Reinier Evers, the guru over at TrendWatching.com is at it again.  Each month, his team releases a new trend report and this month it happens to be about the expectation economy.

 ”The EXPECTATION ECONOMY is an economy inhabited by experienced, well-informed consumers from Canada to South Korea who have a long list of high expectations that they apply to each and every good, service and experience on offer.

Their expectations are based on years of self-training in hyperconsumption, and on the biblical flood of new-style, readily available information sources, curators and BS filters. Which all help them track down and expect not just basic standards of quality, but the ‘best of the best’.”

Welcome to the future of consumption.  We are consuming at a rapid rate, and with that, we have formed many different opinions and set high expectations.  Reinier calls this, hyperconsumption.

Because a lot of our experiences are now charted digitally, we can blame the following databases of knowledge:

• Core77, Inhabitat, Design*Sponge (design, furniture and objects)
• Gizmodo, Engadget, Ubergizmo (cutting-edge gadgets and electronics)
• Treehugger (eco-chic products)
• Curbed (real estate)
• Cool Hunting, The Coolhunter, Josh Spear, NOTCOT (cool, beautiful, have-to-have ’stuff’)
• Gridskipper, superfuture, Jaunted, Wallpaper, TripAdvisor, Monocle (hotels, restaurants, architecture)
• Flavorpill (coolest city events)
• FlyerTalk, SeatGuru, Skytrax (best airlines and seats)
• Luxist, Born Rich (most desirable luxury goods and services)
• Autoblog, Jalopnik, Hybrid Cars Blog (automotive scoops)
• JC Report, The Sartorialist (fashion and style)
• Kotaku, Joystiq (video games)
• Styledash (beauty)
• Slashfood, Chocolate & Zucchini (food and beverage)
• EUKicks (sneakers)
• Vinography (wine)
• FirstShowing, /Film (movies)
• Digital Photography Review (photography)
• And so on!

One last area that I’ll comment upon before you go check out the article is of competition.  This is something that I’ve been mentioning to companies I’m advising and to friends…. competition is everywhere.

When consumers are making a purchase decision, they are weighing not just the direct competitors to your product, but other areas that they could potentially go spend spend their money.  Do I go buy an iPhone or a pair of Onasuka Tigers?  Do I place advertising in an in-game advertisement or on Viddler?   We are competing with the world and it’s products/services since we’re now on a global platform.  Think long and hard about this.

I have an extra $100 - where do I go and spend it?  The world is my oyster…

With that, go and check out the latest Trendwatching briefing….

My friend and colleague Morty sent me an email this morning with a link to a NY Times piece on video games.   The article talks about Electronic Arts (EA) and their IP around the Battlefield franchise.

“I’ve always envied the movie industry when they put a film out in the cinema, then they go to retail with a different business model and then to pay television and then free TV,” he said. “They have the same content reaching different audiences with different models, and we could never figure out a way to do that. Now with higher broadband penetration, we can use the technology to reach a broader audience.”

This is a step in the right direction for EA because they recognize they have to make a few moves to dethrone Activision, especially after they merged with Blizzard (World of Warcraft, etc).  I’ve spoken a lot about in-game ads, virtual item sales, subscriptions, and other incremental ways to generate revenue and the game publishers who are going to win in the future are the ones who are able to successfully transition their business model.

A few players who are going to help the game publishers benefit from this change in traditional business model are PlaySpan, LiveGamer, GameWager, and IGA Worldwide.  With broadband penetration, the world is the oyster for new opportunities to monetize games.

I took an 8 hour flight from JFK to Zurich, Switzerland to participate in a conference at the GDI Institute on digital media and my portion:  the role of video games in culture and business.  While I have history in the in-game advertising industry, I didn’t focus the presentation on this.  I tried to talk about the macro-trends in the video game industry, some of which I posted in early October on this blog.

I spoke solely on in-game advertising at the GDI Institute in 2005 and the crowd really got into it.  Lots of great questions and insights that were shared amongst the few hundred in attendance.  As I noted above, maybe 10% of the presentation this time around talked about in-game advertising but the real time was spent with trends.  In-game advertising is part of a larger trend, which is finding ways to monetize games through the use of everpresent connectivity.  With broadband connectivity being harnessed by consoles, a new ecosystem of monetization opens up (skill based wagering, in-game advertising, virtual goods, subscriptions, RMT, etc).

One of the othe rmain topics I spoke about was about video game culture.  Look at what Guitar Hero and Rockstar are doing for fans.  The Nintendo Wii as well.  Toyota’s commercial utilizing World of Warcraft like content.  Games are finally being socially accepted which is opening up a whole creative market.

We had a fantastic discussion about this last night (as I was trying not to fall asleep due to timezone differences) and really enjoyed meeting a lot of new people.  Had lunch today with a gentleman I met last night and we discussed the presentation further.

For those of you who want to see some pictures of Zurich, I posted some in my Flickr gallery.

Got an email tonight from a friend who noticed me on a list of Top Web Celebrities. I share some good company on the list, including Kevin Rose (Digg), Jason Calacanis (Serial Entrepreneur), Mark Zuckerberg (Facebook), and others. Not bad company to keep.

I’ll be speaking in Zurich on November 7. If anyone is going to be in Switzerland from the 7-9th, I’d love to get together with you. Feel free to reach out and we’ll coordinate.

I installed a new theme on my tumblr log this evening, Ramblings. Thoughts? Also, there are some great new pics and thoughts posted. You know it’s Fall when pumpkins are out.

The video game industry is going through some monumental changes and I thought I’d shed some light on them from the inside. With that said, I decided to whip up a presentation that looks at many of the different areas of the industry including many of the trends that are occuring.

The presentation is geared towards the following:

• If you work at a media co. looking to acquire in this sector
• If you work at an ad agency or brand trying to make sense of the video game space
• If you’re a game publisher and looking to expand your product line and features
• If you’re a game publisher trying to make sense of the macro industry trends
• If you’re an investor, trying to figure out which are of the industry is hot

Please note that I purposely left out IGA Worldwide, a company that I co-founded a few years back. The reason why I left the company out of the presentation is that some readers would think that I made the presentation solely to hype the company. I tried to be as company-agnostic as possible, to give readers a non-biased view on the games industry.

I welcome all commentary and criticism. Please leave a comment on the blog or shoot me an email. I promise to respond to each comment individually.

I think we’re in an extremely exciting time with Halo 3 bringing in $170M on the first day, Areae launching Metaplace, and Habbo & Tencent proving out the virtual goods model. Who said games aren’t fun?

The presentation is below, and hosted on slideshare (if you’d like to view it there):

I read a fascinating analysis of IAC (InterActiveCorp) this evening and wanted to share my view.  First, please read the article written by Sramana Mitra entitled Web 3.0 & IAC.

IAC holds more than 60 online properties and someone could easily mistake it for a VC with a well-diversified portfolio of Internet properties. When some of these properties start “exiting” the portfolio, they seem to be able to get much better visibility and valuation. We have already seen how Expedia has performed over the past one year after being spun off from IAC. The question is, should IAC club together more of its synergistic properties and take them public separately, while maintaining a holding company status? As it stands, IAC seems to be losing focus as well as operational efficiency, and in trying to do so many things at once, it is not doing any of them very well.

The profitability of the company is remarkably low, and that is reflected in its relatively low market cap of $8 Billion, against a 2006 revenue of $6.2 Billion.

One area where IAC can innovate within is the video game arena.  I believe that IAC can grab a leadership position by working independently of any one particular video game publisher but doing business with all of them.  There are different ways to play within the games industry including both long tail and hit-driven models, subscription, virtual goods, and retail sales models.  IAC certainly has the resource to get behind such an initiative and they are currently on their way into venturing into the market.

InstantAction was setup by IAC and has been underway/underwraps for months.  They are buying their way into the games market by acquiring Torque (GarageGames) recently and looks like they are enabling game developers to use their engine to monetize their games (give out the tools and monetization assets to anyone and let IAC monetize their games…. and take a % of the action).  Should be interesting to see what IAC does here… and if the above is correct, InstantAction will probably be a solid standalone company.

Just remember:  subscriptions, virtual goods, in-game advertising, are all emerging ways of monetizing games.  Some do much better than others depending on the type of game/environment/gamer, but if used correctly, could do extremely well for the game publisher/developer.  I am assuming IAC understands this and is building for the future.

I’ve been talking about this for years.  My idea for a MMO (will post about that another day) incorporated this.  Someone is FINALLY doing it and I know a few others who are going to be rolling this out over the next 730 days.

EA Sports’ NCAA 08 Football, released July 17, is the first game to pipe in real-time weather conditions at the venue of a player’s choice, thanks to a collaboration with the Weather Channel. From a snowstorm in Boston to a heat wave in Arizona, the exact environment will not only affect the visuals but also alter game dynamics.

Not only is this amazing for the gamer, but it’s one of the best brand integrations IMHO.  It’s seamless.  The fact that Electronic Arts is taking weather beyond the visual and having it affect game dynamics is impressive.  If it’s raining, it’s harder to pass the ball, whereas if it’s extremely hot out, the players get tired.

I get extremely excited about these types of integrations.  Below, you can see the screenshot from Wired’s article/coverage on this subject.

Allison Mooney over at PSFK beat me to the punch.  Today, she released a writeup about video games and tournaments being televised.  Yes, just like any other sport on television, these games tournaments have full color commentary and multiple camera angles capturing the action of gamers using their fingers on keyboards and their respective mouse of choice.

Broadcasters are still experimenting. DirecTV has the first live CGS broadcasts in high definition. More than 1.5 million watched CBS’ July 29 airing of the World Series of Video Games, a draw “on par with action sports. Those are good numbers,” WSVG commissioner Matt Ringel says.

 1.5 million people watching CBS’s July 29 airing of WSVG… not bad for one of the first televised video game events.  SpikeTV, the cable television network broadcasts the video game awards each year which have been gaining traction amongst the core gamer demographic.  What are we learning from all of this?  Television is a mass reach medium and since video games are emerging as a mainstream entertainment and media channel, the industry is moving towards increased exposure.  With this additional exposure will come mainstream consumer adoption (Nintendo Wii, Xbox Live Arcade, Playstation Home, Casual Games, etc) that will push the business side of the industry in new ways.

Other than video game lessons, one area I like in the video game industry is that of talent management.  Celebrities are emerging from the video game world, like Johnathan “Fatal1ty” Wendel. Fatal1ty’s domination of the video game landscape of professional tournament has not only got him into the top magazines, but also, quite a few dollars into his pocket.

Talent management of the video game industry is going to be crucial.  We’ve heard of UTA and William Morris Agency moving into the space, but what about the smaller guys?  Is UTA/WMA actually doing anything?

The business of video games is only going to get larger, so navigating the path is going to be crucial.  Would love to work on a boutique management firm eventually.

I spent part of my Sunday afternoon reading a presentation given by Paul Heydon, Managing Director of Avista Partners.  The purpose of the presentation was a strategic overview of the space for M&A purposes.  Being in the industry, I found most of the information redundant, but I did like how he highlighted the following:

Trends in Industry

• More developers are switching from high end console to casual games
• Game portals/aggregators growing in popularity with consumers; watching less TV; advertising is a major source of revenue
• Mix of ad-supported, casual games and paid premium games
• In-game advertising is a new source of revenue for developers/publishers
• Casual MMO’s will grow (i.e. Runescape)
• Business models selling items in game growing quickly (i.e. Bigpoint)
• Social 3d chat games will grow (i.e. Second Life, Habbo Hotel)
• Micropayments

Opportunities for Casual Games

• Acquire or be acquired
• Raise money to grow and/or acquire
• Build D2C business on own websites with a focus on community
• Monetize across other platforms by licensing or in-house for mobile, console, in addition to PC in-store
• Sell items in-game
• Publish games by episode
• Build advertising revenues
• Localize sites for key non-english countries
• Outsouce seelct development pieces overseas
• Develop game widgets for social networks (i.e. Bunchball)

Also, there is one area of the presentation I do like… Paul talks about how World of Warcraft is NOT the holy grail of online games.  Reasons for this is that WoW attracts only hardcore gamers and not the mass market.  Of WoW’s 8 or 9 million subscribers, that’s a distant second or third compared to the 50 million users worldwide of Maplestory or the 66 million users of Habbo Hotel.  He also points out that the lifecycle of most MMORPG’s have a life cycle of less than five years.

Join me in welcoming GE/NBC Universal and KTB as lead investors in our recently announced Series B funding.  The video game industry is heating up and I’m excited to be a part of it.

Today’s announcement solidifies IGA’s representation across the media and entertainment sectors and enables the company to strengthen its leadership position in videogame advertising, one of the fastest growing media and entertainment sectors worldwide. In-game advertising is set to pass the $2 billion mark by 2012, growing more than five times in size with more annual growth than any other major advertising medium.⁽¹⁾