Social Games – We’re Just Getting Started Trip HawkinsFounder and CEO, Digital Chocolate

Digital Chocolate

The Next Big ThingIn Video Games

OutlineDC SnapshotDigital Disruption GaloreThe Next Big ThingWhy2011 Predictions

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DC SnapshotThe Pixar of MobileNearing 100 million App downloadsFastest Growing on Facebook5 Studios on 3 Continents

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Millionaire City

5

Virtual Goods on Facebook

30 Day MAU Number of Number ofCompany DAU(M) 2010 Trend

VG Games Games Growing

Digital Chocolate 4 +6 116

Zynga 43 -1811 1

EA 7 -3 8 1

Playdom 4 -513 1

Crowdstar 4 -86 1

-34

(source: AppData.com, 11/21/2010)

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Disruption GaloreThen NowHardcore guy Everyone$50 Free

with Virtual GoodsWal-Mart DigitalPlayStation Anything with a

screenPlay with yourself Play with

everyone100M devices Billions of

devicesU.S.A. WorldSony, EA Up for

grabs

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New Market Explosion Total PC browser users trending towards 2 billion Facebook trending from 600M members to 1 billion Tipping point as 2 billion Western mobile phones “Get

Smart” within 2-3 years How long before 1 billion tablets? The browser begins to invade 2 billion color TVs $7 billion in Virtual Goods in China in 2009 DeNA and Gree both doing over $1 billion in Japan Nexon just did $570 million in Korea Zynga close to topping $1 billion

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The Next Big Thing Has 7 Parts1.Social Games2.Virtual Goods3.Free to Play4.Cross-Platform5.Interoperable6.Cloud-Based7.Cross-Region

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Why Social Games? Beyond subsistence, our biggest needs are social Social capital has declined so we’re very needy (Bowling Alone) Historically, social media monetize 10x better than other media Games are “conversation starters” that enable social play We all have an inner gamer (sports, Vegas, cards, trivia, play) Everyone now has access to a “game platform” Everyone has a mobile, “social computer” Everyone is joining social networks or using a network browser Even hardcore console gamers have gone social (Guitar Hero, Wii) Social games are completely disrupting games and media sectors Billions of people will be playing social games

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Why Virtual Goods? By far the most efficient business model for monetization Allows perfect capture of spending appetite from $1 to $10,000 Stronger potential for emotional meaning and retention “Investment” principles encourage unparalleled spending Works on any platform and with any payment system Was already $7 billion in China in 2009 Proven now in exery country in the world Like SMS texting, has global potential greater than $100 billion

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Why Free to Play? Everyone is easily able to try it Players want to introduce their friends to the “free benefit” Viral funnel becomes enormous Competition for social status spurs engagement Free players convert and spend money to progress faster Whales get to impress their friends Everyone can keep playing and the cycle continues

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Why Cross-Platform? Social games are growing everywhere, but on different platforms

• Japan is mobile• China requires a PC “heavy client” install• Korea is PC/mobile hybrid• U.S. is inside Facebook.com on PC• Germany is browser-based male vertical• Kids browser-based vertical came from Canada (Club Penguin)

Platforms are proliferating “Point platform” hegemony is dying Device populations are burgeoning Everyone can play anywhere, anytime

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Why Interoperable? Everyone can play together Everyone can find friends to play with Because a single player now roams across multiple devices Everyone knows how because it is uniform and consistent Everyone can help their friends learn and succeed All social media have exploded in size once they became

interoperable Fantasy Sports is mass market “existence proof”

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Why Cloud-Based? Because the browser is going to win Cost-efficient and elegant Easy to update versions Customers can play from machines they don’t own Customers can always get to their stuff

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Why Cross-Region? Global industry and marketplace Global rollouts of platforms like Facebook, Apple, Android Scale cost advantages Major regional competitors are ready to cross regions Customers enjoy playing and meeting global players

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Predictions for 2011 Facebook becomes a game platform Growth returns to Facebook game ecosystem Rival social game platforms emerge Bazillions of social devices are sold Mobile struggles to become a social network Interoperable games become relevant NanoStars demonstrate an even better form of virtual

goods monetization

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The NanoStars Platform

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NerdBurger /Brotherhood

+4 to all your cards that are 8 or less.

136Tech (Black) | Human-Male

✔

26

Robin Hood /Foreign Trade

Swap one of your cards with one opponent face-up card.

Wild (Green) | Human-Male 96

✔

27

Octomaid /Crazy Eights

All cards become Eights.Knock restricted.

Tech (Black) | Female 61

✔ ✔

28

Jim/Cult

Kill all your own cards.

Spirit (White) | Male 28

✔

The Next Big Thing is:1.Social Games2.Virtual Goods3.Free to Play4.Cross-Platform5.Interoperable6.Cloud-Based7.Cross-Region

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