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On Developing Web Based Games

The question is (Score:5, Insightful) by hey! (33014) on Monday March 09, @08:45AM (#27119939) Homepage Journal

is worth developing games at all.

In a world wracked with hunger, poverty, ignorance, and environmental catastrophe, is writing games what you ought to be spending your time on?

Oh, wait.

You want to know whether you can make money.

Well, it looks like your friend has learned the first lesson of business: most customers are unreasonable. You can't expect them to care about your problems, e.g., keeping a roof over your head and keeping a wolf from the door. Fuming over the unreasonability of customers is a waste of time, and time is money. If you can't keep yourself from doing this, you should consider the first question, above, because you aren't cut out for business.

A corollary of this is that failing to manage customer expectations is like losing track of that bottle of nitroglycerin that you know is on your desk somewhere. This means keeping a careful rein on your salesmen, including your inner salesman. Salesmen have one imperative: sell. When you're a one man band, it's easy to sell because you have control over prices. You simply whip up expectations to the greatest degree you can, then drop the price until the product moves. This can work, provided that you can take your profit up front. For many kinds of software, especially software sold as a service, this is dangerous, dangerous because most of the costs of supporting a sale are downstream.

Your friend kind of screwed up here, because he's got a service based revenue model and he expected customer expectations to be reasonable. That's OK, because another important lesson of business is this: you screw up just as much as anybody else. If you want to win, you've got to learn from your mistakes faster.

I knew a guy who had a really extremely useful product, but it required a great deal of support. Such a product "wants" to be expensive. He could have made a decent living selling it to only two or three customers who'd spend 100x what certain other customers would pay. Once he had that under control he could have dropped the price a bit and got a few more customers, growing his business step by step by taking successive nibbles of the market. Instead, he tried to grab the whole market in one fell swoop by pricing low, and ended up with more support costs than he could handle, spending all his time mollifying unprofitable customers while profitable customers stewed.

Web businesses superficially seem to be a different animal. They often seem to run on no visible means of support, somehow managing to give expensive things away for free. In truth, the basics remain the same: manage expenses and costs so that you come out ahead. Web businesses make money by aggregating lots of small, sometimes infinitesimal bits of revenue that have even tinier increments of cost. You can make a lot of money selling a ringtone for a buck because once you have the customer's money in hand they never call you for support. Google is successful in the search business because the number of transactions they handle are astronomical. They're tough to dislodge from their position because of the massive investment you'd need to get your transaction costs down; start with the cost of changing a single customer's web habits, multiply it by the number of customers you need to succeed, and it's a daunting hole to climb out of.

It sounds like your friends are well positioned to make a good living with this kind of model. First, they have created a product people care about. That's a rare, rare gift. There's lots of money out there attempting to do this with conspicuous lack of success. One of the biggest costs associated with any sale is the cost of getting people to pay attention, so when people care about a product that's money on the bottom line right there, provided you have any revenue at all. If they can find any source of revenue at all, and keep support costs close to nil, they can very likely come out ahead. If they want to get rich, they sell the business to some operator who has money, but doesn't have a product people want.

Also, if developing this product is a labor of love (see the opening question), you can in effect apply that to the up front costs of the business. Even if the business is a financial failure, you still have the satisfaction of having created something you're proud of. Both the development experience and the business experience are extremely valuable on your resume too. This is probably the most important parameter on whether it is "worth doing".

At the end of your life, it is the experiences you've accumulated that matter, not the money; that's only a means to an end. Still, at the start of your career, when you are young and don't have a family to support, you can set yourself ahead on the money track by doing things just for the experience of having done them. You won't have as nice a car at the outset as your peers who go into a steady career track. You might have to live in your parent's basement and endure their questions about getting a steady job, say at an IT support call center. But it's an opportunity to do what the hell you want that won't come again until you're looking at retirement.

So if you don't have the overhead of a family and lifestyle to support, but do have the talent, go for it. Even if you fail as a business it'll be good for your career. If you don't want to fail, just remember three things. First, control customer expectations carefully. Raise them enough to sell, but the time to exceed expecations is after the sale, not before. Second, balance the source of revenue you have against support costs, cost of sales, and overhead. Overhead is evil, which makes Mom and Pop's basement the best business incubator you'll ever find. Finally, keep a weather eye out for things that aren't working so you can learn from them and correct them quickly. Nothing is more common in business than a brilliant guy who fails because he keeps doing the same things that ought to work, but don't.