Web 2.0 – Bill Gurley – Investing in Online Games

Web 2.0 High Order Bit – MMORPG
Bill Gurley, Benchmark Capital
10/7/04 We’re going to break into the business of MMORPG which are the realization of the environments in Snowcrash. MMORPG stands for massive multiplayer online role playing game and is based on the text-based online games called MUDS or Zork. The first graphical MUD was Ultima Online. NCSoft has the leading mmorpg game, City of Heros. Also, Lineage and Lineage II. There are also Shanda and Sony’s Everquest.

Why are people passionate about mmorpgs? We’ve seen the prosecution of in-world theft in the real world in Korea. Also real world retailation. There has been the resale of digital assets and accomplishments on eBay. People have shown that they can earn a real life living playing games.

There is an untapped market in the IM market for casual games and avatars. The gaming communication and social networks are colliding.

Neopets has 23 million users and is targeted at children. It has all the aspects of a multiplayer game. And offers HTML lessons so that kids can build their own guilds. And it is extremely sticky. Kids will spend a lot of time there.

Lindenlabs has come up with a new mmorpg called SecondLife. They’ve built the development tools which allow people in the world to create the world. It’s essentially a 3D programming environment.

Why are mmorpg’s a good business? They have recurring revenues in montly fees. They have network effects with increasing returns. They offer real competition and include a large amount of time engaged by the players. There is unlimited complexity available and even with the high risk of failure, there is a high reward. The average successful mmorpg lives 5 years and with a sequel can live another 5 years.