I often provide strategy and product development guidance to some of our portfolio companies; however, I wanted a more immersive experience and to be part of the excitement of startup life. So over the last several months, I increased my assistance to a particular portfolio company in the Toronto area, which I believe is well positioned in the marketplace. Strategy discussions with management of this company led to a conversation to bring me on-board as Product Manager of a new mobile social game at the idea stage. Eager to help the company succeed and to gain additional experience, I undertook a more formal responsibility on evenings and weekends as Product Manager. It was a perfect fit for both the company (lacked product management capabilities) and my career ambitions.

As part of the team, I faced my first challenge: Figure out the best way to manage the development team and the product. I evaluated several methods of product development and eventually settled on SCRUM since it is ideal for agile development with rapid iterations and incremental updates — perfect for an iPhone game.

For product managers that are new to SCRUM, be sure to check out the SCRUM Reference Card (great overview) and beginners SCRUM Guide (fairly basic). These were helpful resources in my quest to better understand this product development process.

It was my next goal to conceive of a process to coordinate everyone’s collective efforts on the team to come up with ideas and potential features for the game and to convert that list into the Initial Release Plan and Product Backlog for the game. I created a spreadsheet in Google Docs and shared it with the team. I wanted to be a very transparent Product Manager and show the team everything that I saw — idea list, resource planning, timeline estimates, business value associations to product features, etc… I did this because I believe that transparency will help the team better understand my points of view and decision-making rationale.

Since I am continuing to learn, I invite you to have a look at the Initial Release and Version planning spreadsheets that I created to manage the product development process. Naturally, I stripped out any game-specific information, removed the names of people involved and altered values so that it would no longer represent our plan in any fashion. Other small changes to this public version include:

• For the idea list tab, each item should be a minimum of 4 hours to a maximum of 16 hours only; tasks less than 4 hours should be placed on each developers Scratch Pad and aggregated into an item on the list; tasks greater than 16 hours should be broken down into components (if possible) to fit within the 4 – 16 hours window for ideal planning purposes.
• Each developer would have his or her own “Scratch Pad” (the demo version only shows 2).
• The only tab that was completely removed was the method by which we determine business value for each product feature.
• The “Product Backlog” tab is dynamically driven from the “Idea List” tab and broken-down into version and sprint for each assessment; a tip for collecting the unique “Groups” is to export the long list of Groups from the “Idea List” into Excel and create a Pivot Table, then select the grouping and extract the unique elements to import back into Google Docs.
• In the “Product Backlog” tab, you should determine your own complexity factor for the project  (a guide to determining this factor can be found in the SCRUM Guide linked above).

I would love to hear your questions, comments and (hopefully) suggestions to further improve what I have already created in hopes of making this effort more successful. If you would like a copy of my example spreadsheet, please let me know and leave me your email address in the comments section below; I’ll make sure to get you a copy either on Google Docs or as an export to MS Excel.

My next post will discuss putting this plan into action.

Metagame Design – Presentation Transcript

1. MetaGame Design Reward Systems that Drive Engagement Amy Jo Kim CEO, Shufflebrian
2. What is a Metagame?
3. Using out-of-game info or resources to affect in-game decisions Gaming definition
4. Layering an rewards system onto an existing activity
5. Metagames are Everywhere
6. Collecting Complete Collections — Gain Status, Access, $$
7. Behavior Chart Collect Stickers – Earn Privilege or Prize
8. Karate Develop Skill – Earn Rank, Prestige, Powers
9. Scouting Complete Tasks – Earn Badges, Rank, Prestige, Powers
10. Frequent Flyer Programs Spend Money – Earn Points – Redeem for Flights
11. Arcade Spend Money – Earn Points – Redeem for Items
12. Text RPG Complete Missions – Earn Points – Redeem for Items
13. Contest/Raffle Take Action – MAYBE Win Item
14. Contest/Raffle Take Action – Maybe Win Item
15. Tournament Play Sport – Enter Tournaments – Earn Ranking/Trophies Leagues & Teams are part of this
16. Tournament Play Sport – Enter Tournaments – Earn Ranking/Trophies
17. So how do you design a Metagame?
18. Metagame Design Framework Viral Outreach Feedback & Rewards Points
19. Metagame Engagement Loop Post updates, give gifts, send taunts Get feedback, earn rewards Take actions, earn points
20. Act React Customize Create Earn Spend Step 1: Assign points to actions Viral Outreach Feedback & Rewards Points
21. Which ACTIONS earn points?
22. Which REACTIONS earn points?
23. 3 Types of points
    • Experience Points (XP) – earned directly via players’ actions – track & reward socially/economically useful player actions
    • Skill Points (Score, Rank) – earned via interacting with the system – based on mastery of the activity or game
    • Influence Points (Rating, Reputation) – earned via the actions of other players – proxy for quality/reputation/influence – track & reward socially valuable contributions & actions
24. Is your points system tracking skill, experience, or both?
25. Is your points system assigning ratings to people or objects?
26. Can you Spend your points?
27. Levels Leaderboards Roles Reputation Missions Challenges Achievements Collections Step 2: Add Feedback & Rewards Viral Outreach Feedback & Rewards Points
28. Levels are shorthand for participation and achievement
29. Leaderboards identify, motivate and reward your most devoted players
30. Social Leaderboards drive competition and enable missions
31. Leaderboards can cause problems – don’t be afraid to remove/hide/change
32. Missions tell players what to do next
33. Mission-driven engagement loop Post updates, give gifts, send taunts Get feedback, earn rewards Accept Mission Update Mission List Take actions, earn points
34. Reputation and Ratings track quality/skill + motivate contributions
35. Achievements provide short-term goals + sense of progression
36. Motivate newbies with easy-to-earn rewards
37. Motivate power-users with scarce resources
38. Motivate contributors with a rating system
39. Updates Gifts Sharing Invites Step 3: Grow through Viral Outreach Viral Outreach Points Feedback & Rewards
40. What are the ‘social moments’ in your game?
41. Competition Bragging, Taunting, Challenging
42. Cooperation Sharing, Helping, Gifting
43. Self-Expression Check out my character/outfit/farm/page
44. Case Study: Farmville
45. XP + coins earned by completing tasks
46. Customize your character
47. purchase seeds
48. Plant & Harvest Crops
49. Help Neighbors
50. Design & Develop Your Farm
51. Buy exclusive items with $$$
52. Tutorial introduces pts, levels, rewards
53. Earn coins, level up, buy more stuff
54. Leaderboards facilitate social interactions
55. Achievements come early & often
56. Achievements displayed as collections
57. Achievements displayed as collections
58. Help your neighbors, then brag about it
59. Many opportunities for self-expression
60. Gifting pulls people into the game
61. Case Study: Stack Overflow Technical Q&A site w/crowd-sourced moderation
62. Ask/answer good questions to build Reputation
63. Leaderboards for Reputation score
64. Earn badges by performing basic site tasks
65. Question: why no viral outreach?
66. 5 Tips for Designing a Compelling Metagame:
    • Create a coherent experience that unfolds over time
    • Define a points system (XP, social pts, redeemable pts) that supports your purpose and audience
    • Introduce feedback and rewards that motivate newbies, enthusiasts, and contributors
    • Design rewards that players will be eager to share
    • Use “game pacing” to grant rewards over time

See Amy Jo Kim’s profile on GDC 2010.

The paper analyses the viral spread of an application and how/why are these processes occurring. SocialTimes.com did a great post that summarizes the academic paper. Alternatively, you can view the entire paper here.

Some of the key findings are summarized below:

• On average, each inviter has invited 26 friends while the median number is 10
• Just 10% of users account for 50% of successful invites
• Around 90% of users share their locale information
• Around 40% of users share their friend list
• Only 1% of users share their relationship status
• Invited users remain in the game longer: over 50% kept on playing for more than a day and 20% of all invited users were still playing 80 days later.
• Around 80% of non-invited players leave the game within the first day
• Overall, they find that invitation strategy is more important than demographics in determining invitation success rate

To determine how to create a profitable social game, please explore my previous blog post on the importance of Customer Acquisition Costs for startups.

After being pitched countless times by startups, as a VC I’d like to identify a common misconception that web-based startups often have about their own growth potential and the costs associated with their plans. Management of web services companies, SaaS companies and mobile (web-based) applications commonly believe that because they are situated online, customers will come across their service, submit a purchase order (or subscribe) and notify friends or other companies to use the service as well. Although this may happen from time to time, it is very rare for any company to experience sustained viral growth.

Many companies don’t understand the difference between viral marketing and viral growth. Viral marketing is essentially “word of mouth” or “person-to-person distribution” and is the latest buzzword. Viral growth implies a K-factor greater than 1 (i.e. for each new person who tries a product/service, they will each invite more than 1 registered user of the product on average). Since true viral growth is so hard to achieve in practice, many companies miscalculate the actual costs it will incur to acquire customers. As David points out in his article, the majority of startup pitches lack detail/emphasis on how much it will cost to acquire customers. I second this statement entirely.

Business Model Viability
For a business to be profitable on each new customer, startups must balance two variables: (1) Cost to Acquire Customers (CAC); and (2) Lifetime Value of a Customer (LTV).

CAC can be calculated by taking the business’s entire cost of sales and marketing over a given period (including salaries and other employee expenses) and divide it by the number of customers that the business acquired in that period.

LTV can be calculated by looking at the Average Revenue Per User/Customer (ARPU) over the lifetime of a business’s relationship with a customer.

As Steve Blank mentioned in his recent post, an early indication that a business has found the right business model is when the cost of acquiring customers becomes less than the revenues generated from the customer. “For web startups, this is when the cost of customer acquisition is less than the lifetime value of that customer. For biotech startups, it’s when the cost of the R&D required to find and clinically test a drug is less than the market demand for that drug.”

Credit: David Skok.

Zynga is a great example of a company that has managed to decipher the business model of online social gaming. After thousands of A/B tests and experiments, Zynga finally found a business model where CAC was less than LTV. Once they cracked the nut, the company spent so much on customer acquisition that it was rumored that they accounted for upwards of 30% of Facebook’s revenue in 2009 though its aggressive social ad buying strategies. Similar business models and opportunities exist in virtual worlds, massively multiplayer online games (MMOGs) and many other online businesses. Many social games, such as those created by Zynga, leverage virtual currency, micro-transactions, emotional response mechanisms and social influence to promote the sale of decorative and functional virtual goods.

Before investing in a web-centric startup, good VCs will look deep into a company’s business model and know to look for CAC and LTV metrics. In fact, Trident Capital recently held a meeting with their online advertising and ecommerce companies to help exchange best practices for customer acquisition and improving LTV. My advice to startups: prove out your business model and you will have a much better shot at raising VC dollars. Skok suggests that two key equations be followed by web startups:

• CAC < LTV (3x appears to be a rough minimum for SaaS businesses)
• CAC should be recovered in < 12 months (for subscription businesses)

Startups, if you’ve already figured out your business model and how to make CAC < LTV, stay very quiet and add as much fuel to the fire as you can afford. Your competitors will likely try to hone-in on your tactics and fight back for their share of the market.

Credit: Steve Blank.

Leverage Startup Metrics
Startups are different from larger companies and therefore need different metrics than larger companies. Metrics will give startups a lens into how well the search for the business model is going and help to identify when to scale the company. Besides CAC and LTV, some essential metrics that startups should be familiar with include Viral Coefficient (K-factor)  and Customer Lifecycle. Dave McClure from Founders Fund recently updated his Startup Metrics for Pirates presentation for web sales pipelines. Take a look!

Questions to my Readers
Please consider the following questions and share your perspectives with my other readers and the tech community at large.

1. What metrics do you consider the most valuable?
2. Do you use any tools to help measure specific metrics for your business?
3. What mistakes have you made (and corrected) that can help others succeed?

Now, thanks to an excellent plug-in called IntenseDebate, anybody can now leave comments by signing in through Facebook, Twitter, OpenID, WordPress or IntenseDebate. The plug-in also has some great sidebar tools that dynamically generate a list of the most popular blog posts (ranked by number of comments received) and recent comments received.

If there had been a comment that you wanted to make in response to a previous article, but were turned off by the process involved, I now invite you to participate in those discussions.

To my readers: Thank you all for subscribing and I’m looking forward to the additional conversations that result from these changes. Have a great weekend!

Tim O’Reilly wrote a short article last week on the convergence of Advertising and E-commerce and I thought he hit the nail right on the head. He says that “E-commerce is the killer app of the phone world. Anyone whose business is now based on advertising had better be prepared to link payment and fulfillment directly to search, making buying anything in the world into a one-click purchase. Real time payment from the phone is in your future.” I completely agree. Square is a great example of real-time point-of-sale (POS) coming to iPhone.

In the article, O’Reilly arrives at this conclusion by making a few theories about what can be expected from the marketplace based on some recent announcements and common sense:

• Google, Apple, and Microsoft will announce e-commerce programs akin to AdSense, in which retailers will register with “app stores” to allow physical goods and services to be bought as easily as apps
• We can expect announcements of partnerships between phone providers and Amazon or Wal-Mart to fulfill mobile e-commerce requests

There are a number of mobile apps that are positioned well to capitalize on some of these trends such as foursquare and other mashups of local and geocoded information. IMHO, there is a more exciting category that is only starting to gain excitement. Companies like Layar, Tonchidot (Sekai Camera), Mobilizy (Wikitude) and TAT (Recognizr) are creating augmented reality browsers and applications that use location data and combine it with image recognition technology to recognize specific people or places in the physical world and allow the application user to interact with them in some capacity. I strongly believe that these are some of the fundamental technologies that will make this category of future applications possible. By linking interaction of location-aware data through to payment and fulfillment functions, one can point a phone at a local pizza restaurant and order a pizza to their home en route. Another example may be pointing a phone at a friend and performing a money transfer with only a few clicks.

What killer apps can you think of that combine hyperlocal, e-commerce and fulfillment?

The theme of this DemoCamp was social gaming, with a few other social applications thrown into the mix. All the presentations were very interesting, but I have selected a few that stood out in my mind:

Gurbaksh Chahal (gWallet)

Gurbaksh gave an inspirational talk on entrepreneurship to the crowd, basing the majority on his life story and how he sold his first two companies for $40 million and then $300 million respectively. CEOs, take a look at his 9 entrepreneurship lessons. His new venture, gWallet, provides the next generation virtual currency platform for social media including social gaming, virtual worlds, mobile platforms, abandoned shopping carts and microtransaction environments. Essentially, it is another offer network that is looking to diversify itself from the realms of OfferPal and the like. It was great to see gWallet in action in one of the subsequent demos during the evening.

Albert Lai (Kontagent)

It’s always good to see Albert. I’ve had a beat on Kontagent for a while now, and I still love what they are doing. If you’re developing a social Facebook app, there is no excuse for not using Kontagent, unless of course you have no desire to really know what your users are doing and how best to improve the growth and distribution of your application across the social network. Kontagent really drives down to better understanding the Life-Time Value (“LTV”) of a user based on your Average Revenue Per User (“ARPU”) less the cost of acquiring an individual user – and Kontagent gets very granular so that you, the developer, can determine which sources of traffic tend to monetize well across your social application. If you haven’t heard of Kontagent, check it out.

Greg Thomson (Tall Tree Games)

Greg seemed to be in fine form last night. He demoed their latest game called FishWorld, which was a stellar rip of Zynga’s (and other) aquarium-based games. It was stellar not because Zynga does it to everyone else, but because it went above and beyond other aquarium-style games. Greg and the company really thought through the game mechanics and the game player’s psychology to maximize revenue-making opportunities. One of the best quotes that he said during his presentation was to “Create a problem for your users and sell them back a solution.” For example, in FishWorld the tanks constantly get dirty, but the game offers a suckerfish for $2 that will keep your tank clean and will prevent you from having to do maintenance on the fish tank to keep it clean. Another very smart move was to sell a shark, a premium and monetizable fish that people think are “cool” to have in their tank, but the shark eats other fish that users will then have to replace through coins or credits. In short, great game mechanics. Check it out! You will learn a lot by studying this game.

Greg Balajewicz (Realm of Empires)

Realm of Empires looks like a pretty engaging game where users can build relationships with each other, strategize, and plan their schemes of “virtual world domination”. They have build the company without many game mechanics for increasing monetization, as that did not seem to be their motivating force; these nice guys actually created a “fair” game where users can genuinely compete on skill and strategy – you are not able to buy your way to the top. While very refreshing from a user game-play point of view, it will be interesting to see how this pans out from a business operations standpoint. I think there is lots of potential for growing revenues in this company and that a great business mind could join this team and together they can really cash-in.

There were a few other demos by Oz Solomon (Social Gaming Studios), Joel Auge (HitGrab), Mark Zohar (Scenecaster) and Roy Pereira (ShinyAds.com), and while interesting, they weren’t inherently social games, which I set out to cover in this post. Feel free to check out my reviews from DemoCamp 21 (July 2009).

If you’d like a more in-depth review of your game or game mechanics, flip me a note and I’d be glad to take the time chat, understand your game / mechanics and review it in a subsequent post.

Monday, January 25th – Learn Web Metrics from the Master Featuring Dave McClure
Monday, January 25th – British Consulate / Seedcamp Reception
Monday, January 25th – Nordic Entrepreneurs and Venture Spinouts
Tuesday, January 26th – Girls in Tech: Catalyst Conference – 15% off
Tue & Wed, January 26th & 27th – Web 3.0 Conference
Wednesday, January 27th – Vator Splash Competition – Applications are Due
Wednesday January 27th – Social E-Challenge Speed Dating Mixer
Thursday, January 28th – FounderDating – Where Founders Meet
Sunday, January 31st – Lightspeed Venture Partners Grant Program Application Deadline
Wednesday, Februray 3rd – Bootup Labs (Canada) Demo Days
Wednesday, Februray 3rd – Geo-Loco! The future of geo-location services
Wednesday February 21st – 28th – E-Week at Stanford University

BASES recently launched their “Help A Startup Out” section to more efficiently match the needs of startups with their large and fast-growing global network of entrepreneurs, investors, and top-quality service providers. Startups, give them your input to help make this a success.

I had a chance to work with a few members from the BASES group last year when I volunteered as a judge and mentor for a student team competing in the 2009 Social Entrepreneurship Challenge. They are a great group of people doing great things for the community.

Which subscriptions to tech/startup newsletters and RSS feeds do you read religiously? I’m looking for more sources…

The 2010 Mobile Trends report offers these high level statements:

• More brands will start taking the mobile web into account in their strategies.
• Innovation in mobile payments will accelerate.
• Google will shake up the mobile navigation business.
• Location will start enabling richer mobile experiences.
• Social Computing and mobile phones will expand their love affair.
• Live mobile TV will be hyped again.
• The OS arms race will heat up.
• Application stores will continue to flourish, but none will replicate Apple’s success in 2010.
• Some operators will want to reduce their increasing dependency on Apple.

Read the Forrester blog for a deeper dive into these trends.

My $0.02 on the “Live mobile TV” Trend
If you’re a die-hard TV fan, getting live TV to your mobile phone has been around for a while from Slingbox, which allows you to stream shows from your PVR/DVR at home to a BlackBerry or iPhone. In 2010, I believe much more than live mobile TV is going to heat up in the mobile video segment. Since mobile carriers are now extending the capabilities of their networks beyond 3G, such as the multiple WiMax network deployments by Clearwire/Sprint, higher-quality mobile video finally has rails that can support its intense-bandwidth needs. This means more services that will bring consumers music videos, concerts, plays, festivals, live sporting events, tv shows (live and archived), movies (full length and in bite-sized snacks) — and my personal favourite — video-calling. I’m quietly keeping my fingers crossed that the iPhone 4G supports video calls! One last thing, mobile advertising networks will likely be the default solution to monetizing “lite” apps; as mobile video continues to build traction, watch out for hype surrounding mobile video advertising to heat up.

This post will focus on how I believe the design of BlackBerry App World (“BBAW”) can be improved for both enterprises and consumers.

BlackBerry App World for Enterprises

When BBAW was first released, many BES-connected users had problems downloading applications due to permission-based issues. RIM can’t do much to change corporate policies, but RIM can implement a highly-anticipated BBAW for the enterprise. I am proposing that RIM creates an enterprise app store, similar to the app store announced by MobileIron in December 2009. MobileIron’s enterprise app store allows enterprises to create a repository of approved content and apps, which employees can then download and use with the full blessing of IT. In addition, an enterprise can create device or employee categories with permissions for certain types of content. As mentioned by Kevin Fitchard of Connected Planet, “Salesmen, for instance, would find Salesforce.com’s app in their approved storefront, while a field engineer would not. Both field engineers and salesman could have access to vehicle navigation services, and while a desk jockey might be able to download that same application, the company could set usage restrictions limiting when he or she could use it (say, business trips) or require the employee to pay the monthly service fee in a separately generated bill.” To me, this concept sounds like an app store that would help RIM sell more BlackBerry devices to enterprises, help IT administrators and make employees more productive (and happy) when mobile. Obviously, a more tidy billing mechanism will have to be in place, since I’d reckon the majority of enterprise won’t want to pay via PayPal.

BlackBerry App World for Consumers

In creating v2.0 of BBAW, RIM has a lot of work to do. My last post discusses a few elements that need improvement including the billing systems, pre-loads and fewer bugs. I’d like to add a few more points to the discussion. To begin with, the billing system needs to be more dynamic and allow customers to attach credit cards to their profile for frictionless billing. The billing systems should also be flexible enough to power additional business models for application developers including subscription billing and in-application micro-transactions. Why not bring the minimum price-point to $0.99 as well?

Steven Berkovitz chimed-in to mention that with BES 5.0, there’s a full-blown web version of desktop manager; it uses an ActiveX control to connect to your Blackberry for operations requiring a physical connection and personal data is sync’d over-the-air (“OTA”). However, this functionality doesn’t yet extend to previously installed, licensed and configured applications. As a consumer, wouldn’t it be nice to buy your next BlackBerry, insert your SIM card, load your user profile from within an OTA-driven application and click “Restore Profile” to then have your data, applications (auto-detect new BlackBerry OS and download proper build for the new device) and configuration settings loaded onto your new device OTA? That is one step towards a BlackBerry device that can compete with future iPhone models in delivering the experience sought after by the ever-smarter and bells-and-whistles-seeking consumer today.

Many users are also confused by not being able to find certain apps in BBAW that show up for their friends or colleagues. By design, RIM only shows its users the apps available for their device. In a future version of BBAW, it would be nice to show users all the apps and allow users to be notified (by push, email, SMS, etc…) when the app is launched for their specific OS and device model. This could also give developers a sense of what devices are generating the most demand for their product so that they could focus their development efforts on the makes/models and locations that are going to yield that greatest financial rewards or user adoption.

Ubiquitous Access

BBAW needs to come pre-loaded on all (new) handsets. End of story. In cases where mobile carriers have a contractually dominant position over RIM on controlling content or applications available to mobile devices, RIM should provide those carriers with sufficient access and privileges to formally reject specific applications for use by their subscribers for their own reasons. In concert with these changes, RIM should enter into a formal revenue sharing agreement with carriers so that revenues generated from application one-time sales, subscriptions and micro-transactions can be shared. Once these deals are signed, RIM (or the mobile carrier) should push App World down to all BlackBerry devices. IMHO, this would be a win-win-win scenario for RIM, carriers and consumers.

If you were RIM, how would you design BlackBerry App World v2.0?