The Network Effect and Wirless Games

Hello mateys,

I was just contemplating the "community" aspect of the latest web 2.0 applications, and doing some more thinking about successful wireless services from the previous boom. Surprisingly, even before the Web 2.0 concept came along, some of the most successful wireless services involved a "community" element. Kalador Enternainment was a relatively early mover in the wireless games space. Kalador initially developed wireless games that were "massively multiplayer" and "ongoing" in nature. Kalador then produced tournaments where gamers from around the world would face-off against one another in multi-week elimination rounds. Over time, the multi-player games concept evolved into a "Mobile Communities" concept. Kalador now has thousands of regular users from around the globe, some of whom are forming life-long relationships. One young couple that met online in a Kalador game is now happily married. It's kind of neat considering none of this was possible just ten years ago.

However, as we learned in Strategy Formulation 1, some services benefit enormously from the network effect. The more people use a service, the more others use it, and so on. AirGames, another Vancouver based company, grasped the importance of the network effect early on. When launching their first game, Airgames' held a global tournament with a cash prize of roughly $25,000. As one might assume, the industry buzz was enormous, for this was a first in wireless gaming, and wireless carriers from around the globe quickly launched Atomic Dove under revenue sharing terms (subscribers were charged on their monthly bills). It is now clear that the $25k expense was an excellent investment, for the power of the network effect catapulted Airgames to a leadership position in the wireless gaming industry. The company now boasts millions of users and an enormous distribution channel. Good work!

My advice: Never forget the importance of the network effect when launching a new web 2.0 service. Go for it early, do what it takes to get traction - and then watch the registrations accumulate. Once you get over the hump, the business will be self-propelling. Kalador is a fine little company. It has a few employees and revenue in the "hundreds of thousands" per year. Airgames, which started in the same city with a a virtually identical product, now has millions of users and revenue in the low millions per year. Looking back, that $25k was well worth it.

Drop me a note sometime.

All the best.

Jack_Shalak.