Back during college, I learned an interesting lesson about the varying perceptions of participants in an interactive environment. Everyone's got a preference for how "gung ho" they are in a given set of circumstances be it a baseball game, board game or just regular conversation. We can generalize these degrees of participation into three archetypes that we'll call Divers, Waders and Swimmers*

Divers represent your hardcore users who will jump right into the middle of any cool or fun opportunity. These would be Early Adopters of web tech or Hardcore game players. Swimmers are those want to be engaged, but don't want to look silly. Waders are those who are perfectly fine hanging back and observing others. You can map this to your own social group around a social instance of Rock Band. Some people just have to be singers (Divers), others want to be involved, but don't really want the added obligation of showmanship that comes with the mic (Swimmers) and then there are the fans who just love to watch the band play (Waders).

Everyone wants to be catered to in some level and nobody wants to feel like they made the wrong choice about how they're chosing to be involved. I should add that the application of these labels can easily change for people. One person might be a Diver in one situation and a Wader at the next.

I believe there might be an interesting intersection between these archetypal levels of interaction with and contributions to Social Networks. Take a quick look at this from last month's Forrester Reseach report:

Ok, so when we're thinking about Social Games, how do we map this activity graph to the categorization of participants? It seems like there are some pretty obvious parallels. Without delving too much more on this topic, I'm going to throw out the following categorization of these web activities and the archetypes they relate most directly to. Future posts will explore this relationship more as I figure it out.

I'm willing to entertain that there's a possibility of a stronger linkage/overlap between this group of Waders and Swimmers, but that too is a conversation for later.

Games and activities for each of these categories that are well represented in various Social Networks. Interestingly, the Forrester report notes the addition of a new activity category: Conversationalist. Key demographics on this group show that Conversationalists are 56% female and 70% of them are 30+. The first and most immediate thing that jumps to my mind is this is core justification for Twitter and why it's got staying power. Twitter has worked to create if not actually expand a new category of web interaction. Sweet!

So this brings me to my big question, is this relationship just a nice coincidental linkage or do these activities betray deeper use cases in Social Media that can be directly targetted by games and genres that are not presently represented?

Definitely seems to imply some intersting possibilities. What do you think?

 *One of the papers from my profs back in school citing Waders/Swimmers/Divers can be found here.

With that out of the way, I have to admit that I'm wrong. While I still stand by everything above, I'm incorrect to say that Facebook is dead...It's actually undead. It's been brought back to life and theoretically made "useful" by the large scale usage of popular casual games like Mafia Wars and Farmville.

As the world's only Undead Social Networking site (no MySpace, not you..), Facebook is posting profit in one of the worst economies in recent memory. So how could this be bad?

They're going to slap a mandatory credit usage on virtual currency sales in the platform.

And why does this suck?

Games from Zynga, Playdom, Playfish and others have MADE Facebook a daily desination and are the reason it has reached profitability in such a short time.

It's true that Facebook did create an open ecosystem for developers. (Really they just lured us in with promises that they are now changing) It's also true that folks have made millions off the applications in the form of advertising, direct purchases and virtual good sales. But now in the ultimate show of "Thanks", Facebook wants to "discuss" with major developers about making their own, largely failed, virtual currency "Coins", a standard for the platform...

It wouldn't be so bad if they actually just managed the cash, but the truth is that Facebook is allegedly looking at Zynga's revenues this year (reportedly over 150 million) and is a bit disappointed that they didn't get enough of a taste. It's said that Zynga pours money back into the platform to advertise. But why settle for a few million here or there when you can take 30% off the top? Perhaps some people are not as generous as Mark Pincus with their advertising budgets.

Back at the beginning, Facebook told developers that they could monetize their applications however they could. This got the content they desperately needed and now it's time to turn the screws. In Texas they say you "Dance with who brung ya". Guess that's not true anymore at Facebook. Developers getting screwed. Does this sound familiar?

Both EA and Zynga have taken steps to integrate and insulate themselves respectively by linking via Facebook Connect via their own sites Pogo.com and Farmville.com. Frankly, Farmville has legs and at least another 75-100 million in revenue to earn. Why share that with Facebook if you don't have to? Content is King and I expect other developers to quickly follow suit with standalone sites of their own for heavily played games.

In the end, it's really going to be the second and third wave of developers that are going to feel the brunt of this storm. While the big guys are in position to negotiate themselves into better deals and lower percentage, the small guys will feel a nasty pinch. As is usual, under funded indies get the worst of it. I would really hate to be "the next thing" on Facebook when this change goes into effect.

So thanks Facebook...You asked us to help. Some of us got rich (but not most of us) and now you want to take a bite out of me. No thanks. You can keep your bad UI and your application spam. I'm out!

*It's interesting to note that 3.24% of Facebook users are actually dead.

Protecting the Idea

There are two main groups that your ideas need protecting from. These are Publishers and Yourself. Let’s take those in reverse order.

Protecting the Idea from Yourself

This is always the last person you suspect, but it almost always the individual that hurts you the most. Generally, a poor company structure or development team will cause the most headaches. So how can you protect the Idea from Yourself?

•    Setup a company and get all of the stakeholders to sign the idea over to the company. - Your team can split the ownership of the company with you, but fundamentally, the best way to protect it is to give it away to the company.  Whether you think you game has a big chance or not, there's alot of wisdom in setting up a company. One point to make right now is that when you form a corporation (if you so choose) you need to remember that you become a share holder and not the owner of the content. You own some or all of the business that controls the property, but unless you specifically call it out, your corporation will be the owner of the IP and source
•    Sign contributor agreements with anyone doing work – Make sure that any friends or associates know exactly what they’ll be getting out of doing the work to make the game possible. It’s important that the company has the rights to the work, so give them stock, pay them cash, but most importantly make sure they understand and sign the agreement. It has nothing to do with greed, but with clarity so that everyone understands up front, before they do any work what the deal is going to be.

Protecting the Idea from Publishers

As should be clear by now, the odds of your idea really coming out of the blue are pretty slim. However, it is reasonable to think that you might have some USPs (Unique Selling Points). Often, game publishers are looking for exactly these nifty and novel ideas when trying to find new projects to fund. When it comes down to any kind of danger surrounding the idea, it’s when the USP comes out of the bag that you’ve got a potential problem. Ironically, USP are often obvious combinations that don’t make sense to not already exist and can be easily exploited in a completely different game concept. To protect yourself from publishers, I recommend:

•    Don’t talk too soon – Approaching a publisher is best done when you’ve got a working version of the game that you’re willing to let them see. They prefer this because you’ve shown that you can get things done and it likely means a cheaper investment for them to help you finish the game. Cheaper = Less Risk = More likely to get behind you if you’ve got something novel. Waiting also helps because they will be more incented to work with you rather than to try to beat you to market with a competing game.
•    Sign a Mutual Non-Disclosure Agreement- If you can…but realize this likely means nothing. Lawyers will disagree on that point, but remember this: Contracts are only relevant when you intend to pay to defend yourself against them. Some larger publishers, like Nintendo, may not even be willing to sign anything. Effectively, they deal globally and as such cannot guarantee that they don’t already have an idea like yours in development? Heard of Yoga Wii? I pitched a game almost identical to it to Nintendo, sans Balance Board almost 3 years ago. Am I upset? No way! Yoga Wii Exists and Wii Fit was in development before I had even brought the idea around.
•    Sell them on yourself and your team – Publishers who think they’re dealing with a good team will be more likely to try to engage you rather than screwing you. Be over prepared with Team Bios and your past experience. Make sure they realize you’re for real and not just a group of guys with a dream.

•    NEVER! EVER! Let a Publisher Ruin your Game – It is ALWAYS a preferred outcome that a game sit on the shelf than a publisher come along and ruin it. If you’re of creative mind enough to get to the point where you’re having those discussions and meetings, I’ll assume that you are capable of killing your sacred cows. With that said, Never let them change anything. They take you as you are or not at all. If one publisher will give you money, so will another one. Keep your integrity and don’t let them push you around for a couple of bucks. Once you get on that track, it’s all downhill from there.

Other Risks

Without doubt, there will be others that you need or will want to discuss the idea with. A regular NDA should suffice here with the earlier caveats. However, the best thing that you can do is to get good at vetting people. Instinct is something a new CEO cannot live without. In short, You can’t do good business with bad people. Learning how to spot them quickly is important to your ability to survive.

That’s it for now. Please post any questions you might have in the comments or drop them to me on Twitter as @dclingman!

I find this a particularly good subject for my first post on running a start up studio. Running a small business will consume you to the very core and it's critical to have a number of things in order before undertaking what will become the biggest challenge that most people will ever undertake.

Here's an incomplete but focused list of things that you must have in order to start a game studio.

1. Basic Business Knowledge - You'll need to have a basic understanding of the kinds of business entities and how they operate. Detailing these is for a later post but you can generally figure them out or look here. Once you have made the right selection, you can use a number of online services to get them setup such as LegalZoom.

2. Legal Help - Have discussions with a few lawyers whom you might consider engaging to help review or draft any contracts that you'll need along the way. There are several agreements that you should have right from the go including a Mutual NDA and a Contributor agreement for people who are working on your project that are not owners. Be sure to ask any prospective attorney for some client references and be sure to call them to inquire about the quality of service they felt they received. If you have any "weird" feelings about a lawyer, just keep looking.

Do NOT try to draft you own garbage agreements that you've cut and pasted from others on the web. I've done this in the past as a cost savings measure and I paid a price for it. People who are more experienced (aka Publishers) can spot these hand drafted documents very easily and it will impact your negotiations. If you need a cheap(-ish) solution, check out Tom Buscaglia's Game Dev Kit which has several game centered agreements for a few hundred dollars and is well worth it!

3. A Mentor - This is incredibly important. This is someone who's been there and can give you advice. This needs not be someone who's running a studio now, just someone who you can rely on to give you the best guidance early on. As a budding CEO, there's a specially reserved spot of isolation in regards to tough decisions and information about situations that you can't always share with other team members. It always helps to have a friendly ear that you can bounce your ideas off. You can find mentors in your local community in a number of ways. Be on the lookout for opportunities to meet the studio and technical leaders of your local community. Enroll them in your success by letting them know your goals and that you're serious about making things happen. Entrepreneurs are required to help each other, so don't worry about asking. They will be happy to help. At the same time, be respectful of their time and don't wear out your welcome.

4. Good Ideas - Notice that I didn't say Great ideas. You can get a significant amount of mileage on good ideas. But good ideas need to go hand in hand with...

5. Outstanding Execution - This is the defining characteristic of any software company. You want the best people working to create the best products and ideas they can. Give them whatever you can to make this possible while at the same time remembering that you're running a business so watch your money closely. For a good example of this, check out Mike McShaffrey's outstanding presentation "Spare No Expense! Aeron Chairs and Starbucks for Everyone!"

6. Patience - Cliche' I know, but critical. I worked for a long time to land that first client. You'd be surprised how it snowballs when you do right by your customers. You worry about getting the best work out there that you can produce and the money and business will take care of itself.

7. Guts - Seriously.  It takes alot of guts to put your future at risk for a chance on yourself. All CEO's and Founders are scared that they are not good enough at one point in time or another. You will be no different. You need to be playing like you don't need the money all the time and be sure you learn to play poker. It did wonders for my business skills. (also another post...)

And last, but not least...

7. A Determination to be Rich or to be King. - This is a well known founder's dilemma that you should contemplate right from the beginning. Whether you're making a game that's going to change the world or just want to cash in on a fad, you need to have clear understanding of what your goals for the business are before you have any chance of accomplishing them. More importantly, If you want to be a creative talent, then let someone else you can trust run your company! There are many people who enjoy the business side of things and its not a requisite that you handle bookeeping and business development yourself. In fact, it may be *better* to let someone else do it. Noam Wasserman cited the Rich vs King options and can be viewed in more detail here. For now I'll briefly discuss each of these in turn. 

Being King - As a regal ambassador and controller of your own destiny, being King sounds pretty cool. Most entrepreneurs who want to be King desire to keep control of the company for it's lifetime. Those who are looking to be King often are wanting to brand the company alongside their own personal identity. The company becomes a sort of lifestyle and extension of your person. Being King is cool, but it also puts some very interesting limits on you. For example, to keep the crown, you'll probably give up less of the equity in the company. This in turn will cost you more in up front money paid to employees that you might have offset with stock options. More importantly, if you're sitting on a great idea and a market space that's moving quickly you may very well sacrifice whatever opportunity to create a more valuable company. Timing is everything, but when you're King even of a little rock, at least you're in charge of your destiny right?

 Being Rich - This is the path of the sell out right? The guy who is ruining the game business with more copycat, unimaginative crap right? Well, let's not be so hasty. Fundamentally, the decision to be rich is structured with the mindset that we give away large chunks of the company in exchange for being able to bring in the most amazing team to build out a fantastic, competitive organization that creates great products in the shortest period of time. Have you ever wondered why there's a company right on the edge of every fad in the game business? People who are seemingly right at the beginning of an opportunity and are making alot of money on iPhone and Facebook. Part of the reason these companies spring into action is because they have a strong precept that they can take to get funding and immediately take a large chunk of the market right from the go. Companies like Zynga, PlayFish and Ngmoco all had investment rounds that fueled the strong push and great games out in front of an audience that quickly became addicted to their efforts. The goal of these groups is to be acquired by a larger company like EA. You need to be big, well positioned and ready to sell what's hot if you're evaluating the Rich option. 

There's no right or wrong answer here, but founders of companies who are generally successful have made this decision at the beginning and so long as they stay consistent as they made decisions for the company, they are fine according to Wasserman. In my experience, most game developers that I've met want to be King. That's largely because they want to create meaning through their games, but also because believe that being Rich goes right along with being King. This is rarely the case because they are almost mutually exclusive. The actions taken to be King will thwart the same decisions to be Rich. Your decision on how to operate the company and execute your plans will be driven from this one decision.

Consider, Steve Jobs was King, then became Rich, then had to fight to stay King, then became ousted and then became King again, etc. What does that mean? It means that Steve Jobs is focused on a broader allegiance to changing people's lives through computing and technology and not to a single title. He's also a bit of a serial entrepreneur. He had to do something with all that Apple money right?

 Just to mix it up, here's a short list of things that people think you have to have, but are not a necessity:

1. An MBA - Simply put, very useful but not required. I've considered going to business school, but never had the time. The education will save you time and perhaps some expensive mistakes, but it's not a requirement.

2. An Office - While you'll need a place to work, you don't have to have a physical space. There are a number of outstanding options to renting an office. In Orlando we have the C0-Lab which is shared work space that's complete with a conference room. While it may have changed, Kyle Gabler and Ron Carmel cited that their offices for 2D Boy were in whatever San Fran coffee house they wandered into. Don't let this get too far into your head. It's not critical right away and probably won't be a for a bit.

3. A Publishing Deal - If you're an indie, you don't need to have a publisher yet. Get your game into shape and then you can worry about deals. Give them something that has them wanting more and the deals will come.

4. Money - If you have a computer, time, talent and motivation, you don't need cash. There are several places online where you can give your game an audience. Don't let the lack of funding scare you. All three of my start-ups were funded by VLC (Very Little Capital) that I bootstrapped off funds that I had on hand. There's a price to be paid for this approach and it's largely in time and opportunity, but at least you don't have to sweat personally being tied to a big debt. If you're doing good work and can communicate that to people, they will want to get involved somehow.

Good Luck and Get Back to Work!