Some of my early readers may recall that I was a Magic: The Gathering card player as a teenager. No, that’s not dungeons and dragons or role playing or anything like that. It’s closer to poker combined with chess with a little bit of lord of the rings story telling thrown in. It’s a “mind sport” as far as the PR people at Wizards of the Coast, the company that produces the game, are concerned, although I’m not sure that’s the most accurate label.
Whatever the case, “Magic” as we call it, is a serious game for some people, and besides the first two or so years where I played for fun, most of the latter years in my career as a card gamer, were about trying to win tournaments.
Tournament Magic is big, with millions of dollars given away in a pro tour that travels around the world. Some guys even play the game professionally as their full time job. I never won big money as a gamer (my highlight was representation on the 98 Australian national team at the World Championships), but I did get to visit Japan, Singapore and the USA thanks to gaming. I look back on those years as a lot of fun.
Magic Cards Are Money
Magic cards, like baseball cards, are collectible. Each card has a value, and for a long time I made my lunch money by trading and selling the cards I won at tournaments. As a typical entrepreneur, I often enjoyed the business of running a little card shop as a teenager more so than playing the game itself (unless I was winning a tournament of course!).
Wizards of the Coast (let’s just call them “Wizards”) made some very smart moves with Magic. It became a serious cash cow for them.
In case you are wondering how they keep the cash coming in, each year Wizards produces new cards so the pool of cards people play with at tournaments is constantly cycling over. This makes the playing field very dynamic, but it was also a brilliant business decision as they keep making new cards that players need to purchase in order to stay up to date.
It’s fair to say that effectively, Wizards produced a new form of currency, at least within the realm of their customer’s universe. As long as the cards have value to players of the game, they can print money simply by printing new sets of cards.
Wizards Goes One Better
I thought that Wizards had a good thing going already, but when the Internet came along, the did something really clever – they ported Magic over to the virtual world.
Online Magic is pretty much the same as offline, or real world Magic. You challenge people from all over the world to a game, you can play in tournaments to win more cards and cash and you can buy and trade cards virtually with other people.
The kicker is that the online digital cards have roughly the same value as the physical cards. You can buy packs of cards for the same price, but instead of receiving little pieces of cardboard with pictures on them, you receive digital cards with pictures on them that are stored on computers.
In other words, Wizards can now print money online, with the cost of production and distribution drastically reduced. All I can say is that is one heck of a good business model.
The Power Of A Self Contained Community
One of the amazing things about Magic is how resilient it has been over the years. The game is over 15 years old and while many competing card games have surfaced, one for pretty much every pop-culture television show or movie that gains any following (think Star Trek, Star Wars, Battlestar Gallactica, DC/Marvel Universe, and the list goes on…), none of them managed to supersede Magic as the supreme collectible card game.
Magic is not the only game to profit from a self-contained and fanatical community. In more recent years virtual gaming communities have arisen, not surprisingly targeting very similar demographics of people as Magic, like online computer games such as World of Warcraft and Ultimate Online that target mostly young males.
I’ve never been lured into online gaming, but I’ve seen what it can do to people. Gamers can lose entire weeks at a time, existing in a virtual world and interacting with other people who are sitting at their computers possibly anywhere in the world doing the same thing. It’s kind of perverse, getting your social interaction in an environment that doesn’t include any people around you (unless you’re in a LAN party), but who am I to talk, I work at home alone most of the day and only speak to people online.
Facebook is another great example of a self contained community, in fact it’s probably the best example we have today because it targets pretty much the entire online population of this planet.
I was amazed recently when I was in Canada and my 20 year old cousins all but said that email is dead to them because they just use Facebook to communicate with friends. Think about that, an entire generation of people who you can’t market to via email because they don’t pay attention to it.
Facebook has effectively created their own country on the world wide web. It’s such a compelling community that it doesn’t need Google traffic to survive like most websites. It simply relies on the lure of the innate human desire to connect with other human beings and works to help facilitate that communication. Like what Google is to search, Facebook is to community, providing the tools that people come to rely upon as part of their every day lives to do every day things.
User Generated Content
I’ve written numerous times about the power of user generated content. Content for us bloggers is our currency, but let’s face it, it’s much easier when you own a website that doesn’t require you contribute content to it personally or ever need to spend money to hire writers to create content. What you want is people creating the content – the value – for you, so you can watch your traffic increase and work on how you can profit from it.
That’s exactly the reason why, during my years investing in website property, I focused on purchasing forums. Forums are communities, with user generated content, which can become very dominant in their market, especially if they gain critical mass before any other community in that niche.
What Is Critical Mass?
Years ago when I was still chasing new opportunities online I read the eBay story, a great book that explains how the founder of eBay grew the company to what it is today. I loved this particular book and business case study because the owner had the problem most of us could only wish for – too many users coming in too quickly.
EBay grew tremendously fast and it uses the many-to-many, user generated content business model to great success. The owners facilitated the transactions between buyers and sellers, thus they could theoretically scale to handle as many people as they wanted, assuming they could keep on top of the technology needed to keep delivering the service (that was the challenge).
EBay won the auction war because it gained critical mass before any other auction site and then worked darn hard to maintain the leadership position. Critical mass, in eBay’s case, came when sellers realized they could get the best price and sell the most goods because eBay had the most buyers. Buyers go to eBay because that is where the most sellers are and thus they have more choice of what to buy and whom to buy from.
Other auction sites struggled when they couldn’t get a result for a seller because they didn’t have enough buyers, thus sellers didn’t want to use their service, and buyers and no one to buy from. It’s a classic catch 22, you can’t win until you win. Whoever was the first to win – the first to gain critical mass – would have to screw up pretty badly to lose their market leadership position.
Let’s Make Software and Sell It
I’ve done quite a few different things online, but today I make most of my money thanks to selling information products, either of my own creation or others people’s products. I benefit from being a “maven”, an expert in my market. I’ve spent the last four years blogging, writing my newsletter and free reports to establish my status (not to mention the six years of practical experience before that), and it’s rewarded me very well financially.
I advocate this strategy as well to my students. You should look to become an authority, establish your credibility and then leverage it to maintain leadership and dominate your market.
This article however talks about something else. A community site, with user generated content based upon a unique technological architecture that delivers a service that people want, when it reaches critical mass, can be a multi-million dollar business model, even a multi-billion dollar business for the truly global ideas like Facebook.
If working years, publishing unique content to establish your maven status is not in your interest, then you’re probably thinking about developing some kind of software to sell online, or building a community site. You could focus on delivering a product that simply meets a need, stick up a sales page and sell it, but eventually you’re going to reach a saturation point. If you have no point of differentiation, then competition can come in and erode your profits.
Self-contained community sites are all the rage now, and while I’m not advocating that you attempt to build the next Facebook (by all means go for that if you think your idea is good enough), there’s no reason why you can’t consider all the concepts in this article as ways to protect yourself from competition and dominate your market.
Add community components to your business, find ways for users to create content, develop a service that meets a need that all human beings have, and you can win, big time.
Whom Do You Trust?
The future, especially online, is going to be shaped by two of the most powerful influences in today’s society -
- The trusted expert
- The wisdom of the crowd
Mavens, especially mavens who have focused on constantly delivering more free value than any other person in their market by moving the freeline, will ever more so be the leaders.
Faced with too many choices, users look to even fewer people for advice because it’s too hard to keep up with everyone (think about how many email newsletters or blogs you read today versus a couple of years ago). If you are at the top of your tree, it’s going to be an even greater advantage in the future, assuming you keep working to maintain your status.
Thanks to technology and its ability to analyze, aggregate and disseminate what the crowd consensus is, we’re going to rely more and more on what the greater majority of people “just like us” do. This won’t negate the power of the trusted expert, however people will increasingly look to what everyone else does to influence the decisions they make (social proof), if technology makes it easy to do so. If you own that technology, then you are in a very good position.
Building a technology driven community site that services a need can be the foundation of a successful online business, if you have a unique idea and reach critical mass before anyone else. If you’re creative, understand what people want, have access to the resources necessary to build the technology to make it reality, you might just strike it rich.