Tuesday, August 31, 2010

James Patterson: Henry Ford would be proud!

I have been travelling a lot recently for work. Since I am not a big fan of $300 cuff links, perfumes or expensive chocolate boxes, normally I wait for my flights in the airport bookstores.

That's how I suddenly realized how popular James Patterson is. At any given bookstore, I would find at least five or six of his books. I did some research and what I found was amazing: he holds the New York Times record for most Hardcover Fiction bestselling titles by a single author (56 total), which is also a Guinness World Record. Recently his books have sold more than those of Stephen King, John Grisham and Dan Brown taken together [thanks, Wikipedia!]

How does he manage to do that?

First of all - and this might be the most relevant factor, because it influences all the rest - he is not a proper author. He doesn't have sad stories about his manuscripts being rejected, he didn't publish short stories in the local newspaper and he doesn't get all poetical when he speaks about writing. In reality, he was a very successful professional in the advertising industry before he ventured into writing.

By being an outsider, he wasn't bound by the tradition or the ethics of the writing "clique" and thus could shape his books however he wanted. It turns out that his day job gave him a very interesting style. There are few characters and they are all very simple and easy to read. Chapters are two or three pages long, always ending on a cliff hanger. His prose is simple and sentences short.

In other words, his books bring to books the 30-second ad spot mentality - no waste of time, just the essentials. (Whether or not this is good literature is another question).

The second factor is that he understands the value of brands. Of course, he is not alone here: Conan Doyle's Sherlock Holmes is also a brand, as well as many other characters. However, he does not have one or two "brands" - he has about seven of them. And he develops them to cater to specific niches. He has a series of books appealing to teenagers, another one to house wifes, a third one to fantasy fans and so on. Not surprisingly, the marketing term "versioning" comes to mind.

So, with that we have understood why his novels are popular - he is really good at writing stuff that sells well to different niches. But how does he manage to be so prolific?

That's factor three - and here it gets interesting.

It turns out he doesn't write the books himself.

Yep - he has "writing associates" who do most of the heavy lifting for him.

Currently he has no less than eight of this "associates" - I believe one for each "brand". Because of strict contractual terms, they don't disclose exactly how they working relationship functions, so we have to relay on what Patterson himself says. According to a 2006 Times magazine profile:
"He'll whip up a detailed outline, then ship it off to his collaborator for a first draft. "I may talk to them on a couple-week basis," he says. "And then at a certain point I'll just take it over and write as many as seven drafts. There were a couple of them that really were a mess," he adds ruefully. "At least twice it's been, 'I wish that I just started this thing myself.'"
While this type of collaboration is not exactly new - authors such as Robert Ludlum (of Jason Bourne fame) and Tom Clancy have been doing a lot of it lately - Patterson has taken it to the next level and created a well oiled machine that cranks out about eight books a year.

So, back in the airport, I ended up buying one of his Alex Cross books and reading it on the plane.

Did I like it? No. Is it good literature? No. Will I buy another one? No.

But is it a beautiful display of business model innovation? Certainly. He focuses on what he does best - creating stories and managing brands - and outsources all the rest.

Internet as utility

I haven't had a phone land line since 2004. And for many months since then I have gone without a TV. On the other hand, I have always had an internet connection - in fact, the few days between moving into a new place and having the ISP turn on the service were so miserable that I ended up buying one of those USB mobile modems. It doesn't work too well, but it's better than nothing.

Which brings me to the point: I can't agree when people say that Facebook is a utility and therefore needs to be regulated. This is just non-sense. As Paul Carr put it:

"The test, by the way, for if X is a utility: if the sentence ‘Millions of children in Africa have no access to x’ doesn’t sound like a headline from the Onion". [the Onion is an online newspaper famed for surreal, fictitious headlines. N.A.]

On the other hand, the Internet is most certainly an utility. Maybe not for everyone, but for a lot of people that depend on it to work, to communicate and to do business. Plus, the Internet is the main tool through which citizens interact with their governments - which cannot be said of TV, for instance.

Tuesday, June 1, 2010

Quotes about the future

People love to make bold statements about the future. Normally they follow the following formula:

"In ___ years, most people will be _________."

Predicting the future is one of those interesting exercises where you get points for the impact of the idea - not the accuracy of the prediction. That's why I liked this post by Kevin Kelly about quotes on technology and the future.

Feel free to check them yourself, but here are my favorites. Can you tell which ones turned out to be right?

Yesterday, we changed the channel; today we hit the remote; tomorrow, we'll reprogram our agents/filters. Advertising will not go away; it will be rejuvenated.
Michael Schrage, Wired 2.02, Feb 1994, p. 73

I expect that within the next five years more than one in ten people will wear head-mounted computer displays while traveling in buses, trains, and planes.
Nicholas Negroponte, Wired 1.06, Dec 1993, p. 136

The very distinction between original and copy becomes meaningless in a digital world -- there the work exists only as a copy.
Daniel Pierehbech, Wired 2.12, Dec 1994, p. 158

The scarce resource will not be stuff, but point of view.
Paul Saffo, Wired 2.03, Mar 1994, p. 73

Thursday, May 20, 2010

Games - the gist

I was involved in a very interesting project about games for a few months. Here's a few learning points:

There is no single games industry. The skills needed to succeed as a company, the profile of target users and the typical budget to develop and launch a game vary wildly, with AAA console games (think Grand theft Auto and Gears of War) in one end, and casual, free to play in the other.

Product vs service. Launching a game, today, is no longer the end of a long developing process, now let's all go for a long weekend at the beach. It's rather the end of a short developing process and the start of a permanent state of alertness and reaction to user feedback. When they say games now are about the service, it's completely true. Because games now are online, they are being permanently updated and improved.

Online beats Piracy. Game companies learned with the music industry (maybe). You can pirate a CD, but you cannot pirate a live concert. Similarly, you can pirate a PS3 DVD, but you cannot pirate an online expansion pack or an online game server. Have you ever heard of a pirate FarmVille?

Brands are your friends. Remember when two guys in a garage could make millions selling iPhone Apps? Those times lasted for about one year. Now all best selling paid apps are from big brands. Why? Because when customers have thousands of competing offers, they need a way to help them make a decision, and a familiar brand normally does the trick. We are seeing the same effect happen now in Facebook games. Check out the largest gainers of every week and increasingly you will see known brands there.

Social games are nothing new. In other words, the image of the socially awkward teenager playing Nintendo alone in the basement is an exception. Games are inherently a social experience, the problem was that it took 30 years for technology to develop to the point as to allow video games to be multiplayer. Thinking back, even in the times of Donkey Kong and Asteroids, playing in the arcade in the mall was a social experience, wasn't it?

Don't take out your wallets yet. Social games are great. Zynga and its friends are making a killing. It's just like printing money. If they go IPO they will become gazillionaires. What's is wrong with this picture? One single thing: ALL of Zynga's businesses happen within another platform, namely Facebook. How was the saying about putting all your eggs in one basket? They are all trying to create separate platforms (such as farmville.com), but so far to no avail. If Facebook is the one social networking to rule them all, maybe all the crazy multiples that Disney and EA have paid for Playfish and Playdom might prove to have been a mistake - maybe there are no such things as "social" games, but just Facebook games... Just to reinforce the point, I did a quick mapping exercise. As of March 2010, 9 out of 10 top Facebook game developers were located within a 20 miles radius of Facebook HQ.

Meanwhile, beyond Sillicon Valley... In the other hand, there is life elsewhere. Companies are doing very well by simply staying out of Facebook and going for other social networks and other demographics. Mentez and Vostu dominate Google's Orkut and the Brazilian Market. There is another company doing the same in Russia. Facebook? No thanks.

In short, there is a lot going on in the games industry. As a parting thought: Games is the only media industry that has not been disrupted by the internet. Instead, games companies - to different extents, of course - are riding the wave and learning very fast. The figures are there to prove the point: While TV has remained stable and newspapers, books and magazines have been shrinking, games have been growing at a CAGR of 5%.

Tuesday, April 13, 2010

It's the network, stupid

Zynga is on a roll. It's like magic: every new social game they launch on Facebook gets millions of users almost overnight.

At first, it's hard to understand how they do it. Their games are good, but not so much better than the competition. There is nothing exceptionally ingenious about their monetization strategy - they sell virtual goods like everyone else. Even the names are the same - PetThis, AcquariumThat, DinnerThis, IslandThat.

So what's the trick?

It's the network. Zynga's secret was to build a large user base, as fast as fast gets. From then on, it just gets easier. The so called network effect is well know in business and management (I mentioned it before in this post). What is interesting is that, due to the nature of social games, it's influence here can be absurdly strong, and probably explains why, comparing the number of users, Zynga is two times as big as the next competitor (which is Facebook itself).

And this advantage will only get stronger. The only thing that could change this would be some disruptive development, such as a complete new game format that gets everyone by surprise, or regulatory changes.

But I think this train has left the station. Zynga will remain the number one, and competitors will have to learn how to live with it.

[update] Just as expected, the threat to Zynga's dominance came from a regulatory change - not from regulators, by from Facebook itself. By severely limiting the use of viral channels, Facebook diluted the power of the network effects a bit. Evidence: Farmville lost about 20 million users in the last 3 months or so. [June 7th, 2010]

Monday, April 12, 2010

Free+simple beats Paid+complicated - an online video odissey

Last weekend I wanted to catch up on my movies list.

You realize that you live on modern times when you discover that DVD rental stores as as good as gone today. You have to look really hard to find one, and when you do, it will probably be either (a) expensive, niche focused and "artsy" (b) far from where you live or (c) creepy, with a large porn section in the back.

I live very central, so whereas I could find many souvenir shops open and selling I-heart-London T-Shirts, there was no DVD store in sight.

"But this is the 21st century", I thought, "I can certainly solve this problem online". Oh, how wrong I was.

I first tried to sign up for the European equivalent of Netflix, called Lovefilms. I loved Netflix when I lived in California and the prospect of all-you-can-eat movies in the mail was very exciting.

So I filled up the sign up form, selected a plan and was ready to put together my movies list. But then my credit card got rejected. Not one credit card - all of them, three or four, from different banks, shapes, sizes and colors. The reason: the website use one of those security systems that check you billing address, and they only accept UK addresses.

It is possible that Lovefilm have a good reason to do so, but I suspect that the true reason is as simple as saving having a poorly planned payment interface that does not accept non-UK postal codes. Whatever the reason, no Lovefilm for me.

The next obvious option was iTunes. They do actually accept PayPal, but I had another problem: iTunes is like getting married to your computer. Once you open an iTunes account using one specific computer, it is for the rest of your life. It turns out that the computer with my iTunes account had crashed and was in the process of being restored - or else I would lose all my libraries, playlists, purchases, the whole season of Lost. If I opened another iTunes account, my life would be a mess - duplicated sign-ups, redundant libraries, chaos and destruction. So, no iTunes movies for me.

Amazon could be a nice option. Back in the day, they had a nice online rental system called Unbox (since then renamed to something else). I love Amazon and buy even my toilet paper from them if I can, so, eagerly, I went to Amazon.com. But - no! The automated geoblocking system caught me - who do you think you are, trying to fool us that you are in the US? - and redirected me to Amazon.co.uk - which doesn't have any movies rental service.

You see, I was trying hard. I had been to three well-known websites, and still could not get my movie fix. Each in their unique way, they made my life complicated - limited payment options, DRM, walled garden systems, geoblocking.

Were I not a law-abiding citizen, I would have simply downloaded whatever movie I wanted to watch from BitTorrent. Or I could have watched it in a streaming website hosted in Croatia. Or I could have found a link and downloaded the file directly from some online storage website. All free. Would that be illegal? Yes. Do most people care? No.

And this is the sad conclusion: people keep on downloading illegal files not only because it's cheaper, but also because it's easier. Users don't want to jump through hoops just to watch a movie.

I know I don't.

Friday, April 9, 2010

Every eyeball has a price - literally

The biggest innovation brought by Google (and largely responsible for it's ground breaking success) was that under a cost per click systems companies now could measure ROI much more precisely. Instead of relying on indirect audience measurements - number of newspapers sold, TV audience ratings - advertisers now could know exactly how many people clicked on an ad.

The evolution of CPC was the so called cost-per-action, in which the advertiser pays when the user actually do something - spend time on a website, accept an offer, buy a good.

However attractive these types of advertising deals are, they all had the same problem - there is no real incentive for the audience to engage with the ad or respond to it. And the click through rates and conversions rates showed it. For every thousand ad impressions, if you get 20 to click on your ad, you should consider yourself lucky.

This is why I was pleasantly surprised when I read that some companies are now offering money for users to watch an ad. The basic idea is similar to the "internet offers" made famous in the social games industry (sign up for Netflix and get 50 gold FarmVille coins), but less scammy and much more straight forward. Users sign up for an ad network and get cold, hard cash for watching video ads.

This is very interesting. And much more so because in the early nineties, Bill Gates predicted that something similar would happen with spam and email - advertisers would pay users if they opened and read commercial messages.

As with most futuristic predictions, even if the details of the idea were incorrect, the general idea was in the right direction.