The gaming industry has had plenty of watershed moments in 2020 as consumer entertainment habits have shifted in response to the pandemic. One trend has been the crystallization of MMOs as social entertainment hubs that serve more needs for users than ever before.
Following my survey of gaming-focused investors on trends in the AR/VR world several months ago, I pinged a handful of investors to tap their thoughts on the shifting trends and opportunities in social gaming.
- Hope Cochran, Madrona Venture Group
- Daniel Li, Madrona Venture Group
- Niko Bonatsos, General Catalyst
- Ethan Kurzweil, Bessemer Venture Partners
- Sakib Dadi, Bessemer Venture Partners
- Jacob Mullins, Shasta Ventures
- Alice Lloyd George, Rogue
- Gigi Levy-Weiss, NFX
One thing that most investors expressed excitement around was the widening entertainment ambitions of social platforms, as concerts and movie screenings find homes on gaming platforms like Fortnite.
While evolving free-to-play mechanics continue to elevate the experience of single-player titles into something more living and breathing, platforms like Roblox have found areas for growth that seem more unique, developing into destinations for users to communicate and share.
“It’s where culture is created,” Madrona’s Daniel Li told TechCrunch.
Not all of the respondents shared the belief that a gaming platform like Fortnite would grow to become the next Facebook. General Catalyst’s Niko Bonatsos pointed to adjacent platforms like Discord or Twitch as the constants that would remain as consumers cycled through different platform ecosystems. Other pointed to the the still-disjointed experience switching between mobile and desktop experiences as a yet-to-be-solved stumbling block.
Building the metaverse and building a popular casual mobile game are two different things. Most investors I talked with emphasized how much the pace of scaling has accelerated across categories though with breakout hits rising faster than ever while disasters seem to grow evident just as quickly.
“I think that you look at Among Us, and Cyberpunk on the other side, anything can happen much faster and more extreme than it used to be just because of distribution,” Rogue VC’s Alice Lloyd George told TechCrunch.
Read below for the full answers; some responses have been edited for length and clarity.
Hope Cochran and Daniel Li, Madrona Venture Group
The idea that the next big social network will be an MMO seems to be a trendy take in the VC world, what are the roadblocks to this actually happening?
Daniel Li: Hope and I were trading some notes and part of our thesis is that gaming is the future of social and for Gen Z, gaming is replacing not just old games, but it’s replacing TV and Netflix. So instead of going to watch music videos on YouTube, you’re going to a concert in Roblox and that’s a social experience with your friend … instead of going to the mall, now you’re in Roblox. It’s where kids are hanging out and it’s where culture is created.
Hope Cochran: And in COVID, it’s the only place where they can hang out and I think the gaming industry has done a really fabulous job creating another social engagement that we need right now. I don’t want to focus too much on kids, but parents are becoming more accepting of their kids in the games because there is this social engagement and, for instance, I can see that my child is upstairs connecting with his four best friends. They log in together and they play. They normally might be out on a soccer field but they can’t right now so I think parents are becoming a little more comfortable saying, “Oh, he’s playing with his friends.”
Gaming has seemingly become a more “mainstream” area for investment, as someone who has been in the space a bit, what’s different about investing in the gaming sector?
HC: It’s very hard to find that balance between creative or understanding what might become a hit and a real business mind. So my experience has been that when you look into a gaming company as an investor, it’s actually more driven by math, stats and analytics, and then you have a core team who has the creative juices, so I try to look for that kind of dynamic.
So, who is developing what the users will love and who is analyzing it and how are they responding to what the users are loving. I do think there’s a point where a team develops a game and it’s mostly a creative process but then you have to kind of toggle to the analytics. It’s where the mathematicians meet the magicians and there needs to be a combination of that within every game.
What’s different about how popular games and MMOs are scaling these days? Have you seen any interesting growth hacks or strategies that seem promising?
DL: I think there are more and more of these cultural memes that just seem to come out of nowhere, like Among Us kind of just sat there for two years and streamers started picking it up and now it’s super popular. I’d say for nearly all of those, they’re going to be a social category of games, you don’t see a game like Cyberpunk come out of nowhere without any marketing dollars behind it.
So I do think one of those new channels is getting influencers to talk about your games, and typically I think for those it’s not actually the big influencers picking it up, it’s a whole bunch of small influencers all starting to play a game and have it start to build up steam that way. It’s more likely the Call of Duty’s that can hire the big streamers and pay them millions of bucks to play a new game, but I don’t think there’s a new to go-to-market for smaller studios around that.
How can MMOs, which feel like fundamentally active experiences, provide a better passive experience for users that may be more interested in the community than playing a first-person shooter or battle royale? How do games become more approachable to a wider audience?
DL: A lot of people are saying these single-player games aren’t really fun games anymore, they’re just like cinematic experiences. Like playing Cyberpunk for 60 hours versus binge-watching three TV series, it’s definitely a different experience. The thing that’s actually more interesting here is the virtual events that are happening inside these games. Thinking about what the next Twitch looks like, it’s probably some kind of experience where you’re inside the game doing something more passive.
Niko Bonatsos, General Catalyst
The idea that the next big social network will be an MMO seems to be a trendy take in the VC world, what are the roadblocks to this actually happening?
The next social network is not going to be an MMO and it’s not going to look like any social network we already have. If you look at where people are spending their social time today, it’s across instant messaging networks.
MMOs build community but those communities often graduate and move on. Younger people graduate from Minecraft to Roblox to Fortnite to maybe even Among Us lately.
These are worlds that people spend a lot of time in but they’re often socializing on platforms like Discord or Twitch alongside. They can also be great places to watch shows and consume content that others have created for the platform. They don’t have the full social network effect (at least right now).
People aren’t creating content in these MMOs and sharing to go viral in the MMO. Often, the content that gets created/captured goes viral on places like Twitch!
We’ll continue to see innovative MMOs with new mechanics and ways to engage people. But they aren’t the next social network (yet).
Gaming has seemingly become a more “mainstream” area for investment, as someone who has been in the space a bit, what’s different about investing in the gaming sector?
Gaming has always been a great place to invest and some gaming properties have become huge businesses. What’s different is that in a lot of cases it’s taken many years to get there — you’ve seen that with Niantic, Epic and on the infrastructure side with Unity.
So you’ll see a lot of seed or series A stage investing in gaming. Development of these worlds takes a ton of capital and time to develop. Cycles are long. It’s tough to get right, especially on the content side, but when it hits, it really hits.
What’s different about how popular games and MMOs are scaling these days? Have you seen any interesting growth hacks or strategies that seem promising?
Live operations have become really important in MMOs. There used to be expansion packs that would come out every six or 12 or 18 months that let people re-up on a game and get into new content. Now, new features and content are released all the time thanks to the rise of live-ops powered games.
Users never run out of things to play. This is true for both MMOs and casual/mobile games. I think growth hacks that are interesting are ones that make it easy to create and monetize on a platform. If you make it attractive for developers or the influencer set, boom, you’ve got content and experiences for your users.
On the infrastructure and tools side, it’s not an intentional growth hack on the part of the Discord team but when Among Us took off this year, you saw Discord in the app store as a top-five app. New interfaces and gameplay mechanics can really help these ancillary companies take off.
How can MMOs, which feel like fundamentally active experiences, provide a better passive experience for users that may be more interested in the community than playing a first-person shooter or battle royale? How do games become more approachable to a wider audience?
It’s all about the content. MMOs can have broader appeal by focusing on content consumption crossovers. Especially now that we’re spending so much time apart, MMOs could be focused on watching a movie, attending a concert or seeing a DJ set together with your friends or other fans. It may seem obvious but it’s all about the content and creating the opportunity for shared, not passive, experiences. These kind of experiences get more diverse users to join MMOs too.
On the social infrastructure side, what startups do you wish to see in this space but don’t yet?
I really like what the teams at Bunch and Powder.gg (two GC investments) are doing and want to see more companies that are making it easier to create, share and draw people into content in these virtual worlds.
7 investors discuss augmented reality and VR startup opportunities in 2020
Ethan Kurzweil and Sakib Dadi, Bessemer Venture Partners
The idea that the next big social network will be an MMO seems to be a trendy take in the VC world, what are the roadblocks to this actually happening?
Large MMO-style games actually take a ton of time, effort and money to get into the world and in the hands of players. While mobile devices are becoming more powerful with every release, the experience of playing on mobile still doesn’t fully compare yet to PC/console. Once that gap completely closes, we will see the rise of even more Roblox’s and Fortnite’s as social platforms.
Gaming has seemingly become a more “mainstream” area for investment, as someone who has been in the space a bit, what’s different about investing in the gaming sector?
The outcomes are even more binary than most other sectors — and it’s hard to predict fun! In the SaaS world, it is much easier to launch products and get feedback and metrics quickly.
In gaming, especially for console/AAA titles that take millions of dollars and years to develop, you don’t really know until you know. Mobile gaming is much easier to develop for and rapidly iterate to improve playability and stickiness but much more difficult to acquire and retain users profitably.
What’s different about how popular games and MMOs are scaling these days? Have you seen any interesting growth hacks or strategies that seem promising?
Most gaming startups are now using social platforms like Twitch and Discord to engage communities of fans early on. Nearly every successful game of the past few years has come from regular players watching their favorite streamers, playing with their friends and capturing moments for others to see, generating extremely rapid organic/word-of-mouth adoption.
The team at Among Us attributes some early growth to a streamer in Korea greasing the wheels for a meteoric rise on Twitch. However, a lot of companies come with a vision of paying streamers to promote their game, which tends to be costly and much less scalable than the hard, difficult work of building a game players love to repeatedly play. It’s also inauthentic, and prospective players can usually tell.
How can MMOs, which feel like fundamentally active experiences, provide a better passive experience for users that may be more interested in the community than playing a first-person shooter or battle royale? How do games become more approachable to a wider audience?
Gaming has already gone mainstream with some estimates placing the number of gamers around the world at over 2.6 billion people! While there are many startups that appeal to a certain demographic of players, there are tons of different game genres/concepts outside of first-person shooters that appeal to gamers regardless of their age, gender or location. As more companies recognize the opportunities that exist, we believe we will continue to see everyone play at least one game that resonates with them.
On the social infrastructure side, what startups do you wish to see in this space but don’t yet?
Products that help bridge the gap between viewing and playing are sorely lacking in gaming. How can we help make the viewing experience more interactive? This would be a benefit to gamers and developers, who very much want to lower the friction to trying out a new game.
Jacob Mullins, Shasta Ventures
The idea that the next big social network will be an MMO seems to be a trendy take in the VC world, what are the roadblocks to this actually happening?
We’re already there: looks at Fortnite. That said, cost-effective customer acquisition is the roadblock. Now that this perspective is trendy, VC dollars are pouring into finding the next big MMO, which will mean a lot will get funded, but very few will become the big winner like Roblox or Fortnite.
As an entrepreneur and investor, I would focus on early engagement, retention and viral K-factor metrics. If those metrics aren’t fantastic, scaling user acquisition will be riding a horse off a cliff. Iterate on your game loops and experience until you nail these metrics.
Gaming has seemingly become a more “mainstream” area for investment, as someone who has been in the space a bit, what’s different about investing in the gaming sector?
Gaming has always been a great sector, look at the longevity of Mario Brothers or Zelda. The industry took a swerve in the past decade due to the ease of creation, and proliferation of casual mobile games. The early days of mobile meant wide open customer acquisition. However, many of these games were focused on lightweight casual dynamics that didn’t retain users for the long term.
While some titles were able to gain dominance like Angry Birds or Candy Crush, endless copycats were made, overfunded, and customer acquisition became no longer profitable — games became branded a “hits-driven business” and went out of favor.
What’s different about how popular games and MMOs are scaling these days? Have you seen any interesting growth hacks or strategies that seem promising?
The most successful games today are live, social and always evolving. Social dynamics and “live-ops” enable games to actually increase engagement, users and monetization over time, as opposed to shedding them. The game developer builds the map, tools and rules, and the interactive community is the content.
Today’s MMOs scale virally as users are able to create content on their own and naturally want to share out to their friend networks. The trick is to enable people to create and share.
How can MMOs, which feel like fundamentally active experiences, provide a better passive experience for users that may be more interested in the community than playing a first-person shooter or battle royale? How do games become more approachable to a wider audience?
MMOs have enabled spectating, which has given rise to esports. As in traditional sports, the game is at the center and around it are differing skilled tiers of players who have interest in competing or excelling, while others choose to spectate and admire aspirationally.
When the community is the content you are not limited to the storyline of a single-track game. Games are ubiquitous with the largest generation in history: Gen Z; as they get older and control more consumer spend, we will see increased screen time dedicated to spectating MMOs and eSports.
On the social infrastructure side, what startups do you wish to see in this space but don’t yet?
There is a huge opportunity for identity and authentication that can be ported from one game to the next. Similar to Facebook authentication, you can imagine bringing your Fortnite avatar with you to other games, or even to a social watching party on Netflix.
I’m sure this is coming. Separately, EQ is largely lost in MMOs, it’s mostly game play execution and audio — VR has the opportunity to bring the emotional aspects of human connection, body language, gestures and eye tracking, into MMOs.
Alice Lloyd George, Rogue VC
The idea that the next big social network will be an MMO seems to be a trendy take in the VC world, what are the roadblocks to this actually happening?
I think that these networks need to have functioning economies, some of those have been better than others but there needs to be this functioning economy that relates to creators as well, but the other thing is on a macro level there has to be a connected tissue of interoperability.
Another thing that maybe some people don’t see as an immediate issue is instancing. If you went to something like the Marshmello concert in Fortnite, there were millions of concurrent players but these were broken into thousands of instances so I couldn’t attend with my friends. I think the social graph needs to be solved and part of that is really just a technical thing.
What’s different about how popular games and MMOs are scaling these days? Have you seen any interesting growth hacks or strategies that seem promising?
I think that you look at Among Us, and Cyberpunk on the other side, anything can happen much faster and more extreme than it used to be just because of distribution.
Gigi Levy-Weiss, NFX
The idea that the next big social network will be an MMO seems to be a trendy take in the VC world, what are the roadblocks to this actually happening?
I think that there is a difference between an MMO and a visual world. The next social network needs to be a place to hang also when you don’t come for a game session. Hence while Fortnite for example has lots of social network features (relationships between users, interactions, etc.) — it is still far from being a fully blown social network. So my view is sort of the opposite — for games to become megagames, they will need social-network-like and virtual-world-like features, not the other way around.
Gaming has seemingly become a more “mainstream” area for investment, as someone who has been in the space a bit, what’s different about investing in the gaming sector?
Gaming is a unique combination of science and art, left and right brain. It’s never just science (I.e., software and data) — which is why many investors find it hard. It’s become more popular recently as in many of the new megagaming companies (like Playtika, Playrix, Moon Active, etc.) the data element is a lot more dominant than the art part, making it easier for investors to understand.
What’s different about how popular games and MMOs are scaling these days? Have you seen any interesting growth hacks or strategies that seem promising?
Scaling seems to have stayed more or less the same with some new innovative uses of influencers the last few years. But it’s still mostly a combination of paid marketing and viral hacks to get users to invite others.
How can MMOs, which feel like fundamentally active experiences, provide a better passive experience for users that may be more interested in the community than playing a first-person shooter or battle royale? How do games become more approachable to a wider audience?
That’s a big issue as game developers tend to focus on the game itself … and those who don’t like the game are unlikely to enjoy the environment if they don’t play. The question is whether any game developer can develop their universe in a way that embraces nongamers and provides them interesting nongaming activities that are not one-offs (like an in-game concert). I haven’t yet seen any great example.
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