2B B2B or B2C: Entrepreneurship in digital gaming and social media

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Entrepreneurs in social media and digital gaming are, amongst many choices, confronted with the very formative question of whether to opt for a business-to-business (B2B) route to market or business-to-consumer (B2C) route to market. This is a decision that will have far going implications for the DNA of your company and ultimately the things you will and/or should do in order to be successful. Digital games developers are now faced with the question to market their games independently or through an alliance with a publisher. The same goes for social media services, is it better to ‘white-label’ such as ExMachina’s PlayToTV or better to go direct to market such as Tribesports?

Despite there being hybrid solutions, such as Facebook eventually partnering with game developers for matters of engagement, or Sticky Game Studios that offers the occasional direct to consumer digital game such as the recent Temple Trouble to channel extensive creativity. Ultimately, the focus of the company should be predominantly on one or the other. In many cases there often is one route that will work best taking into account the product, team, and industry. And regardless of the opposition that publishers such as Chillingo face nowadays, it could well be that partnering up to commercialize your service is the best route to market.

From features to futures – critically evaluate your darlings, don’t kill them!

So you have developed a killer technology that will disrupt the current state of technology in your sector! Or it could well be that you thought of this concept that will change the lives of a certain consumer segment drastically, for the better that is. Killer technologies and million dollar concepts more often than not fail due to lack of direction and proper execution. To critically evaluate your darling by asking yourself the following questions is key here. How is value being created? How appropriable is your service? And, is your service rather scope-able or scalable? Answers to these questions will help determining the preferred route to market.

This not so much about the quality of your service (I am assuming it’s great) but rather about its signaling properties. If all you have is that killer technology, going B2B and relying on a partner’s customer network and brand image might be the better route. This way you can just focus on your core added value, the technology that is. Take into account that the more protectable your technology is (due to patents, complexity, obscurity of the source-code) the easier it is to rely on others for commercialization and still make a healthy profit from that.

When you are trying to create value on the back of an existing technology on the other hand, you need to own consumer data and a create a strong brand. In this case it the better route to market will probably be B2C. You don’t own the technology (due to licensing, using open source, or it just not being very revolutionary in technical terms) and as such you need to create value through other outlets, such as knowing your consumers and/or being recognized as an attractive brand by them.

Related to this is the group(s) of people your service has value for, if the service requires mass, you’d be better off by throwing one or a few big rocks, that is aim for one target audience and go B2B. On the contrary, when you find your service being of value to multiple, dispersed, groups of people you benefit most from throwing many pieces of gravel. In this case rely on partners for reaching these audiences.

Take a look in the mirror! Team composition says it all

At the end of the day, businesses are created by people. Reportedly, one of the reasons for EA acquiring Chillingo was that the management team knew how to build sustainable relationships with the Indie community. The reason why people get excited for Respawn’s latest project, a studio without any track-record, is because it is run by the people responsible in part for the Call of Duty franchise. Look at yourself and your team and ask yourself, what is your team most capable of doing? Which capabilities do we have and which do we lack? What assets do we own besides this great technology or concept? Your market orientation is in large part determined by your company’s team composition.

Despite a growing adversity from major publishers by Indie developers, Indies are usually best positioned by cooperating with them. Let’s face it, if your team consists predominantly out of programmers and the occasional designer, you are most capable in that department. Going B2C in this case would mean having to learn commercialization capabilities, this is not an easy job. This equally applies to app developers. It takes great effort to develop a network of people relevant to reaching your consumers and knowing how to deal with these people.

It is often forgotten that either the development or the commercialization of a service is only one side of the story. Your team is likely to be specialized in either side, especially for young companies, ambidexterity is a rare phenomenon. Investor’s evaluate the team behind a service in our industry into great lengths. They can often tell by the team’s composition where the company is going and whether that is the right direction, we have noticed this for iSEN too.

If your team is well positioned in a relevant network of businesses you ought to go B2B. However if you have access to the channels and own the skills to communicate with these channels, to reach a specific target audience, B2C is the way to go.

OK, now look at your industry – what is your sweet spot?

Up until now we have been fairly inward looking, something creative companies are generally good at. However, in order to take a route that is beneficial, one must learn to know the map to travel. It has been seven years since Facebook was first released, we are at the end of a console cycle, and knee deep into Apple’s Appstore ecosystem. As David Edery shows us, the ecosystems organizations maneuver in, change over the course of their lifecycle. This is no different for markets in social media or ecosystems that at first sight do not seem to have a definite end. Furthermore, industries have architectures that might have an influence on your preferred route to market. Are there any access barriers to your consumers? Do you need complementary assets for successful commercialization? And, who has access to these assets?

Consumers in young industries are more easily accessible compared to consumers in maturing industries. This is because of increasing competition and a greater weight allocated to gatekeepers that can make or break a service with the maturing of industries. Apps in Apple’s Appstore or on Facebook now have a much harder time being discovered and being valued for their quality. In these segments it might well be best to try selling your service to other businesses as they understand the added value off apps. In emerging industries, as for example the market for location-based-services, it could well be very beneficial to go directly to consumers.

The vast ‘App clutter’ (there are over 400,000 apps on iOS and over 550.000 on Facebook!) is due to a lack of significant access barriers to consumers. In other industries, such as console games (physical production) or operating systems (OS) for mobile devices (closed technologies) there are access barriers to consumers. In these cases, when you do not have the assets to overcome these barriers to access, you are forced to deploy a B2B route to market if you ever wanted to generate revenues!

Familiarizing yourself with the environmental factors you are facing and acting accordingly will be very important for the sustainability of your business model.

Conclusion

As shown above, there are many determinants in arriving at a decision for a particular market route. The aspects discussed in this article have been distilled from practical experience and are fuelled by an academic project I am currently working on. The product’s features, team composition and industry analysis are all indicative to greater or lesser extent in determining the preferred route to market and even the potential of your service value appropriation. As I am currently dealing with this particular issue, I can say that it is by no means an easy or obvious choice.

Additionally, it has been argued that eventually all B2C services in digital gaming and social media should derive their income from B2B practices. For example the Freemium perspective argues that digital products should be as free to consumers as possible and derive their revenues from B2B activity or paid-for premium additional services. This perspective however does not takeaway that a decision on market orientation needs to be taken at first; without an engaged audience, business would not be willing to partner with you!

It should be evident that there is no wrong decision here. You can be either B2C or be B2B. Opt for a route to market based on what you have and where you stand. In the end, the only wrong decision is not to make a decision and get ‘stuck’ in the strategic middle!