everything you know is wrong | neil young

Everything you know is wrongNeil Young : Casual Connect 2016

“Forecasting the future is really hard, even understanding the present is difficult. So unless you have a lens to look at the market you might

make a mistake.”

Not as snappy…

“We always over estimate the change that will happen in the next two years

and under estimate the change that will occur in the next ten”

— Bill Gates

How humans think about the future

How humans think about the future

How technology impact develops

Over estimate

Under estimate

How humans think about the future

How technology impact develops

We are in an industry where new technologies are being introduced every ~5 years

Over estimate

Under estimate

How humans think about the future

How technology impact develops

Understanding where a given platform is on this curve is

essential

What drives this for games?

2 primary dimensions…

Less Atom Complexity

More Atom Complexity

(Smaller, Simpler, Inexpensive)

(Larger, Complex, Expensive)

Less Atom Complexity

More Atom Complexity

(Smaller, Simpler, Inexpensive)

Requires Little Change(Low Behavioral Friction)

Requires lots of Change(Low Behavioral Friction)

(Larger, Complex, Expensive)

Less Atom Complexity

More Atom Complexity

(Smaller, Simpler, Inexpensive)

Requires Little Change(Low Behavioral Friction)

Requires lots of Change(Low Behavioral Friction)

Fastest

Fast

Slow

Slowest

(Larger, Complex, Expensive)

What about the content?

Oh yes! Apply a force multiplier for breakthrough content

Less Atom Complexity

More Atom Complexity

(Smaller, Simpler, Inexpensive)

Requires Little Change(Low Behavioral Friction)

Requires lots of Change(Low Behavioral Friction)

Has Killer Apps

Has no Killer Apps

Less Atom Complexity

More Atom Complexity

(Smaller, Simpler, Inexpensive)

Requires Little Change(Low Behavioral Friction)

Requires lots of Change(Low Behavioral Friction)

Very Fast & Very Big

Very Slow & Very Small

Over estimate

Under estimate

How humans think about the future

How technology impact develops

As an industry, what are we over-estimating & what are we

under-estimating?

&

1. Why we over estimate VR’s near term impact.

Smart, successful

people want us to believe.

But…

Lots for Atoms

Requires behavioral change

This is never going to happen

More like this…

What to expect then?

Lots of Atoms = More Expensive = Slower

Requires Behavioral Change = Slower

Bonus: Divorce = Slower

Less Atom Complexity

More Atom Complexity

(Smaller, Simpler, Inexpensive)

Requires Little Change(Low Behavioral Friction)

Requires lots of Change(Low Behavioral Friction)

Slow

Slowest

Fastest

Fast

Less Atom Complexity

More Atom Complexity

(Smaller, Simpler, Inexpensive)

Requires Little Change(Low Behavioral Friction)

Requires lots of Change(Low Behavioral Friction)

Slow

Slowest

Fastest

Fast

But isn’t there a lot of VC money?

Seed / Incubator

Seed / Incubator

Strategic

Seed / AcceleratorStrategic

Strategic

Seed / Accelerator

“75% of all investments in VR & AR in 2015 were Seed or Series A”

— CB Insights Q1 2016

~$150m invested

Where’s the breakthrough content?

If you followed the money, AR > VR

If you looked at the VR investments, business verticals/industrial a bigger deal

than consumer.

In consumer, investments are in industry infrastructure (tools, distribution, ad/

marketing platforms)

Does this mean that I should not create, publish or invest in VR?

6 Strategies for winning in VR1. Wait

2. Work with someone for whom VR is strategic

5. Focus on a vertical where adoption is a given

4. Build essential market infrastructure

3. Do something that requires only Seed or Series A Capital

6. Make the breakthrough content

2. Why we have under estimated the size & impact of the mobile

games market.

In 2010….

In 2016….

Over estimateHow humans think about the future

How technology impact develops

When reality exceeds expectation, it always looks like you are at the top.

Over estimate

Under estimate

How humans think about the future

How technology impact develops

But… because we are beyond our expectationsit’s hard to know if you are actually at the top.

We often think we are here

When we are actually here

It takes new reference points to redefine where the top might be….

It takes new reference points to redefine where the top might be….

But even then we tend to use the prior reference

points to predict the new peak.

#1 has no relation to #2!

We’ve seen this before….

Japan

In 2011, these 2 games were each doing $25m+ / Month

Looked like the overall Market had

peaked.

Source: Macquarie Japan

Total Monthly Games Revenue / Total Mobile Subscribers

¥0 / Month

¥175 / Month

¥350 / Month

Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12

Total Monthly Games Revenue / Total Mobile Subscribers

It was impossible to imagine a radically

bigger market.

Source: Macquarie Japan

Total Monthly Games Revenue / Total Mobile Subscribers

¥0 / Month

¥175 / Month

¥350 / Month

Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12

Total Monthly Games Revenue / Total Mobile Subscribers

Released early 2012

By 2013, it generated $1bn+ annually in Japan alone

It wasn’t an incremental increase over Kaito &

Driland.

It was 4x

“It’s just a one off, a phenomenon that can’t be

repeated”

In August 2013, Mixi released Monster Strike.

In 2015, each game generated $1bn+ in Japan

alone.

¥0 / Month

¥175 / Month

¥350 / Month

¥525 / Month

¥700 / Month

Jun-10 Mar-11 Dec-11 Sep-12 Jun-13 Mar-14 Dec-14

Since P&D release, the entire market in Japan has doubled.

Source: Macquarie Japan

Total Monthly Games Revenue / Total Mobile Subscribers

¥0 / Month

¥175 / Month

¥350 / Month

¥525 / Month

¥700 / Month

Jun-10 Mar-11 Dec-11 Sep-12 Jun-13 Mar-14 Dec-14

..and about 5x the size of the comparable point of

device penetration & usage that we have today

in the US.

Source: Macquarie Japan

Total Monthly Games Revenue / Total Mobile Subscribers

Over estimate

Under estimate

How humans think about the future

How technology impact develops

All this leads me to the place that we are early in our underestimation!

…and we are wildly underestimating what a “hit” can look like.

In Mobile, the $10bn game…

…seems inevitable to me.

Less Atom Complexity

More Atom Complexity

(Smaller, Simpler, Inexpensive)

Requires Little Change(Low Behavioral Friction)

Requires lots of Change(Low Behavioral Friction)

Fastest

Fast

Slow

Slowest

Mobile has grown very fast…

Less Atom Complexity

More Atom Complexity

(Smaller, Simpler, Inexpensive)

Requires Little Change(Low Behavioral Friction)

Requires lots of Change(Low Behavioral Friction)

Very Fast & Very Big

…and very big powered by breakthrough content

This is the latest in a long line of breakthrough

content.

Why Pokemon Go!It’s built on a game that’s been tested for 3 years (Ingress)

It requires no new atoms to get a breakthrough experience.

It leverages & extends a behavior we do all the time.

It brings people together in the real world - Humans like that.

It’s Pokemon - 20 years old and known by everyone under 35.

Over estimate

Under estimate

How humans think about the future

How technology impact develops

I still don’t think we’re at the top - to get there….

Keep investing in Mobile

Keep creating breakthrough experiences

At N3TWORK we believe in this next stage of Mobile and we’re building a new type of

developer and publisher to meet the opportunity.

Thank you & if you want to learn more…

That’s what we’re doing…

neil@n3twork.com@ncyoung

http://n3twork.com