Social games are like mini startups – always in search of a business model

After working for a fat startup that died I was introduced to lean startups by Eric Ries, I even attended Eric’s fist workshop. Friday I was lucky enough to attend Eric’s first Lean Startup Conference . Where as most hate conferences this one was power packed - Kent Beck, Steve Blank, and Randy Kosimar riled everyone up enough to run out and begin their own startups if they hadn’t already. But a startup of my own was never dream of mine so I ran out trying to figure out how to apply the methodology at Playdom. And when you think about it, each social game is like a mini startup.

It’s a dynamic hits driven business

Social game companies have already shown that there is a business model behind virtual goods and games but as we all know, every new game is a new opportunity for success as well as failure. It’s just like Hollywood and as William Goldman says:

Nobody knows anything.

That doesn’t mean Hollywood executives are stupid, but refers to the fact that prior to a movies release, Hollywood has no idea how well a film will do. It’s the same for social games but where as movies are static, social games are highly dynamic. That isn’t to say you can interact with them but that they’re continually evolving. Testing features to see if it will improve monetization, engagement, lifetime value, etc. Startups do the same thing.

Search for a business model

One of the tenets of lean startups is understanding that a startup is in the search business. Not the search business like Google, but as Steve Blank says – for a business model.

A startup is the organization used to search for a scalable business model. It’s all about the search, not execution or maximizing profits.

Blank goes on to explain that because it’s a search, startups have different metrics than a traditional business. Where they think of balance sheets and cash flow, a lean startup worries about viral coefficient, lifetime value, etc. That certainly sounds a lot like the social game business.

Built to learn

As Eric points out, lean startups also differ from fat startups in that they’re built to learn not execute.

Many founders believe that early stage startups are endeavors of execution. The customer is known, the product is known, and all we have to do is act.

Eric takes a different approach. He believes that many early stage startups are labors of learning. The customer is unknown, the product is unknown, and startups must be built to learn.

In many ways the same is true for social games. The industry is still young and wide open. The majority of players are female, the game industry has never seen that before. The game industry has a good idea what guys look for, but women?

Currently the industry use game mechanics to engage players but is there a potential to employ other mechanics? Hint, hint…

Social games as lean startups

As Steve Blank explains, lean startups execute customer development and lean startup methodology. I get to do the same with social games at Playdom. Exciting times.

2 thoughts on “Social games are like mini startups – always in search of a business model

  1. These are all excellent points. In fact, it makes me pause in going too far with my own social game experiment in terms of building too much gameplay too soon. Instead, I think I will simply put one piece of gameplay out there and solicit feedback.

    I'll need to do some split testing as well.

    –Bruce

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