Introducing Conduit Labs

We just announced our recent Series A investment in Conduit Labs, a Boston based company that’s focused on building a social networking / casual MMO hybrid.  Well, what does that exactly mean? And aren’t there a hundred companies now doing this exact same thing? 

This new space – the intersection of Web 2.0 and online gaming – is a very difficult one to define.  This categorization encompasses companies like Kongregate to Areae to Three Rings – each of whom is vastly different from the others.  To make it even more confusing, Conduit Labs is not really like any of the three companies I just mentioned.  They’re inventing an entirely different interpretation of what it means to sit at this intersection. 

Conduit Labs is building a gaming environment.  That is to say, the primary driver of user interaction is game mechanics.  This gaming environment lives in an immersive, graphically rich world.  But the gameplay Conduit Labs is building isn’t exactly like other online games we’ve all now become familiar with: there’s probably not going to be much kart racing or princess saving or dragon slaying.  We aren’t yet disclosing what the gameplay or graphical metaphor will consist of, because that’s part of the secret sauce. 

Leigh Alexander from Worlds In Motion wrote up a great interview with Nabeel that provides more insight into what Conduit Labs is up to.

Nabeel: “I think probably every other day now over the last couple months, I see a new casual MMO or virtual world startup; it’s been constant…and what I saw was the same kind of dichotomy — two types of startups. There’re hardcore MMO gaming guys trying to make that experience more accessible, sort of like World of Warcraft meets the web. And the other side of the coin is a bunch of web guys who want to build a web site with virtual gifting and more gaming.”

While Hyatt recognizes the value in both of those approaches, he adds, “I think they’re missing the larger point – which is that there is no interaction on the web that is like a social game. I don’t mean a single-player game, which is based on a legacy of, really, only video games; it doesn’t last hundreds of years. There’re actually thousands of years of games that are primarily social activities like dancing, or bowling. And those are about you bonding with your friends, and there’s nothing like that online right now. And I think the web and social networks provide a whole new medium to create something that’s never been seen before.”

Just like the Wii and Guitar Hero reinvented the social gaming metaphor for a broader audience, Conduit Labs is trying to do the same for your web gaming experience.  I’ve also seen innumerable business plans in the last year for startups in the online gaming and virtual world space.  But most of them have been rehashes of things we’ve already seen, building things like “making the MMO even more casual” or “putting casual games into Facebook” or “Club Penguin but with chimpanzees.”  (disclaimer: I actually like chimpanzees quite a bit, probably more than I like penguins.) 

We invested in Conduit Labs because I believe the team there really gets it: there’s an entirely new type of immersive experience waiting to be built.  It has less to do with technology (although we are building on the basic assumptions/principles of the zero-barrier MMO and all that entails), and more to do with social engineering.  This is a great team that has the right blend of experience that includes Web 2.0, hardcore MMOs and the scalability expertise that comes from supporting tens of thousands of concurrent users, and understanding how to design “fun” for a mass market audience that comes from building groundbreaking social games like Guitar Hero. 

Recent CRV Investments: Twitter & Social Media

We’ve made a couple of interesting investments recently in the social media space – Twitter and well, the aptly named Social Media.  Social Media, the company, is building a highly viral network of micro-applications that live across multiple social networks.  The announcement regarding the Social Media funding is here.  Social Media is a 1st cousin to companies like Slide and RockYou – both of which are essentially virtualized social operating systems, coordinating massive networks of widget-based microtransactions.

What I find compelling about Twitter and Social Media is that they are both creating standards around specific user behaviors and then syndicating this standard across multiple social operating systems.  This server side synchronization of user relationships and user behavior is the key asset to own.  We’re now moving into a client agnostic era, where clients – whether they be Flash, Ajax, Facebook-centric, or MySpace-centric - are marketing channels whose function it is to drive efficiency into the process of targeting and segmenting your users. 

A client should be an interpretation of a user group’s needs within a specific context (by ’context’, I mean the 14-18 year old females on Facebook have a different community ethos than the 14-18 year old females on MySpace and thus could be segmented into two different user groups).  Done well, this can lead to lower user acquisition costs and a broader distribution engine.    All in the pursuit of creating the zero barrier platform.

Seth Goldstein, Social Media’s CEO, put together a cool summit last week called AppDevCon.  It was a get together of 60-70 of the leading Facebook application developers.  I spoke on a panel about investing in Facebook apps.  Justin Smith, from the Inside Facebook blog, wrote up a good summary of the event’s sessions here.  My comments were truncated because Justin was liveblogging the event, but to sum up what I said:

• We are actively investing in Facebook apps.  However, I feel there are very few, if any, standalone apps today that would make outstanding venture investments.  There are interesting threads and patterns that are emerging that could become great venture investments. For example, MySpace and Facebook are the two most well known asynchronous social platforms. There is great market opportunity for an emergent synchronous social platform or application.  I’m also very interested in virtual gifting and virtual currency platforms that operate across myriad environments.
• I am most interested in investing in smart, creative folks who have an interesting hypothesis, a good process for experimenting in rapid iterations, and a methodology for collecting data that gives them insight into when and where to place the big product bet.  The pace of innovation on the Facebook platform is insane right now.  It’s enormously difficult to predict what the killer app might be. 
• Should app developers be building on other platforms other than Facebook? It depends on the ROI – Facebook is but one user acquisition vehicle with its own Customer Lifetime Value datapoint.  If you build a framework that lets you test aggressively and measure results quickly, there’s no reason you shouldn’t be deploying across multiple environments.

Areae and the rise of the Social Networking / MMO hybrid

When I started writing this blog, very few people were talking about the melding of MMOs and Web 2.0.  My goal for the last year was to proliferate this concept widely and to help bring together what I observed to be two very segregated, but highly complementary communities.  This was my motivation behind putting together a Virtual Worlds/Casual MMO panel at the Web 2.0 Expo and for including the panel on “Virtual Items: Mainstream or Not” at the Virtual Goods Summit. 

 Yesterday, BusinessWeek published a special report called “Getting Serious about Gaming.”  Two of my investments are mentioned in this article, one of which is Areae:

“One of the most high-profile efforts in this area is the L.A.-based Areae, founded by industry veteran Raph Koster (former chief creative officer at Sony Online Entertainment (SNE)) in December, 2006. Still in stealth mode, the company is talking very broadly about its plan to reinvent virtual worlds. But the basic idea is to bring down the astronomical development costs of the popular MMOGs by borrowing from the equally popular and vastly more economical Web 2.0 technologies supporting sites such as MySpace and YouTube.”

Hrm, they don’t exactly get it right.  What they do get right is that Areae is still very stealthy. In all seriousness, I don’t like invoking a Web 2.0 metaphor where the sole conclusion is ”cost reduction.”  Web 2.0, while an accelerant of more cost efficient development models, is in my mind, primarily characterized by a collaborative and community-driven relationship with your users where “A+B” does not merely equal “A+B.”  This is the kind of alchemy all of us technologists strive for – how do we transform mundane, commodity database driven web pages into something that supports life?  ;>

And since when was MySpace Web 2.0?  

In any case, all my good natured snark aside, I’m very happy to see the transformation in the market that has taken place over the last year.  The conversation around next generation social media has moved far beyond Second Life and WoW.  Every day, I see new business plans and prototypes of entrepreneurs constantly innovating in this space. 

Come to my Web 2.0 Expo panel: Gaia Online & Club Penguin talk publicly for the first time ever

If you’re at Web 2.0 Expo, come to my talk tomorrow, Wednesday from 3:20 – 4:10 pm in room 2009, about “the Future of Online Gaming & Virtual Worlds.”   I’ve put together a wonderful group of panelists that includes:

• Gene Yoon, VP Business Affairs for LindenLab / SecondLife
• Craig Sherman, CEO of Gaia Online
• Lane Merrifield, CEO of Club Penguin
• Raph Koster, President of Areae
• Joi Ito, Chairman of Creative Commons, Board member of Mozilla, and my World of Warcraft guild leader

I’m psyched because Gaia Online and Club Penguin are both talking publicly for the first time ever about their businesses.  These are two of the most exciting web companies you’ve probably never heard of, unless you have kids between the ages of 6-15.  

I’m taking question suggestions!  Post your comments.

We’ll be talking about why “online gaming and virtual worlds” is incredibly important to the future of the Web as a whole.  And maybe delving into SecondLife’s furry monetization strategy.