Zynga needs more friends in its social network.

Some interesting news today about Zynga, just after yesterdays post about Friendster becoming a social games platform.  Apparently they are completely dependent on Facebook.  Not only has Zynga won Facebook, but they have been captured by FB.  This is exactly the kind of thing that I would worry about as an investor.  Single platform dependence is a big problem.  Anything from a temporary interruption to a permanent change in policy on the part of FB could effect Zynga’s ability to provide it’s games.  That dependence should worry investors even if they feel that FB is 100% reliable.

If I were looking to invest in Zynga I would want to see a comprehensive plan that explains how they are going to get themselves off a Facebook dependency ASAP.  Just because Facebook has become my main personal social network does not mean that making it the sole foundation of a companies future is a good idea.  (Only because I don’t have a Google+ invite yet)  Diversification is important to investors.

This does shed light onto yesterdays post.  Zynga has huge incentive to ‘play nice’ with Friendster.  And Viximo for that matter.  This can act as a test of Friendster…  Managing a relationship with Zynga could really provide a lot of information about how smart the folks at Friendster are.  Knowing that Zynga has no other social networks under it’s belt shifts the balance of power to the networks.

Zynga has an incentive to love and support (and maybe even provide money to) anyone that can help them break dependence on Facebook…  Er…  “Grow the user base” (That sounds much more friendly).  Does Zynga work with Viximo?  Hmm.  Maybe they should get in contact.  Zynga needs to add Friendster, Google+, and Viximo to it’s ‘social network’.

Friendster = Social gaming platform? Wha?

This is interesting news.  Friendster is relaunching as a social gaming platform.  They have quite the challenge ahead of them.  Ultimately any ‘social media game’ has to compete with users of Zynga’s products (Cityville, Farmville, etc).  Tadhg over at whatgamesare.com made the point that Zynga won Facebook, and they did this by being a really smart company.  To compete Friendster would need to bring something to the table that Zynga can’t provide.

Or maybe Freindster isn’t trying to compete with Zynga.  Maybe they are trying to provide a new platform to Zynga and get some cash by putting new faces in front of Z’s games.  This puts them into the old position as trying to provide something new that Facebook can’t.  Viximo already plays in that space and is capitalizing on putting games everywhere that Facebook ins’t.  We Americans tend to forget that there are some really big social networks out there which are not run by Zuckerberg. And Viximo has a big head start on taping that market over Friendster.

All this just as Google+ is happening?  We have no idea what the impact of Google+ will be on social gaming.

In any event, it seems Friendster has a real challenge ahead of them.  They are trying to solve their own problems by playing in a highly competitive space and just may be positioning themselves between a good number of rocks and a couple hard places.  The mantra of any company that wants to make money is “Find out where customer pain is, and remove it”.  I’m not sure there is pain that Freindster can remove, or at least I don’t see it yet.  Maybe you smarter folks can point out to me what I’m missing in the comments.

Minecraft Bonus Post!!!! Mojang Forecast.

Another week, and another bonus post.  Lucky you.  This bonus post, however, is going to be a bit less project oriented and  a bit more analysis oriented.  Which you may or may not find interesting.  Consider yourself warned.  This post started because I was replying to someone on the escapist about Minecraft.  

Mojang Specifications has really dominated gaming news from E3 2011.  Microsoft announced Minecraft for the Xbox with Kinect support.  Mojang with Sony Ericsson announced a mobile version on the Xperia PLAY device.  Notch recaps all the points in his blog post.  He also mentioned on twitter that the game officially hit 2.5 Million purchases.  On the Escapist Forum Bags159 noted that is an impressive number only if it comes along with price information.  He is correct.  I wrote a reply to fill Bags in on rough pricing information about the game.  It seemed like a good idea to polish that reply a bit, as my first drafts tend to wander.  Also the math is interesting, and forecasting is fun.  Here goes!

So how much has Minecraft really made to date?  

This is actually relatively easy to figure out at any given time because Mojang has always posted total sales on their Minecraft website.  Which means that people have been tracking this information.  There have been price changes, which must be taken into account.  We can gather a little information, do some estimating, and come up with reasonable numbers without too much effort.

Crafthub wrote an article about this excellent graph of the 2010 purchases. 

The information is a little old, obviously.  But as the chart goes up to 10/18/2010, it captures most of the Alpha sales of the game. The game moved into Beta on December 10 2010 at which time the price changed. Based on the chart there would have been just over 150,000 purchases in Alpha.  At the time the price was 9.95.  Lets call it 200,000 purchases for easy numbers.

Alpha total is: 200,000 x 9.95 = 1,990,000  About a million Euro in Alpha.  Not bad.

Checking the Minecraft.net stats page we see that to date (6/12/2011) they have sold 2,505,070 copies of the game.  Subtract the number of sales in Alpha from that and we get the number of sales in Beta.  Then we can multiply that by the €14.95 Beta price.

Beta total is: 2,305,070 x 14.95 = 34,460,796.50

Add the Alpha Total and the Beta Total together and get the Total Gross Income = 36,450,796.50

A word about Gross Income for anyone still following this that does not have an understanding of Financial Accounting.  That is not the profit the company makes.  There are taxes to take out, approximately 48.3% in the case of Sweden.  There are an unknown amount of expenses (new offices, servers, Paypal transaction fee’s, data fee) to take out.  So it would be incorrect to assume that they have that amount sitting in an account somewhere.

So what about the future of Mojang Specifications?

Business School teaches you about the Innovation Adoption Curve.  Some might argue that the Demand Curve should be used here.  The demand curve would usually be more appropriate for computer game sales, but because Notch released the game almost the moment that he made it, the innovation adoption curve better describes the sales of this unique game.  Generally we don’t get to see the ‘ramp up’ phases in computer games.  AAA “Game Industry” games shoot for a huge opening weekend and then demand trails off.  Those kind of releases match the demand curve.  But because the game was released early and updated frequently the purchases of Minecraft will be different then the purchases of say Skryim (which will be release about a week before Minecraft officially releases).

Assuming that Alpha correlates to the “early Adopters”  phase.  Beta is the “early majority”. That means that official release (starting 11/11/11 or the week after) will pick up the “Late Majority”, and then some “Laggards” at the end.  Mojang could see another 2 million purchases in “Release” and .3 million from “Laggards” at 20.  Let’s hedge our bets and assume they see slightly less then that.  That could still be another 36 million Euro.

So that shows a really nice future for Mojang Specification on just PC sales on a single game title.  Mojang Specifications also has a second title coming out, Scrolls.  That game targets the Collectible Card Game market.  Scrolls aims to be a better computer CCG then Magic the Gather port, because it will be native to the computer.  There is a good sized audience out there interested in this type of game, and there could be quite a lot of cross over from Minecraft.  But the game is completely different.  At this time we have no reason to assume that Scrolls will be awesome, and no reason to assume that it will be a flop.  Better to focus on Minecraft as a basis for valuation of the company.

In terms of just Minecraft it’s not exactly clear how to think about the Xbox and Xperia sales.  Perhaps PC sales will drop off precipitously and the Late Majority will be made up of console and mobile purchases.  Or there could a late majority of PC purchases lurking out there.  There are many people who have heard about the game but don’t really like it the way it is.  Maybe they will swoop in after release. 

Were Mojang Specifications to do an IPO they could be worth as much as 50 – 70 million Euro.  Possibly 100 million Euro if Scrolls is a modest (in compared to Minecraft) success and expenses are kept low.  Mojang is a small team of people who do very little in the way of traditional marketing (they do use LOTS of Inbound Marketing, however) and therefore expenses could be kept very low.  Then again success may spoil them, and they could start spending like mad.  

I see a bright future for the Mojang Team.  Notch is a smart guy, and Carl (the CEO) is no slouch either.  The whole team is pretty impressive.  They have the additional benefit of living in a culture with very different values then America.  Hold onto the money guys and stay in Sweden.  And good luck!

Is anyone going to buy an Xperia just to play Minecraft?  Or wait until it comes out on all Android phones?