Unstructured gaming spaces and startup randomness
I’m deeply interested in the unstructured gaming spaces which Gen Alpha and Z are increasingly inhabiting. Broadly, this represents the expansion (but not migration) from functionally specific apps (Insta, Whatsapp) to multi-purpose places like Fortnite, Roblox and Discord but specifically, I think, it represents the unlabelling of gaming as a social class1.
The victory of demographics over history is delightful for former (fellow) gaming nerds everywhere but it feels more like the end of the beginning than an impending global embrace of esports. The nature of these unstructured spaces, especially User-Generated Content (UGC) gaming platforms, is complex, at least one magnitude more complex than anything the social companies have produced.
I spent some of the weekend reading Andrew Cetodal’s essay on the economics, policies and general competitiveness of UGC gaming platforms. He uses quite a useful metaphor of sovereign economic policy to contextualise and assess Fortnite, Roblox and others (it’s a long essay but as a bonus you get a potted economic history of South Korea and Venezuela).
David Taylor (who wrote an excellent UGC landscape piece for Naavik recently) had some LinkedIn musings on the growth of platforms and their evolving relationships with developers from collaborative to antagonistic over time. Dan Cook’s Game of Platform Power (PDF!) from 2011 is still an excellent essay on this (on a standalone basis but also because it was written during the peak-Facebook Zynga period)
All three of these are worth reading. And to a greater or lesser degree, all three remind me that Bill Gates’ definition of a platform was “when the economic value of everybody that uses it, exceeds the value of the company that creates it”.
Critically, this only works if you first have sufficiently robust underlying unit economics. Roblox’s gross margin is ~19% (Netflix by comparison is 40%). However the interesting distinction between the platforms of internet past and UGC gaming today is the latter has a far greater force of bundled economic optionality. Roblox and Fortnite (although a very different beast, arguably this is true for Discord as well) have many ways for monetization to happen by virtue of being 1) a three-way marketplace (players, developers, platform) and 2) with founders that are obsessively focused on the health of their trilateral communities. There is a compound effect here which I wouldn’t underestimate. And let’s not lose sight of the fact that irrespective of underlying economics, the Gen Z and Alpha hours continue to accumulate in these unstructured spaces in numbers which dwarf any other media platform.
If you speak to any serial builder or investor, the more humble will talk about timing and randomness. There is plenty to be said for making your own luck. It is a theory I subscribe to but nothing beats being in the right part of the business cycle (a phenomenon best understood in retrospect).
Lots of second-time founders are going through a particular hell right now as they discover how much they didn’t learn when building a company the first time compounded with the trough of a particularly nasty down cycle (at least for venture backed things).
For many, now is the time for tactics. You can impress your board by calling it a Markov chain but essentially it’s putting one foot in front of the other. You deal with random things trying to kill you by just surviving. It isn’t pretty, you can’t make videos or write newsletters about it, you just deal with it.
So what role does planning have in startups? I can hear your laughter echoing through my inbox. All mirth aside though, it’s an interesting question, right? It would be quite wonderful if a global database of product development data (costs, timelines) existed for well-known apps and services which allowed some element of reference-class forecasting to exist.
Perusing case studies from Bent Flyvbjerg and Dan Gardner in How Big Things Get Done was an interesting reflection on how much I’ve obsessed about customer-centricity when building products and companies and how little I’ve thought about partner/supplier interactions along the way. But it also made me think about the shipping container approach to building companies: for as much as Tesla taught founders that they need to vertically integrate everything, it’s a reminder that you can create incredible companies on the building blocks of others. Founders spend a lot of time convincing investors that their product is utterly unique when a lot of the time it really doesn’t need to be if it just solves the customer problem.
This is sort-of a postscript to the above post. I often get asked for opinions by founders and investors. At least in the area of company-building I increasingly feel that general advice is a very bad thing to give. These days I try to contextualise as much as possible with industry, team, product, state of market and as many other things as I can cram in before delivering the actual specifics of the experience. It’s one of the very best things about having the time to meet founders and see so many counter-factuals to my own experiences (and opinions).
“I don’t know” Clavish
Presumably esports will follow. Eventually.