I often wonder how we end up with technology bubbles — you know, the ones where there’s a market that’s so completely hyped that all anyone talks about is how much start-ups are selling for. Of course, revenues are often murky, and profits are elusive. I’ve spent enough time in the technology industry to not be surprised when these things happen. And I know not to register too many thoughts when deals such as Disney’s purchase of Playdom happen.
My take on that deal was as follows:
- The deal is for $563.2 million with another $200 million in performance-based compensation.
- The claimed monthly audience for Playdom’s properties is 42 million users, but there are many caveats to what that may mean in terms of time spent, engagement and monetization.
- We don’t know what this audience would look like if they had to pay for casual gaming.
In other words, Disney is buying an audience. And it is unclear whether this is (a) a stand-alone audience, (b) an added feature to Disney’s existing properties, or (c) a hedge against Facebook and MySpace.
So. Aside from the huge audience measurement question. There is also the issue of value. Are casual games stand-alone media properties? Are they digital media that can be appropriated by marketers? And can they be valued solely as a marketing outlet for other, more traditional, media.
But that’s not what we hear discussed in the media. Actually, the thing that surprises me is the absolute incompetence of those in the media industry, especially journalists. Because major publications seem to believe that — in order to cover current technology topics — they need to find fresh-out-of-journalism-school candidates. In other words, young people. Because, only young people can truly understand the value of digital media…
Or at least, that’s how it appears when I turn on the radio and manage to catch On Point‘s recent program about “The Social Game Craze.”
This hour-long program played up all the hype about social and casual gaming, and it managed to present zero facts about the size of the casual gaming industry, audience and even demographics. The reporter from the Wall Street Journal lives entirely in the world of anecdotes. And the only solid number he mentioned was the amount that Disney paid for Playdom. Although he said the number was $763 million — which is an optimistic guess at the final value of the deal. This is a reporter for the paper of record for the U.S. financial industry, not the Puddin’Town Express. When asked about the demographics of casual gamers, he tried the vague statement that audiences “tend to skew” towards females — when “I don’t have the foggiest idea” would have been appropriate.
If you live in a world of market research or media measurement, please. Whatever you do. Don’t listen to this show. It will make your head explode.
And for all of us. A lesson. Unsubstantiated facts supported by anecdotes is not research. Yes, there’s a very good reason for Disney to buy Playdom. But no, it’s not because casual and social games are a vauge, unquantifiable opportunity. It’s because this is one thing in digital media that Disney can quantify.
Believe the hype, but not for the reasons you hear.