This piece was published in October 99 in Wall Street Journal Interactive.
Up until September 1st, the Total Entertainment Network (www.ten.net) was the online game service for the hardest of hardcore gamers. It was a place where you went to "frag" people in violent, first-person shooters like Quake and Unreal, to engage in profane banter with other players before and after turning them into "gibs" (the slang term derives from "giblets," which may give you some idea), and to hang out with like-minded gamers. TEN was the sponsor of the Professional Gaming League, an organization that runs computer gaming tournament, with the "finals" at heavily promoted sites with the press invited, a rather bizarre attempt to make a professional sport out of computer games that has made celebrities (at least among gamers) of people like Thresh, winner of the 98 tournament. And TEN sponsored LAN parties--imagine a warehouse-like space thrumming to a relentless techno beat with noseringed twenty sometimes standing at computers all aroud the space and fragging each othher with abandon, high-power speakers roaring with explosions.
On September 1st, TEN became pogo.com, a fun, friendly, family-oriented service for everyone, featuring such happy games as Hearts and Euchre and online Bingo. Its new site no longer boasts black backgrounds and self-consciously hip graphics, but primary colors and a fun, friendly, family-oriented look.
It is hard to imagine a more drastic makeover.
What's going on here?
Just this: TEN was hip. TEN was hot. TEN was unprofitable.
TEN was founded in 1996 as a simple technology play: They had, so they said, solved the basic problem of online gaming. Two problems, actually: Latency, and the difficulty of finding opponents online. TEN provided low-latency connections for people who wanted to play games like Quake online; that's useful, because in a fast-moving game like Quake, you want your computer to connect to the other players' as quickly as possible. On the public Internet, lag times sometimes make games slow and frustrating to play. And TEN provided player-matching services, letting you hang out in a "chat lobby," choose a game to play, and start up almost immediately, instead of searching through web sites, looking for the IP addresses of game servers until you finally found one you liked.
TEN planned to charge for their service--initially by the hour, later a flat monthly fee.
That didn't work. For several reasons: For one thing, TEN had competition from the start. MPath, another venture capital start-up, had essentially the same business plan and the same service. And a slew of established computer game companies launched similar services as well--Sega's Heat.net, Microsoft's MSN Gaming Zone, Sierra's Won.net. Most of them charged nothing for online play. And publishers began to provide free online play through their own proprietary services, like Blizzard's Battle.net, building lobbies and connection to their service directly into their game software, making it far easier for gamers to use the publisher's service than anyone else's.
Player-matching became a commodity. Most people offered it for free. People wouldn't pay for this. TEN's initial business plan was screwed.
Over the course of 1996 and 97, both TEN and MPath transformed themselves into "aggregators." They launched classic games, like Spades and Backgammmon. They shifted more and more of their services into free, ad-supported areas, offering some "premium" services for a flat monthly fee. The idea was to reach a critical mass, to attract a broad enough audience that ads could pay the freight.
But everyone and his brother began offering Spades and Backgammon and the like. These games are public domain, and are not difficult to program; they became a commodity. Today, you can play classic card and boardgames on a dozen sites on the net, including Yahoo! and Excite and Gamestorm and Won.net.
And--Spades doesn't dovetail with games like Quake very well. A Quake player might while a little time playing Spades--but a typical Spades player is never going to decide to "graduate" to Quake, to become a hardcore fragger, to sign up for that premium service. Usage numbers rose when the classic games were introduced, but not enough to pay the bills--and the basic notion was schizophrenic in the first place. It's hard to be all things to all gamers.
But in the meantime, a plucky little Boston-based operation called Gamesville showed that it was possible to make money with ad-supported games on the net. Gamesville offers online Bingo; registered members win cash prizes when the play. Essentially, Gamesville shares a portion of its advertising revenues with its customers. It has attracted 1.6m registered users, as reported in the Journal it is one of the "stickiest" sites on the web (meaning people stay on the site for long periods of time), and it has operated in the black since the fourth quarter of 1997. It's one of a handful of profitable Internet companies--and one of an even smaller handful of profitable online operations.
Founded on a very scant capital base, Gamesville never conceived of itself as an online gaming company--but as a targeted marketing company. It implemented games as a way to attract large numbers of eyeballs, but from the very start tailored its games to the demands of advertising, requiring demographic information from its users to pipe them ads on the basis of demographics. In short, it had a workable business plan from the inception, and has been highly focussed on achieving its goals.
TEN--rather, pogo.com--now wants to be in this space. It's retaining its classic boardgames, it's launching "gameshows" along the lines of Gamesville's Bingo and will be entirely closing down its for-fee operations.
Meanwhile, MPath, too, has adopted a different approach. Last year, it introduced voice chat to its service--a system that allows people to speak to each other (in half duplex mode, meaning only one person can talk at a time). Voice chat proved enormously popular, with half of service usage consumed by voice chat, and many people coming to chat, or sing a long, or use the service without ever playing games. MPath quickly launched a second serve, Hearme.com, to cater to non-gamers. And it went public, earlier this year, with a prospectus that barely mentioned that it had ever been a gaming firm: It is a virtual community company, apparently, with MPlayer.com being merely one example of the kind of community it can create--that one aimed at gamers, of course.
Neither company yet operates in the black.
In essence, they're still thrashing about for a business plan than works; they've failed twice, and are now on their third shot at the brass ring.
Will pogo.com succeed? Possibly--but it has more competition than Gamesville (1.6m registered members). Uproar (2.6m members), a direct Gamesville competitor, is taking the same approach, and went public last year for $7m on the Vienna exchange, of all places. Sony Online Entertainment's online versions of Jeopardy and Wheel of Fortune have similar appeal (4.2m members). Pogo.com has real competition--and it may be no easier to make this plan work, in the face of such competition, than its previous ones.
But there is a deeper lesson, here, one that all Internet firms should take to heart: The failure of TEN and MPlayer show that an advertising-supported service, like a broadcast TV show, must cater to the lowest common denominator. Small revenues per customer means you must attract the widest possible customer base. That means games like Hearts, and Bingo, and Jeopardy Online. It doesn't mean Quake.
If you want a mass audience, you must be accessible to the masses.