Game Theory: Play Pays

Brian Martin never imagined he would become such a die-hard gamer. Sure, as a

teenager he occasionally hit the arcade. But that experience stacks up like a

tilted pinball machine compared with Internet games. With his keypad and mouse,

Martin can skywalk through the air and launch missiles to blast enemy fighters

across the globe in a nanosecond. He says he can sit for hours playing games

such as Team Fortress. "You feel kind of like a kid playing war,’’ says

the 29-year-old computer network administrator from Texas.

That sort of enthusiasm has made gameplaying one of the Web’s predominant

activities. Games top instant messaging and music downloads on the list of

favorite pastimes of online households. Nearly 26% of US Web surfers, or 40

million people, hang out at hard-core game sites such as PlanetFortress.com and

Myst.com, according to researcher PC Data. Add in the millions of Web surfers

who enjoy a quick go at online cribbage, trivia, or puzzles, and the number of

US game aficionados soars to 75 million people, nearly half the online

population.

What’s more, games keep customers coming back. Visitors to Pogo.com spent

an average of nearly three hours per month at the game site, making Pogo.com the

stickiest site on the Web, according to researcher Jupiter Media Metrix. And

they aren’t just twenty-something Rambo-wannabe guys. Half of all online

players are women, although they tend to prefer board games and trivia quizzes,

says PC Data.

Now, the action is breaking out of games-only sites and onto the wider Web.

Games have become standard fare on big Web portals such as Yahoo! and America

Online. Even specialized sites are offering games. Technology professionals

browsing job opportunities at BrainBuzz.com find a game called Prairie Doggin’.

Much like the comic strip Dilbert, the game features cartoon caricatures of

stereotypical workplace bosses–a "high-strung’’ administrator, for

example, and a sales manager named Slick Dick–who pop out of cubicles as if

they were prairie dogs. Players get points by bopping administrators, instead of

co-workers. Although BrainBuzz doesn’t track the number of people who play,

Chief Executive Jeff D’Adamo credits the game with helping to boost site

traffic to 384,000 visitors in January, from 158,000 in September.

Name that tune. It’s best to use games that fit the demographics of your

site. Prairie Doggin’ works because it appeals to the anti-management ethos of

the engineers the site targets. Similarly, tunes portal Planet of Music offers

trivia games that let visitors test their knowledge of jazz, rock, and R&B.

The site also offers keno and blackjack, but the trivia has proven most popular.

Many sites, however, are not so smartly designed. Take Nabisco’s

Candystand.com. The Web site sports games that range from miniature golf to

football, each one tied to a Nabisco product, such as Chips Ahoy! But the

deliciously playful Candystand hasn’t successfully driven traffic to Nabisco–in

part because kids don’t know or care to go to the corporate site. Nabisco

might consider placing a link to Candystand on a site that kids already flock

to, such as MTV.com.

Tie games to your Web site’s demographics and product mix, however, and you

could turn yesterday’s pinball wizards into paying customers.

By

ROGER O CROCKETT in BusinessWeek. Copyright 2001 by The McGraw-Hill Companies, Inc

Divine overhaul

Some of the cash-rich, market-cap-poor companies are taking the opposite

approach. Realizing their original business plans were failures, they’ve done

180-degree turns and overhauled their strategies. Divine interVentures, for

example, went public as an incubator and started up more than 50 companies. In

February, with its stock market value lower than the $190 million in cash on its

balance sheet, Divine announced plans to remake itself into a software company–CEO

Andrew Filipowski’s area of expertise. It even changed its name to Divine. The

moves have helped a little: The stock of the Chicago outfit has climbed from its

low of $1 a share to $1.69, although that’s still well off the $9 a share at

which the company went public last July.

In December, the California company, Ventro, closed two of its online

business-to-business marketplaces–the Chemdex market that allowed companies to

buy and sell chemicals on the Net and the Promedix market for medical supplies.

Ventro then said it would change its focus to helping other companies build

marketplace sites. So far, they haven’t convinced investors that its new plan

is any more viable than its last one. Its market capitalization is still only

$50 million, even though it has a treasure trove of $235 million on its balance

sheet.

Then there are those companies that are sticking to their guns. They simply

think the stock market is unfairly punishing them and, if they perform well,

their stocks will recover. Consider Neupert at Drugstore.com. "We’ve made

a lot of changes in the last six months–laid off a substantial part of the

workforce, dramatically reduced marketing plans, and reconstructed the business

model to break even," he says. That’s why he’s confident his business

will survive, even though its stock has dropped from $67.60 in 1999 to $1.31.

Autobytel is staying the course, too. The company, with $82 million in cash

and a $41 million market valuation, expects investors will become bullish once

it hits operating profitability in the third quarter. "We are well enough

established that we aren’t taking down marketing costs, nor are we

anticipating any large-scale layoffs," says CEO Mark Lorimer. "After

all, we’re going to post profits in a few (months)."

Despite the risks, cash can be a powerful lure for potential acquirers. If a

purchase can be completed quickly, the leftover cash can help fund the

operations of the surviving company. The women’s site iVillage acquired

Women.com Networks for stock in February, partly to get its hands on its

one-time rival’s $30 million in cash. The two sites combined some operations

to reduce expenses and now should have plenty of money to make it to the third

quarter when the business is expected to begin generating cash. "The deal

that we cut with Women.com makes sure that we have enough dollars for a rainy

day," says iVillage CEO Douglas McCormick.

There may yet be a handful of deals like McCormick’s in the wings. But it’s

a treacherous market these days and potential acquirers will have to weigh the

risks carefully–before moving licketysplit. The free cash is disappearing

fast.

Pallavi Gogoi–BusinessWeek