrete limited resource called "the spectrum." Innovation in technology and usage models can increase usable wireless capacity far beyond what is possible today.
Now, the administrative infrastructure around spectrum policy does have costs, and there are legitimate arguments for charging some minimal fees to avoid perverse incentives for wasteful wireless usage. Adding a dollar to the price of a WiFi router wouldn't sink the industry.
Yet that's not what this new proposal contemplates. The Administration's budget justifies the new "usage fees" on the grounds that unlicensed wireless approaches should face the same cost structure as competing licensed services:
"Service providers using different technologies to deliver a similar product can face different spectrum license acquisition costs. The lack of parity in spectrum assignment creates incentives that can diminish the overall utility of the spectrum."
Parity? Level playing field? Sounds like the arguments incumbent phone companies always make to hamstring innovative competitors. If unlicensed wireless approaches are more successful because they don't require exclusive assignment of capacity to one service provider (who pays a fee for the privilege), that's no reason to burden those efficient technologies with a tax. Moreover, because unlicensed systems need not have a central service provider, imposing taxes may be significantly more complicated and limiting that with tradiitonal services. It's like the Kurt Vonnegut story where anyone above average is forced to wear heavy weights and wear headphones playing distracting noise, in order to bring them down to the norm.
And don't buy the line that the proposal arose from fiscal policy. The fees would make a negligible contribution to the budget. At a projected $360 million per year, they would amount to about 0.1% of the current deficit. The cost in terms of productivity and investment in new wireless technologies that could be destroyed far exceeds that.
Let's not kill off the golden goose of innovation with needless and discriminatory taxes. I thought Republicans like George W. Bush opposed that sort of thing.
UPDATE: Harold Feld of the Media Access Project, who knows the Washington telecom landscape as well as anyone, is urging people to calm down about this news. He says the proposal is actually targeted at digital TV broadcasters, and is unlikely to ever be passed in a form targeted at unlicensed wireless. I hope Harold is right. I've just seen too many sneak attacks like this from incumbent lobbyists to be confident.
Posted by Kevin Werbach at 8:03 AM | Comments (1)
February 5, 2006
Pre-Pre-Supernova Dinner in SF -- February 16
I'm hosting a networking party/dinner a week from Thursday in San Francisco, as an early kickoff for Supernova 2006. The details:
Thursday, February 16
5:30-9:30pm (come whenever you can)
Cha-Am Thai, 701 Folsom St. (at 3rd)
Cost is $20 per person, which includes a full Thai dinner and non-alcoholic drinks. Please RSVP (and pre-pay) by February 13 if possible, through the event wiki, which has additional information:
http://www.socialtext.net/snparty/
I'm looking forward to some good networking and fun conversations. If you're in the Bay Area, please join us!
Posted by Kevin Werbach at 9:01 PM | Comments (0)
February 2, 2006
Network Neutrality: The Story and the Non-Story
In recent days there has been a good deal of publicity about the concept of network neutality, a requirement that broadband network operators not discriminate against unaffiliated content and application providers. There will even be a Congressional hearing Tuesday on the topic.
I've personally been raising the net neutrality issue, in one form or another, for seven years. Yet I have a hard time getting energized about the current fight.
Jeff Chester's article in The Nation gives a nice synopsis of the concerns. Jeff has also assembled a very useful set of documents on the issue, including white papers from equipment vendors such as Cisco describing just how operators could discriminate against or block services. And Ed Whitacre, CEO of the "new" AT&T, has been quite up-front about his desire to charge services like Google for the privilege of reaching his broadband subscribers.
Catherine Yang, writing in Business Week, added fuel to the fire by revealing that Verizon's new FIOS fiber optic network will reserve 80% of its capacity for its own services, leaving just 20% for Google, Amazon.com, eBay, Yahoo!, and the rest of the Net. Ars Technica challenges these claims, arguing that Verizon's FIOS plans anticipate allocating 640 megabits per second of broadband data capacity to each 32-node home in its service area, eventually increasing to 2.4 gigabits per second. In other words, even though the data "lane" is dwarfed by the private IP television "lane" (which is allocated 3.5 gigabits per second in Verizon's current deployment), it's plenty wide for everyone else.
I was one of the first people to raise and publicize the threat that closed broadband networks could pose for the unbridled Internet, in a Release 1.0 piece called "The Future of Internet 2.0" published in February 1999. I'm very sympathetic to what the network neutrality advocated want -- heck, I'd put myself in that category too. Yet I just can't help feeling that it's all too little, too late. Network neutrality is getting traction in Washington DC precisely because there's no longer any real possibility of shifting the architecture of the broadband Internet through public policy. It's a safe way to make noise about the importance of competition and innovation.
I'm pessimistic because, over the past seven years, the incumbent broadband operators have put billions of dollars of network equipment into the ground, while the competitors who could have provided a check to their closed approaches have largedly died (or been killed) off. It's heartening to see the tech industry, including Google, taking on the net neutrality fight aggressively. On the other hand, when there was a real opportunity to influence the debate, only a few tech companies such as Microsoft and Amazon.com were willing to stick their necks out on network neutrality.
The pressure around network neutality did force the FCC to issue a policy statement supporting the concept in principle. I suspect this will have more influence in a few years than anyone anticipates, when the FCC finds cause to point to its language. In the near term, though, the policy statement has no binding force. And I have a hard time imagining Congress doing anything more than jawboning the broadband operators to make some equally vague commitment to openness.
So, I'm afraid to say, something of the Internet as we've known it is likely to be lost. Just how much depends on the possibility of real alternative broadband networks, and just how powerful Web-based service providers like Google and Yahoo! really are. If these companies can route around the network operators, or if customers are truly more concerned about the quality of their Google experience than the quality of their Verizon experience, there will be a reasonable check on broadband discrimination. That could still hurt smaller companies and non-commercial activities, which don't have the economic heft to counter the incumbent broadband operators. But I think that's the world we're going to live in.
I hope my friends among the network neutrality advocates will prove me wrong.
Posted by Kevin Werbach at 12:53 PM | Comments (0)