Dominate Your Market: How Self Contained Communities Create Permanent Barriers To Entry
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
Skype & Myspace Team Up To Bring Voip To Myspace IM Users
Talk about an odd couple. Social networking giant Myspace has teamed up with internet phone provider Skype to bring Voip (voice over internet protocol) service to Myspace IM users. The proposed service update would provide Myspace IM users the ability to enable voice chat.
This will bring voice chat to Myspace in a big way. Skype is the worldwide leader in Voip technology, and this pairing should provide a fantastically intuitive edge to social networking.
Earlier this week Myspace announced their API release, which would be huge for third party developers. This second big announcement could be just what Myspace needs to edge out Facebook once and for all in the social networking market. Facebook seems to be the more innovative company, but with over 80 million registered users, how could anyone not be bullied by Myspace?
This race for social networking supremacy is far from over but Facebook is rumored to have a “big announcement” coming within the next few days or weeks. Speculation would lead me to believe that the proposed 4 billion dollar partial buy-out of Facebook, may be the announcement that we are waiting for. All of this is strictly speculation at this point though. I guess we’ll have to be surprised together.
Facebook.com To Fetch $2 Billion?
About six months ago I was working with two mates here in Australia to get an aussie version of the university social networking site, Facebook.com, set up in order to beat them to this market. Unfortunately due to various personal concerns the project was closed.
A short three months later and Facebook went and opened up doors in Australia. It was always going to be tough to beat them to the market down under since they had a proven system which just needed to be replicated for Australia. We had to build the system from scratch and well, I doubt we would have had a working site in three months anyway.
I’m not entirely sure how well Facebook is doing in Australia but I know they, err, face competition. A huge Australian highschool community site, Bored of Studies, recently opened up a fairly obvious clone of Facebook called The People Album and I expect with access to their substantially sized established community will have a healthy jump on Facebook.
Despite the potential issues down under things are looking pretty good for Facebook. In the last week there’s been a bit of buzz circulating about the site having recently turned down a $750 million dollar offer and instead looking for a buyer willing to spend $2 billion. That’s for a company started two years ago. Not bad growth, eh.
