• Corporate deal, not the “founder buy-out” traditionally commonplace among gaming fansites. MMO-Champion was previously owned by Major League Gaming, already a multi-million dollar enterprise (by comparison, $46 million funding).
• Completes a duopoly (2 dominant businesses) in the core World of Warcraft “fansite” market – Curse and ZAM. While there are other large businesses and specialist niches on the fringe, none of those appear to be growing into the core WoW market.
• Exposes an intriguing driver of this market structure: Systems costs – the underlying technology and support costs. Intriguing because these were crucial in determining the market structure of far more traditional sectors of the economy, like groceries.

This article analyses the latest acquisitions and discusses the unseen importance of systems costs. On this page:

• The Other Online Game
• Curse vs ZAM
• Sold!
• Systems Costs
• Descent into Madness

The Other Online Game

New readers may be surprised to learn that there are millions of dollars involved in World of Warcraft-related websites. A Strange Game and Learn2Play, the new Real Money Trading provide an introduction.

My Map of World of Warcraft Online Communities showed the structure of this market in 2008. By 2010, all the communities in the core top-left quadrant of that map had become owned by large (typically multi-million dollar) businesses. The centre-ground is now commercially mature: In 2010 there is no big fansite that didn’t exist in 2008, while many of the large fansites in 2008 had barely existed in 2006.

All these large businesses are now diversifying into other games, because WoW hasn’t expanded beyond around 5-10 million players (excluding China), and inevitably this will fall at some point in the future (no video game can remain so dominant forever). Diversification is a tricky strategy because WoW continues (through strong marketing and new player retention) to attract customers, while competitors fail to challenge it. Indeed, its competitors are increasingly not even “Massively Multiplayer Online Games” – instead, browser games like Maple Story, or (Facebook) social games like Farmville.

Owners’ focus varies: For example, IncGamers has almost forgotten its roots as WorldofWar.Net, while WoWWiki is increasingly a platform to aggressively promote Wikia’s wider gaming portfolio. In contrast, Curse and ZAM still feel like they have World of Warcraft at their core, and continue to develop (or invest in) a range of services for World of Warcraft players.

So if World of Warcraft continues to be popular, and the core market remains mature, Curse and ZAM will tend to dominate popular fansite content. Other larger sites, without sufficient focus, will tend to get left behind (just like WorldofWar.Net), and smaller niche sites will tend to remain in small niches. This is why Curse and ZAM are interesting.

Curse vs ZAM

The Curse gaming network emerged from a World of Warcraft guild of the same name, originally as a database of addons – small scripts/programmes that can be run within the game. WoW addons remain its forté, with both developer and player-facing services. Curse started buying up WoW fansites in 2008, including MMO-Champion’s traditional competitor, World of Raids. World of Raids subsequently lost many of its visitors, while MMO-Champion thrived. Curse also attempted to launch a database website, in direct competition with ZAM’s Wowhead. Rather too direct: ZAM threatened legal action due to the similarity of WoWDB’s design.

ZAM was created from the acquisition of 3 large databases of gameplay information (Thottbot, Wowhead and Allakhazam) by some combination of Brock Pierce/Jon Yantis/IGE/Affinity Media (accounts vary). ZAM is understood to still to be privately owned. ZAM have also had some success with addons (especially WoW Interface), and have become interested in guides: Acquiring Tankspot’s video guides, writing event guides on Wowhead, even acting as a host for Deca/Alex Albrecht’s Project Lore.

In 2008, Curse’s ties with World of Raids would not have made it a natural ally of MMO-Champion. However, MMO-Champion hasn’t had flawless relations with ZAM either: Wowhead publicly appologised for “not appropriately crediting” the reuse of MMO-Champion’s content. The appearance of MMO-Champion’s own database probably didn’t help either.

While Major League Gaming does run World of Warcraft tournaments, MMO-Champion’s audience isn’t solely interested in tournaments. It is not surprising to see the site sold. And if my analysis is correct, there were only ever 2 potential buyers: Able to find the (undisclosed, but presumably substantial) fee, able to guarantee a reasonable amount of editorial freedom, and able to offer systems support:

Sold!

Independent fansite acquisitions typically involve:

• A creative founder suddenly discovers they can’t manage servers, staff, legal issues, or… and yet dealing with these things prevents them from continuing to do what they are good at. It might sound odd, by selling often isn’t about “the money”.
• An operating/managing/owning network that has experience of doing all the things the founder cannot, and can gain an “economy of scale” or market share or something useful from doing so: Typically by sharing expertise, management and information across many somewhat-similar websites.

At least that’s the ideal model. Some acquisitions are far more cynical or aggressive: Sites acquired solely for short-term advertising revenue, to resell a domain name, or to promote some dubious third party product or service.

This case is more complex, because the site hasn’t been independent for 3 years: It is difficult to judge all the reasons for a corporate acquisition (accountancy can often justify such decisions), but the main motivation for the sale appears to be technical. And not just visual issues, like the desire for fully-functional forums or a modern design. This is the most interesting reason Boubouille (the founder) gives:

“I think some people just underestimate the technical shitstorm behind each Beta patch or every single news. Having the backup of a WoW-focused company with tons of WoW-focused developers is a pretty huge thing for me.”

I hinted at the complexity of the process in the Adventures in DBC Files box. There are 2 problems:

1. Large amounts of regularly changing, but partial data, which must still be delivered accurately, as fast as possible. Hundreds of thousands of things, many inter-related.
2. Only a few “fansites” that need tools to analyse this data, and only a modest number of people with sufficient specialist knowledge to work with the data.

This is a lot like… groceries.

Systems Costs

Grocery stores’ (especially supermarkets’) competitive advantage lies in the rapid turnover of stock: The faster the store can buy merchandise from suppliers and sell it on to consumers, the sooner that cash will be available to buy more stock. Effective inventory (especially “supply chain”) management is key to profitability. That means lots of data, constantly changing.

But that’s not the only similarity: Each grocer gains advantage over competitors by developing “better” systems to manage inventory and related information. Sharing those systems with others would lose competitive advantage, yet ever-better systems cost more and more to develop. The only way to survive is for grocers to merge businesses, and share systems costs in a single merged business, even if they continue trading under familiar store names. It’s what forced US giant WalMart into Europe, and many European grocers to do the opposite. And for the whole industry to slowly agglomerate into a handful of huge global businesses.

Gaming fansites aren’t quite on the same scale as Wal-Mart. Yet. But the pattern emerging is similar: For example, programming expertise (and code) can’t be freely shared between competing fansites, because then everyone would produce precisely the same analysis at precisely the same speed, and any notion of competition would be lost. Yet several sites in the same network can share expertise much more freely between themselves – meaning fewer programmers or more flexibility.

While gaming sites are often profitable, most continue to make remarkably little money from so many customers: MMO-Champion may have 7 million monthly visitors, but it will struggle to earn a cent ($0.01) out of most of them. Most of that revenue disappears in operating costs, before a 40% profit margin (typically expected by early-stage venture capitalists) has been paid. On a fansite property that has probably already reached its maximum potential (barely 7 million people both play World of Warcraft and read English). So either this acquisition was part of an ill-conceived rush to spend venture capitalists’ cash (possibly before Games Workshop take it all in damages), or someone is planning to gain some serious efficiencies.

Descent into Madness

In theory almost anyone can setup a new WoW fansite. But in practice they won’t be able to compete anywhere except an undiscovered niche, because the technical, systems “barrier to entry” is now so high. The “fansite” market structure that emerges is the ultimate reflection on the complexity of the game itself: So much information, that individual websites can’t sustain themselves alone.

But then, rationally, none of this made any sense at the outset. As I previously concluded:

“Much of the third-party information is already coded into the game by the developers, obfuscated as game-play, discover by players, fed into third-party services, and then used to play the game by everyone else.”

We shouldn’t be concerned about systems costs because there should only be need of one system: The one in the game.

And I didn’t even mention that these third-party services are not licensed, but still tend to profit from the developers’ intellectual property. Or that such information might be better delivered in-game, not via websites. And that websites are preferred precisely because they can be operated commercially without permission. But then we’d have to acknowledge that these websites remain popular because they’re doing something game developers seem unable or unwilling to do.

While Curse and ZAM are still small businesses compared to mainstream game developers/publishers, both now have much to lose should anyone try to unpick this mess. Strange game indeed.

Nothing isn’t new. The problem baffled thinkers for much of the 20th century. In the 21st we may finally be being overwhelmed by it. Possibly without realising. How society resolves a potentially uncomfortable relationship with nothing is important. And intriguing. It’s possibly the most difficult problem to resolve, yet underpins many contemporary issues.

This article introduces 3 approaches to resolving nothing. They are an attempt to summarise various different articles I’ve written over the past year. Broadly:

• Tangible Renaissance: Physical representations of nothing. Idols to communicate abstract values. Belief in certainty.
• Virtual Illusion: Virtual consumerism. An economy base on nothing, happily sustained in the denial of the meaninglessness. Belief in who cares?
• Post-Existential Skepticism: Understanding built from nothing. Presumption of illusion. Belief in uncertainty.

This text is poorly researched, incomplete, and, well, uncertain. But it might be an interesting summary of the extent of my current confusion. This is written from a Western, especially British-American perspective. Keep these quotes in mind:

“Assume you are wrong (and forecast often).” – Paul Saffro (The Revolution After Electronics)

“More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.” – Woody Allen (My Speech to the Graduates)

Tangible Renaissance

Intangible sectors of the economy increasingly dominant (Socio-Economic Environment, Valuing). Yet we tend to favour physical representations, especially to convey status and action. From the idolisation of most religions, through the grandiose buildings occupied by banks, to cloths fashion.

The pattern continues into political government: The preference of “train sets” in transport policy, in spite of their minimal influence on transport (Railways for Prosperity). The inability of political government to even understand its impact on the intangible economy is well documented. Ironic, given the tendency for government intervention to define the value of intangibles (Valuing, again).

Tangible expressions of the intangible historically tend to be used to communicate concepts across large groups of people, especially across language or cultural barriers. The human illusion also seems to be stronger than any virtual creation (upcoming: examination of fame in World of Warcraft), so perhaps tangible things will always be preferred?

Tangible Renaissance is also associated with certainty (Optimism), in spite of growing uncertainty in the world itself (upcoming: why buses should be late – an examination of the paradoxes of denying the existence of uncertainty in policy making). Failure to acknowledge uncertainty compounds an ever-more complex underlying world. The extremes become more extreme, while the population continues to expect everything to be “normal”.

Overall, this traditional approach appeals to human instincts. It’s comforting and reassuring, regardless of its failure to address underlying problems. Unfortunately, it’s wasteful of increasingly limited physical resources, and relies on lucky to counter extremes of variability in the world. Logically, a Tangible Renaissance will eventually fail. Spectacularly.

Virtual Illusion

This approach takes an already predominantly intangible, consumerist economy (Socio-Economic Environment), and transfers it entirely into a virtual environment (Valuing, Adventures in the Invisible Tent). “Virtual consumerism” – socio-economic activity without utility value, without any physical component.

These illusions are still constrained by the uncanny (Adventures in the Invisible Tent), with an “augmentalist” relationship between the physical and virtual self (that they are the same entity). The human emotions behind what is physically happening, simply transfer to a virtual arena (Do You Fish in Real Life?).

There are significant advantages to this approach. Most obviously, the maintenance of civil “happiness” and economic prosperity in the face declining physical resources (Socio-Economic Environment). Philosophically, it’s a practical defense against the “nihilistic epoch” – replacing the realisation of pointlessness with a benign, but self-perpetuating, illusion of purpose.

The legal structure for this already exists with Intellectual Property rights (Poor Gina), allowing a feudal-style structure of sub-society, where everything is subservient to the master right (the Goblin Princes in A Strange Game exemplify the complexity possible).

While such a structure might be sustainable (these are “customers”, not slaves), it evokes many Marx-era fears of the dominance of the corporation over the people. But with some 21st century twists: I am both my right and a right owned by someone else – which conflicting right wins? Values can be internalised within the structure (made non-transferable), preventing conventional income re-distribution of wealth to offset inequality (Animal Farm). The potential evolution of the corporate right-holder into “a god” (A Strange Game). Plus more widely accepted intellectual property and privacy debates, such as restricting re-creativity (Poor Gina).

These conflicts potentially lead to civil tension. Tension which cannot be resolved through the parent legislature, because that government is wedded to the Tangible Renaissance. It will struggle to comprehend its role in this. So the Virtual Illusion might also be flawed.

Post-Existential Skepticism

The fall of the Virtual Illusion raises questions for individuals, which potentially lead to a much broader understanding of the self. Specifically an appreciation of the multiplicity of self (Valuing). That in addition to you, there can be lots of other versions of you:

The structure of law would be an unexpected, but logical, way to challenge the popular perception of the physical and virtual self as the same entity – the unresolved conflict between my right to I and I as a right owned by someone else. Or perhaps the result of the Virtual Illusion is that “reality” evolves to have so little certainty, that the only sane path is to assume uncertainty? Critically, human perceptions need to cross the uncanny Valley (Adventures in the Invisible Tent).

So, somehow, we emerge into what I’ve called Post-Existential Skepticism. An inversion of conventional meta-physics: Notionally starting from nothing, and questioning everything as a series of uncertain assumptions. The opposite of assuming “god created”, and then picking apart reality like a vulture, until there is nothing left to believe. The transition through nothing is widely considered absurd, terrifying, destructive, even apocalyptic. Yet Nietzsche, and many since, have also seen great potential for humanity in overcoming nothing. Chaotic, emergent thought is the most intriguing (Difference and the Same).

However, the popular trend is towards de-immersion and de-canniness (Adventures in the Invisible Tent). People gravitate towards each other (Difference and the Same). And humans don’t evolve anywhere near as fast as technology (Financing Hyper-Virality in the Clouds comment, Do You Fish in Real Life?). Optimism seems to triumph over logic (Optimism). And the pessimists get frustrated.