steveharmon.com

Hard to believe that the industry started as a video version of ping pong today is larger than the movie, TV or radio industry in annual revenue. Yes, we’re talking video games which are in the news today as World of Warcraft inks a deal with Netease in China for its popular online game. Hard to believe that video games began in a more humble way…I want to take you on a little journey down video game memory lane…if you can handle it. From the days of the first video games to today’s interactive “movie-like” experiences.

The Top 10 Moments In Video Game History (I’ve played every one of them!):

#1 Pong
The first time I came across Pong I was just a kid. The local Sears department store had the game plugged in next to the escalator (why? who knows!). I remember looking forward to going to Sears so my brother or sister and I could challenge each other on Pong. Looking back, Pong was a very simple game (not even in color). But in a world dominated by board games and a 3-network TV choice, Pong was the only interactive media going. Atari went on to sell 19,000 Pong units, installed in stores across the USA. Here’s a glimpse:

#2 Space Invaders.
Aliens advancing down the screen to a monotone beeping sound. Now suddenly you were pitted against the unknown advance of offworld spaceships shooting at you. The drama quotient went up rapidly vs. Pong.

#3 Pac-Man.
The turning point for arcade games was the little yellow gobbler that had to eat as much as possible before being killed by rival eaters. The Pac-Man music is now classic. Not sure what the idea says about culture of the 1980s: eat or be eaten?

#4 Atari 2600.
There were a lot of home video game consoles launched in the late 1970s and early 80s. The standout by far is the Atari 2600. Now, for the first time ever, those cool arcade games could be brought home. Pac-Man, Chopper Command, and Adventure. I remember playing Adventure and finding the hidden “Easter egg” which the programmers hid behind the wall along the journey.

#5 Mainframes.
Nothing like a bored programmer to write his/her own adventure game. And that’s exactly what one did at a major technology company where my sister worked. I used to go to work with her on the graveyard shift (11PM – 7AM) and play a textbased game called “Quest” that you controlled entirely by keyboard commands. In other word, “E” was to go East, “W” to go West, etc. Occasionally you would bump into an object and “P” pick it up. When you did, the object type would be revealed, such as “a shiny bright box.”

#6 Mattel.
Some of the first handhelds were from Mattel. One of the most popular was Football in which you would move little red-colored LED “players” around the screen to score points. This game was by far the most popular in my high school. It even sold out in local stores. Kids would play it in class and at recess. I ended up buying another Mattel handheld that had an LED light you raced up the screen by passing other cars. My best time was about 21 seconds.

#7 Playstation.
With the advances in graphics, computing power and storytelling the Sony Playstation took video gaming by storm. As kids that grew up with games we all were ready for more complex adventures, stories, challenges. On March 31, 2005, Playstation became the first video game console system to sell more than 100 million units. Ridge Racer kept many people awake at night testing their car racing skills. Parties became PS parties, not movie parties. Beer, chips and Playstation.

#8 Nintendo handhelds.
Game Boy and DS hit the offspring of first-gen gamers in force. Cool games, good graphics, Mario. What kid could resist? Nintendo’s DS crushed the competition on price and fun games. Hats off to Mario.

#9 Wii.
‘Nuff said? from sports to Star Wars, pinball (yes, you can play the Williams pinball games on Wii and it’s a blast), they’re all here. Wii was a game changer, taking gaming from the trigger style stationary controller to the moving hand, arm and body controller.

#10 Online.
What began as one of the world’s first first-person shooter games, DOOM in the mid 1990s turned into something much larger and diverse. Multi-player online gaming is now taking the world by storm 15 years later. Activision Blizzard’s World of Warcraft debuted in 1994 as Warcraft: Orcs & Humans, at a time when Internet connection speeds averaged 9600 baud. Today, in a world of broadband almost everywhere World of Warcraft is a global phenom with more than 11.5 million monthly subscribers. It holds 62% of the world market for online multiplayer games. Just last week the game partnered with Netease in China to bring its 1 million Chinese World of Warcraft players to Netease. In the US, Europe and North America console-based gaming is popular. However, in China and Korea, many players play at Internet cafes on PCs. China has more than 100,000 cafes serving more than 40 million players.

As video gaming is now more popular than the movie industry, what began with a simple ping pong ball is a pong heard ’round the world.

Right now the hottest company in Silicon Valley is Twitter, the micro-blogging, 140 character, company… as in:

“I’m eating toast right now”.

Having been in the web industry 15 years now I’ve seen this movie before. Sometimes it’s a double feature: 1) buzz 2) success as a company with revenue and earnings. The movie is still going, it can end like this:

Or it can end like this:

Right now Twitter is just buzz. Lots of celebrities (some new and some you forgot about or want to forget about) are using Twitter. Twitter itself promotes a handful to new users.

In his heyday (1990) I don’t think 200,000 people would be interested in MCHammer’s vitamin habit. And I like Hammer, saw him perform back in the day. But seriously, his daily updates are “took vitamins, heading to soccer game”.

Where are the Hammer baggy pants when you need them?

If you don’t know (or care) what Twitter is here’s the lowdown: it lets anyone share what they are thinking, doing, making, promoting, etc. in 140 characters (or less) and then have others subscribe to those updates. Basically, SMS meets the Web. Or the newfangled news groups, for those of you who’ve been on the Web since the early days.

From my experience and observation (cutting through the hype) it’s basically a modern-day PR service that people basically use to promote themselves or their company, etc.

Twitter just raised another $35 million from a group of venture backers that swear they focus on revenue and earnings, despite Twitter having none of either.

I’ve seen this movie many times:

* Netscape (owned the entire web, its browser was the default. Microsoft beat them and Netscape didn’t see the website itself as a business until it sold traffic to Yahoo and others).

* AOL (blanketed Earth with sign up disks and bundled itself with Windows in a deal with the devil in 1996. Time Warner was its hemlock).

* Alta Vista (the geek’s preference for Web search from 1995 – 2001. Got tangled up with Digital/Compaq and mangled in a body slam from CMGI).

* Blogger (hottest blog platform, sold to Google and lost its unique brand ID. Same guys founded Twitter).

* Skype, the #1 free web-based phone service, sold to eBay and stopped innovating. Now emerging as a player again thanks to iPhone wifi phoning.

With every twist and turn, technology companies hit crossroads and take the better path or they lose focus and dwindle an opportunity.

While some observers think Twitter should sell to Google, my advice to the Twitter founders (which I already shared with them) was this: just license the search on Twitter to Google and make Google pick up Twitter content for use across Google search and YouTube. Price?
charge Google $250 million per year for this.

This is a similar deal News Corp. CEO Rupert Murdoch did. He sold MySpace search to Google for $900 million license fee.

I like Twitter and believe a gem could exist if it’s smart about the future, smart about ways it grows. If not…then the movie ends there.

While the US media is gaga for Twitter what really caught my attention this week was Changyou, a Chinese online video game service that was spun out of Sohu (SOHU). While US media keep crying about how bad the economy is I believe they are behind the times. They’re
chasing a story that peaked November, 2008.

Anyway, since I prefer to live in real-time here’s the scoop: Changyou went public April 2 on NASDAQ and closed its first day of trading up 25%. Changyou raised $120 million.

Changyou makes and runs popular online multi-player video games. Its best-known game is Tian Long Ba Bu. Here’s a screenshot of the game:

Changyou says it has about 1.8 million paying active accounts for this one game and 800,000 simultaneous users in March of this year. It also offers other games and more on the way, which the $120 million will help, I’m sure. Sohu still owns and controls a majority of the company.

Maybe the tweet from Changyou is: I’ve got game and a business…hey, and also publicly traded stock.

Facebook’s dilemma after two years of record growth is how to grow the next 175 million users. Where are they? Easy answer is China. Sure there’s Europe also. But that’s 20 languages and Facebook already seems to be making headway into places like the UK. But China remains the elusive prize.

Five years, $500 million invested in it and 175 million registered users later does Facebook have growth questions? Yes, size matters on the Web where attention spans for friend networks last about as long as the buzz from a Red Bull soft drink. After all, anyone remember Friendster, the first mega social net? How about Ryze? Six Degrees? Even MySpace has lost its edge.

On the Web with no real emotional connection these networks become like flavors of cola. Coke, Pepsi, RC, or the Chinese made Future Cola. Cola seems to taste the same, social networks seem to be similar. Buzz means growth.

A few months ago Facebook reportedly saw smallish Twitter (3 million reported users) as a growth tool and offered to buy it for $500 million. Twitter turned it down, reminiscent  of Facebook spurning offers from Yahoo and others of over $1 billion just over a year ago.

In the U.S. Facebook is the 4th most used website now. College students, professionals, educators and brands all invaded the service a little over a year ago when Facebook opened its doors beyond the initial college user base. Suddenly your mother in law is your friend on Facebook, which is actually kind of bizarre in many ways.

The secret to Facebook’s exponential growth has been opening up and also turning itself from a service into a platform via its API. Through the Facebook API thousands of third-party developers built applications (and businesses) on Facebook. Example, Slide.com, Rockyou, and many more.

What Facebook did correctly was realize that nobody had a social network platform, that the key to success with a Web-based company is not just the user base but giving outside developers the keys to create businesses on the platform.

Apple is doing the same thing with iPhone (and did it earlier than Facebook). What Apple and Facebook learned is that Microsoft became the dominant PC operating system not from the operating system but by allowing third-party developers to write applications that used the Microsoft OS as the foundation. 32 years later and Microsoft still owns the PC platform.

Do you think Bill Gates was thinking of global domination here:

The race for the ’social network operating system’ (snos) is on.  Microsoft owns a small piece of Facebook, though not much. But if it was smart it probably negotiated for first right to acquire Facebook before anyone else can. Now may be a good time, in the last year Facebook’s valuation for common stock reportedly has dropped from $15 billion to $3.76 billion. $5 billion and Microsoft owns it.

In terms of winners you could call Facebook champion. After all, it would really have to screw things up to lose its position. Facebook also just turned its user profiles into “streaming” updates so that users can answer “what’s on your mind?” as they login, basically stealing Twitter’s thunder and growth curve in one swoop (ok, don’t accept our $500 million, we’ll just copy it and deploy it into our user base which is 50x larger).

Facebook is the largest photo sharing site in the U.S. with more than 4 billion photos uploaded.

But it would be a mistake to believe that Facebook will win the war. The battle? yes, this first one. But across the world many social networks have established themselves and built larger native user bases that Facebook will find hard to dislodge. Sort of like the image of Britney Spears OBGYN exit from the limo will be hard to purge from memory. An entire generation lost in one image.

Facebook has been smart in several ways, though, that many may not have noticed. Consider that China billionaire Li Ka-shing invested $100 million. And rumor has it that Facebook has been sending small envoys into China to try and figure out how to become the largest social net in China.

30% of Facebook users are in the U.S., followed next by the UK with 7% of its users. Chinese Facebook users account for only 2% of its users or under 4 million people — that’s small in a country with the largest Internet user base in the world with 300 million users, 70% of them on broadband connections.

So Facebook has its work cut out for it in many spots around the globe where it must grow now that 1 in 4 U.S. Internet users is on Facebook. Growth from here is almost ALL international.

Which is why in China a homespun company, Xiaonei, with about 40 million registered users is the leader there. 87% of Xiaonei users are in China and 2% are from the U.S., which is an exact mirror of Facebook’s Chinese user base of 2%.

Most Americans have never heard of Xiaonei and probably never will, although it’s raised more than $430 million from Oak Pacific Partners (which is  backed by U.S., Chinese and Japanese investors).  Investors mean nothing if the fickle users go elsewhere, to the new “new thing”. As the masses invade Facebook it’s coolness factor drops dramatically.

Remember that today’s Facebook can be tomorrow’s Friendster, popular but fleeting. That’s the power of the Web and appeal for entrepreneurs, the evolution is never-ending. Facebook’s goal of being the SNOS may turn out more like the dog treat: Snausages.

Mavericks. It has nothing to do with U.S. presidential wannabe John McCain and everything to do with authentic originality, daring and guts.

Let me share with you a story. Growing up in Southern California my friends and I took clay skate wheels from roller skates and fastened them to boards and invented skateboarding. We took our Schwinn Stingray bicycles, the ones with the slick tires in the back, the banana seats and big U-shaped handlebars.

(Here’s a photo of an early Schwinn):

Original Schwinn Sting Ray bicycle

Not being content with a plain old bike, we pondered how to make it more like what we wanted: a motorcycle. Why not weld a crossbar onto the handlebars? Add a racing plate? replace those tires with knobby tires? take off the old seat and put on a seat from a 10-speed to make it more maneuverable; put motorcycle hand grips on it, paint the frame black…and suddenly we had a whole new bicycle, what we called bicycle motocross, or BMX.  It looked something like this:

Schwinn Stingray modified into BMX bike

The lesson we learned was to create something new from what you had. Use imagination to bridge the gap. Be original. Innovate.

About the same time the first Chinese-made movies began to trickle into movie cinemas in California. The first was “Five Fingers Of Death,” which was not very well made but got my interest. A short while later, another Chinese martial arts movie hit U.S. cinema: Fists of Fury (known as ‘The Big Boss’ in Asia). Its star? an unknown named Bruce Lee.

The U.S. was introduced to a new thing it had never seen before: kung fu. Chinese martial arts. The difference between Lee and the other martial arts films was a “authenticity,” a belief and focus that made Lee more than an actor. He was living the martial arts and his genuine commitment came through in every move.

While some of my friends played baseball with me, none of them studied kung fu as I began to do. At age 9 I became one of the youngest in the local kung fu class and was introduced to Shaolin style fighting. I began to read a book written by Bruce Lee called ‘The Way of the Intercepting Fist’ (which in Cantonese is called Jeet Kune Do).

It was clear to me even at that young age that Lee was not an “actor” but was only living who he was, a martial artist/philosopher. After about 6 months of study I began to study Jeet Kune Do and also my dream was to move to China and study with real Shalolin monks. There was something about the focus and simplicity and incredible discipline, mentally and physically, that appealed to me as a youngster.

Growing up I would re-read Bruce Lee’s book, in junior high school and high school, and it was clearer to me then that he was a maverick, an original. I later learned he was the first Chinese actor to play a real person (himself) and not a stereotype in Hollywood films. Lee wasn’t somebody following the footsteps of others but expressed who he was, his talents and goals. Later I learned he went through a lot of rejections from Hollywood and others early in his career.

In business, I’ve been somewhat of a maverick, recognizing in 1994 that a new industry called the Internet was being born. I recognized in entrepreneurs like Marc Andreessen (created the browser), Jerry Yang (co-founder of Yahoo) and Jeff Bezos (founder of Amazon) a can-do spirit. When they started their companies I chronicled them as a business analyst and shared thoughts back and forth on how advertising could one day be a revenue source online. At the time there weren’t any ads on the Web, nobody cared about the Internet. I went on to invest in a company that made advertising better at a time when nobody cared about advertising on the Web. Several years later, Google acquired that company and today it is Google Ad Sense, the largest advertising network in the world, about 1/3rd of Google’s entire revenue.

These mavericks envisioned the future and built it. Yes, the industry has had its ups and downs but everyone uses the Web today, everyone emails, everyone buys online. And so here we are in 2009 in a world of ostrichs. Ostrichs are the birds that hide their heads in the sand for fear of the outside world. Business leaders are asking for government help. Governments are taking taxes and paying off banks for bad debts (which is a bad idea I believe).

And being a maverick I’m looking for mavericks. There are very few, even the ones who should be at the head of the pack. There’s a profound lack of leadership at companies, governments, and ideas.

I’ve been to China a few times, Hong Kong, about 10 years ago. I met with the senior leaders (chairman and his team) of China Development Bank and others. I was impressed by them and resolved to one day go back and perhaps partner with CDC on some ventures. Perhaps this year.

But I haven’t been to China for several years now. So it was refreshing for me to hear Jack Ma talk. Jack is the founder of Alibaba Group. He was in the U.S. on a discovery mission last week, meeting with different companies, from Google to Starbucks.

Jack is a maverick. The Alibaba story is one like many in the world of mavericks, one with rejection and doubt from others but belief in yourself and the future. 10 years ago Jack asked U.S. venture capital firms to invest in his idea, they all said no. It didn’t stop Jack. He went on to build Alibaba knowing that small businesses in China needed to be able to trade better using the Internet. Alibaba today employs 12,000 people and is growing. Jack is building value, not hiding under rocks.

So look at your situation, your “regular” basic bike, your roller skates, your companies and say “what can I do to be part of the solution, to pioneer value, to be a leader, be a maverick?”

Mavericks don’t work alone but they do resolve in themselves to see a vision and future and build it rather than discuss the millions ways it cannot be done.

After all, some 36 years after his death Bruce Lee is still a maverick. Nobody has come close to being as good at what he did. And that’s the legacy of doing something from your heart. It rings true and prevails though times may change its value continues to build. I leave you with this lesson from Bruce: