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Network Effects With Lock-In? Yikes!
Posted on | January 22, 2009 | No Comments
I was listening to a talk on my iPod the other day, and the speaker was talking about how some of the biggest Tech businesses (Apple, Microsoft, Oracle, Google, eBay, Amazon) were either founded or hit their stride during bad ecomonic times. That’s a fine fact, but he was saying it to a bunch of entrepreneur students at Stanford. I have a tiny problem with using the biggest, most exceptional businesses as examples to show principles. All of those businesses are where they are because of many fortuitous events coinciding. You can’t use them just to demonstrate once principle without at least mentioning the entire context.
As my mental rant about context continued, I argued to my iPod that those were all either started at an optimum time in the market and would be impossible to duplicate today, had huge economies of scale, or powerful network effects . . . network effect, why is that chiming in my head right now?
No answer from my head for a few seconds.
…
Then a sinking realization and a little bit of sickness in my tummy.
Collectible trading card games are a network effect business if ever there was one! You don’t collect cards to play against yourself – the value of the game is if there are other people to play against! That’s why I quit playing Magic in 10th grade – I was still geeky enough but my friends stopped playing so it wasn’t fun anymore. So if I want GeekStack to succeed, I need to understand network effects and build around them.
[A quick primer on network effects: the idea is that the next user or customer is more valuable than those before. The more participants, the more valuable the service is. This is why eBay, despite having a lot of serious problems, has never had a real challenger - they have the most buyers, so they get the most sellers, which brings more buyers, luring more sellers. The telephone and road networks are similar - no one would bother setting up an alternate phone network where you use letters instead of numbers - everyone is already on the existing network.]
Network effects are great if you have the biggest network. Not so great if you don’t. In the TCG world, Magic is the biggest and oldest game, having millions of players all over the world and has been around for over 15 years. The only serious challenger I’ve heard about is the World of Warcraft TCG, and that has the unique advantage of millions of WoW online players who already know the name, the story, the characters, and how to part with their money.
What do I have? Bupkus. No, not true, I have vision. I have a powerful theme (science and technology shaping the real world). I have a nigh unlimited font of characters, events, places, and actions already written for me, I just need to dig them up through research. So now that I’m puffed back up enough to continue working, what does this do to my strategy?
Well, since people need other people to play with, this means that geography matters. I’m currently leaning towards doing live playtesting with cheap ugly prototypes here in the Chicago area, and I’ve found a few groups of people on Meetup.com that play games. This way I can get high bandwidth feedback on the game while I’m developing it. This also means that until I get a playable version of the game on the web, most of the activity will be local here. 1000 customers buying boxes would be great, but if they’re all in different cities, it might be less valuable long term than 500 boxes sold in Chicago.
I don’t know what this means in practice. I’ve put off developing the website, artwork, social features, even research until I get a theme, gameplay structure and goal and set of mechanics that I’m comfortable with and the have been playtested and approved. Things might end up going in a very different order when that’s done.
And lock-in? After spending hundreds of dollars building a good deck, you don’t really want to switch to a new game that no one plays and start over, do you? I’ve got to makeGeekStack enticing enough that yes, yes you will.
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