Saturday, January 12, 2008

Deep Appeal and Ad-Supported Business Models

I talked with a friend of mine yesterday and he reiterated his conviction that advertising-supported games are the way of the future (and, coincidentally enough, as I write this, my wife came into the dining room with a Christmas card buried in the mail stack we picked up from the post office from the very guy – Hi Paul if you’re reading. Nice picture of the family). Anyway, Paul thinks advertising is it, and there’s a lot in what he says. Advertising support means cheap or free games, and customers love free.

Sometimes.

TCSDaily has an article titled Google the Destroyer that points out the dangers of ad-support becoming the dominate business model. Namely, quality and diversity of content suffer, because in that world, the content (game, in our case) is not the product, the consumer (that would be you) is. And the consumer is not the customer, the ad buyer is. That doesn’t mean there can’t be good content, just that good content – and the production budget needed to create it – is harder to justify. Take broadcast TV. Sure, popular shows have higher ratings and thus greater ad revenues, but that reduces each potential viewer to a binary data point. Either you watch, or you don’t. It doesn’t really matter how engaged you are or how happy you are watching the show. A show that you love and one that you just happened to watch because it’s on both count that same. That’s how a show like Firefly with devoted fans gets cancelled while a ton of sitcoms with marginally engaged – but larger - audiences survive season after season. Most TV shows strive for a shallow appeal to a broad audience because there’s no way to monetize deeper appeal (at least not directly within the ad-supported framework. Merchandising deals, movies, books and the like can tap that deep appeal, but those things aren’t supported by advertising). And all things being equal, deeper appeal is more expensive to get. There are some TV shows with great production values (and high cost), but I have a hunch they are counting on non-advertising revenue at some point.

So, what it all amounts to is, an advertising-supported business model doesn’t work very well for niche markets. About the only way to make it work is to pick a niche market with a really, really wealthy audience. If your niche happens to be people willing to drop a half-million on a new Island Packet Yacht, then you might be able to charge enough for your ads to pay the rent. (They are really great boats, BTW, if you’re in the market…). So, I think I’ll modify what I said in paragraph one. Customers like free, but they usually don’t love it.

Hmmmm, so what kind of a sailing game can I make?

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