Have you seen anything like that already, where developers have said, well we thought about doing it this way, but we're going another way? PR: Too early. The phones aren't even out yet, user experience hasn't occurred yet. I would say July, we'll get a lot of feedback once these games come out with push notifications. The other thing that's kind of interesting, by the way, is that OpenFeint is working on cross-compatibility, because if I have a 2.2 iPhone and you have a 3.0 iPhone, and you send me a social challenge, in my app on 2.2, it won't show up as a push notification, right, because I don't have the 3.0 iPhone. So we are support the concept of push notifications in the plumbing and infrastructure of OpenFeint, however on a 2.2 phone, whenever the user next opens the app, they would see a screen that is an OpenFeint screen that would have a notification saying "you've got to beat my score," as opposed to seeing it on the iPhone icon, as a number, like the Mail thing, where it says you have notes waiting for you.
So I think as a user experience, the jury's still out, because the platforms are just getting ready, right? So the key here is to say that we're going to make it trivial by continuing our tradition, which is no servers, very easy to integrate, and some big games will launch in July with push notifications and then we'll go from there.
I think, to a certain extent, the same thing will happen on the microtransactions side. It already has happened with Xbox Live -- I don't know if you remember the story of horse armor, where everyone says "how can you release a different graphic and ask us to pay for it?" Have you seen examples yet of how developers want to use microtransactions? Are they aware of that danger or are they fearful of that at all? PR: So I think the obvious one, just because I have, as I said, investments in companies in the Facebook app space, the big reason for microtransactions is virtual goods. So any kind of virtual world, avatar apps, some of these Mafia iMob apps, you can assume that there will be virtual goods unlocking with microtransactions. That one I think will translate over fairly well, in fact Net is going next week to China, where he's a keynote speaker at Tencent's annual conference. Tencent is an Asian company which does
a billion dollars in microtransactions, all of it virtual goods. So I think that microtransactions, as we see them on social networks today, will come pretty much that way onto the iPhone social network, or the iPhone gaming network.
NJ: I also think that it will actually lead to the pricing, might even drop dramatically, but those who are charging for applications are going to go free, because they're going to earn much more by making it free and leveraging microtransactions.
Yeah, if you're charging $4 for an app and can sell four levels for $1 each, that's the way to go. NJ: The user starts playing, gets very engaged, and wants to get to the next level and make the purchase, and it's very difficult not to make the purchase if you're engaged and you want to continue the game.
PR: The thing that's a little trickier, I think, is when you have microtransactions that aren't directly virtual goods, because virtual goods don't fit the theme. But are like chapters, or just additional content in the game. Then, I think, the business model is a little trickier, because that's your content update strategy, and to some extent, the iPhone user is used to -- like, if you look at the success of Pocket God, it's a double edged sword. If you talk to the
Pocket God guys, their game is one of the few games that stays in the top five constantly. It's just always in the top five. And they use OpenFeint, and they're going to use push notifications, but when we spoke to him about microtransactions, he said, I have to figure that out, because their commitment to their userbase is, every week you're going to get an update with more content. So given that he's already committed that on the current price point, how does he unlock more content with microtransactions? So he was the first to say I definitely want to do push notifications, but I have to think hard about how I could incorporate microtransactions into Pocket God. So I do think there's a little more complexity there, especially when it's not just direct virtual goods. But I think they'll crack it. I think some other people we're talking to are certainly thinking of Chapter 1, Chapter 2, Chapter 3, three microtransactions. And certainly the virtual goods guys are like no questions how they'll do it.
And there are definitely precedents for both, in terms of episodic gaming on other services. Jason maybe you can talk about this, too, as a developer -- I'm really interested in the balance between making sure that what you're selling people is worth it, or something that's not. If you're asking to pay a dollar for a gun that's just a re-skin, people won't go for that. What do you think of that? JC: I think, as a game designer, what you have to really think about is the motivations for why people will want to purchase this content. Whether it's a re-skin or not is less important than what it will allow you to do in the game. And the reason why I think virtual goods have done so well on social networks is that social pressure is a huge motivator to getting people to do things, and if part of that social pressure results in you engaging and buying virtual content, people are much more likely to do it. I mean, if you just have another gun that allows you to increase your DPS by two points, that's not terribly interesting to anyone but the ultra hardcore gamer, and then they'll probably just be pissed off that they have to pay for it. So that's not really an appropriate way to go about it. As a traditional gamer, buying episodic content or buying level packs, or substantially new gameplay experience, fits with my head, and then virtual goods, I think, have to be motivated through social pressure.
And the last question I have is just about the future of OpenFeint. I have to give it you guys -- there were quite a few, and there still are, services poking around that want to do the kind of stuff that you're doing. And just in terms of size and influence right now, you're kind of the top of the heap. So what's next, are you planning to kind of sit on the heap and just keep things set, or are you still aiming to improve here? PR: I think that definitely we will continue to innovate and add more services to the platform -- there's no question that it's a platform play, and that we will continue to add features and additional things. I would say two things: one is, we will publish games, always, on top of our own platform technology, that will really kind of push the borders of gameplay design around the OpenFeint platform, to sort of demostrate and lead the way. So in the last announcement, we did hint at a new game coming out this summer based around push notifications and microtransactions, where we want to lead the industry. Because we never think that by being in front today, that we will be always in front. So we want OpenFeint to be the premiere platform, we agree that today, we certainly feel like it's way up there, but we feel like you constantly have to build new product on top of your platform to really make a world class platform. Because otherwise you're just sort of opining and thinking oh, this is good stuff. So we always want to test our own platform, and expect a title this summer based on OS 3.0 and OpenFeint features.
The second thing, which is, I think we're really doing something different around the business model. Ngmoco
announced their Plus+ platform this week, and it's really a publishing tool rather than an open platform, and we're pretty proud of the fact that we're sort of the biggest player who is really able to provide an open platform where a developer does not have to make a publishing deal with us in order to get access to the platform. Ngmoco's platform is hey, we have this platform, it's part of our publishing network, and if you want to publish games with us, that's how you get the platform, and obviously you know the economics of the publishing business in the game industry, right? There's revenue that has to be sacrificed there. So I think as a guiding strategy, we will never make our platform related to anything with our publishing because it's our belief that this OpenFeint thing does two things that we will always have to provide for publishers: no servers, because 90% of developers have no experience building servers, they build great console games, client side stuff, C, C++ programming, all this stuff, but they really don't have any backend experience. And two, we're not going to take rev share, in terms of publishing deals. And those two things, I think, are sort of our long-term guides. The third thing is to build our own games constantly, so we can use Danielle and Jason's game design and knowledge to say here's the kind of games we can do. So if we can do that and execute, I think, with some fingers crossed, with some luck, we'll emerge as the de facto standard, which is our goal.
I had talked to Danielle a little about pricing already, but I wanted to ask about microtransactions as well -- when you do that stuff, are you not skimming off revenue as it comes through, or what is the pricing scheme there? PR: Well even today, we have cross promotion inside OpenFeint 2, even before microtransactions, where if two players meet in a lobby, and they're from different games, then one player clicks on the other player's game, and you go to the App Store and you buy that other player's game? That's what you call our one-touch iPromote product inside of OpenFeint, it's a big draw for a lot of developers, because our community is now three million and growing -- we call it our social bazaar, because the App Store is so cluttered now that it's hard to differentiate. So you use OpenFeint and get your game in front of three million people in these lobbies. That revenue, when someone buys a game using OpenFeint's cross promotion feature, doesn't come from the developer, it comes from Apple. Because we are an Apple affiliate, through BigShare. So we take the user into a webview, which is our own catalog, where you can buy games off the App Store, and then Apple actually pays us. So that's hopefully -- this is the same thing, the whole idea is to get Apple to pay us every time there's a purchase in the App Store, including in-app purchases, as opposed to the outside.
Great. That's pretty much everything I had to ask, was there anything else you wanted to share? I guess we'll keep an eye on the game coming out this summer. JC: Yeah, I guess the only other thing worth mentioning is that OpenFeint is available now -- it can be downloaded by anyone from our website. It's real.
Cool. Thanks very much. 
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