Take off your coat. Loosen your collar. Have a drink. Don’t be a square. You’re at Facebook’s party now, and you’re not having nearly enough fun.
Sure, you’re checking in on friends, “liking” things. But Facebook has noticed you haven’t been playing many games. Wait, are you on your smartphone working? The people who paid for this soiree aren’t going to like that at all. At Facebook, CEO Mark Zuckerberg told his investors/keg masters earlier this month, "the games part of the platform...is continuing to grow at a slower but steady rate." Bummer.
But you’ve got to fight for your right, so today Facebook announced it will aggressively spike the punch bowl at its gaming party, providing advertising and Facebook staff time to the most promising upstart Facebook game companies, with an eye toward turning boring Facebook users like you into long-term gaming addicts. Some 260 million users per month toy with Facebook games, but more than three times that many visit Facebook monthly on mobile phones alone.
“There are many developers with awesome mobile games who don’t yet have the upfront resources for a paid [promotion] strategy, and we want to help them,” Facebook engineer Victor Medeiros wrote in a blog post announcing “Mobile Games Publishing,” as the initiative is known. In return for its help, Facebook gets a share of revenue from developers.
Facebook is just one in a constellation of companies offering special incentives to get app developers building on their platforms. Also juicing up their app parties in recent months are Google, with its special fund for Glass developers; the investors behind 3-D interface company Leap Motion, who launched the Leap Fund; telephony company Twilio’s Twilio Fund; and Samsung’s Samsung Catalyst Fund.
It remains to be seen how this wave of platform-specific funds will fare. If they can fulfill their ambitious dual goals of both making money and bolstering the underlying platforms -- if they party hearty, in other words -- the spiked-punch trend could turn into a full-fledged movement within tech finance as vendors behind other online ecosystems follow suit. If too many of them fail, the mere existence of a platform fund could become a stigma, a sign of platform desperation.
Facebook could not be reached for comment, but it seems to have learned some lessons from the last time it played sugar daddy. Its fbFund incubator program ran for two years before it was mothballed in 2010. That time around, Facebook had no clear guidelines for what it wanted developers to build on its platform, and allocated money accordingly, to a scattershot array of apps (in dating, activism, music sharing, photo sharing, crowdsourcing, search, wine, gifts, payments, and more).
This time around, Facebook is ultra-focused, spending its resources not just on gaming but on mobile gaming specifically, and small-to-medium-sized companies at that. This makes it plain how everyone can make money: Games developers can sell their apps and sell virtual goods and advertising within those apps, while Facebook can make money by facilitating virtual goods sales.
The path to profit for Google Glass, expensive and available only to developers, and Leap Motion, which just came out, is less clear.
“To form a successful platform-specific fund, the platform has to be massive,” says Matt Murphy, a general partner who manages the iOS-focused “iFund” for Kleiner Perkins.
Funds for niche platforms tend to lose sight of actually making money. “The Twillio and Leap things are just to kickstart activity on their platform,” Murphy says. “It's smart but self serving as it’s driven by the platform... The bar will inherently be lower for these platform funds as they want validation more than a high return on investment.”
Dave McClure, a startup investor closely involved in the Twilio fund and late fbFund, says smaller platform funds must make it clear how both app makers and the platform vendor are going to make money. Twilio, for example, charges app makers as they use its developer interface, or API, and those app makers are, in turn, typically charging corporate customers.
“Twilio, at least, has very clear model for how businesses can use their platform to make money,” McClure says. And that might be the start of a much larger trend: “There are big opportunities for other platforms like Salesforce and LinkedIn to go after the business app market,” McClure adds. “It’s an open field.”
