Electric-car maker Tesla preparing IPO

Reuters

U.S. electric-car maker Tesla Motors plans to go public soon, two sources familiar with the matter said, amid growing interest in green technology and battery-powered vehicles.

An IPO filing from the 6-year-old start-up, best known for its $109,000 all-electric Roadster, is expected any day, said one of the sources. The person did not give a specific time frame, although IPOs typically take several months.

Tesla spokesman Ricardo Reyes declined to comment on what he called "rumor or speculation."

Tesla Model S

Tesla Model S

(Credit: Caroline McCarthy/CNET)

Tesla would mark the first public offering from a U.S. automaker since Henry Ford's Ford Motor debuted its shares in 1956. The IPO represents a landmark in the resurgence of electric-car technology that most carmakers had dismissed as impractical until recently.

The company's chairman Elon Musk said early last year that an IPO was a possibility in either late 2008 or 2009.

But the financial market turmoil following the collapse of Lehman Bros. in the latter half of 2008 virtually shut down the IPO market. The appetite for IPOs has picked up since mid-September this year with a robust pace of new filings.

Tesla's IPO would follow the successful debut of lithium ion battery maker A123 Systems, whose shares rallied 50 percent on their first day of trading on September 25.

Analysts have said that the success of A123, the first green-technology IPO this year, would encourage more venture capital-backed green companies to go public.

Tesla will compete with established automakers like Ford, General Motors, and Nissan Motor, all of which are racing to launch electric or plug-in hybrid vehicles. Tesla, by contrast, is a small player with a high-end market and limited production.

A combination of factors has driven the recent interest in developing electric, or partially electric vehicles, including the Obama administration's push to have 1 million rechargeable vehicles on U.S. roads by 2015 and low-cost Department of Energy loans for manufacturers.

Venture funds back green cars
The carmaker is developing a second, lower-cost model, an electric sedan known as the Model S, which will have a base price of $49,900.

Tesla said in September it delivered 700 Roadsters since February 2008. The Roadster, which is built on a Lotus frame, can go from 0 to 60 miles an hour in less than four seconds, making it faster than a Porsche 911 or a Ferrari Spider.

The electric-car start-up was offered $465 million in low-cost loans by the U.S. Department of Energy to help build the new Model S. Tesla said it will build the new car in California.

Tesla's investors include Google co-founders Sergey Brin and Larry Page.

Other investors include Daimler; Abu Dhabi-based Aabar Investments, which owns a stake in Daimler; and venture capital funds Valor Equity Partners, Technology Partners, The Westly Group, and Compass Venture Partners.

Tesla said it had achieved overall corporate profitability in July with about $1 million of earnings on revenue of $20 million.

But like established automakers, survival in the hyper-competitive U.S. automotive market has not been easy for Tesla. The company had to face cost overruns and production delays for the Roadster.

Story Copyright (c) 2009 Reuters Limited. All rights reserved.

Can Tesla become the next great American car company?

Inside Virtual Goods: What Portion of Social Gaming Revenues Come From Offers?

This is a post by both Justin Smith and Charles Hudson

When we set out to write the Inside Virtual Goods: The US Virtual Goods Market 2009-2010 research report earlier this year, we wanted to gain a deeper understanding of the payments ecosystem throughout all popular virtual goods markets in the US, especially the booming world of social games. Given the explosion of payment companies focused on the social gaming market – from mobile payments to offers, large payment companies like PayPal to emerging programs like Facebook’s own “Pay With Facebook” – we wanted to understand where the money was really going.

So over the course of the next four months, we spoke with dozens of leading players in the industry, including: social game and free-to-play MMO developers, iPhone developers, offer companies, mobile payment companies, prepaid card companies, traditional payment companies, new companies building in-game payment widgets specifically for social games, and leading social networks. We gathered data from all of them through thorough interviews, synthesized what we heard from everyone to triangulate what we believe are the most accurate and in-depth estimates to date, and then passed our results by other industry experts (not in the research group) to sanity check our conclusions.

What did we find? To read our full analysis and outlook, you’ll need to get the report. But here’s a summary of our findings as it relates to offers specifically today:

Payment methods inside social games vary widely depending on the developer and aggregator. Based on our conversations with many industry leaders, we estimate that offers are generating just over 30% of all US social game virtual goods revenues in 2009, though some large developers don’t integrate offers at all, and a few developers report numbers over 50%. The remaining 70% is split between various methods of direct payment that we mentioned earlier.

As you might expect, offers often function as “on-ramps” to get players engaged with social games. However, once players become more engaged with a particular game, they increasingly migrate to direct payments because they usually need more currency than offers can provide to progress, and the same user is usually unwilling to take more than a couple offers in a given time period. Rather than giving personal information to more and more advertisers to take part in less appealing offers, users who are increasingly engaged with a particular game choose to pay more directly. So, almost by definition, games that succeed in growing ARPU (average revenue per user) and the base of paying users will tend to skew toward direct payments, as that’s the only way users can fund their accounts.

Most publishers are also surfacing direct payment methods via their offer partners. Only the largest and most sophisticated publishers (in general) are focused on direct integrations with payment gateways. Because of this, the offer aggregator often develops the optimization technology around which direct payment methods are most successful for different user segments within each game. For example, the aggregator may choose to display a greater variety of particular types of direct payment options that are more popular in certain regions, displaying more mobile payment options to adults in Europe or Asia than adults in the US, while displaying more prepaid card payment options to US teenagers than South American teenagers. The best payment methods often vary widely by location, age, and level of engagement.

Thus, the percentage of revenue going through offer partners is not necessarily the same as the percentage of revenue going to offers. Smaller developers in particular often generate their direct payments revenue via integrations with offer partners, going direct once they reach the scale to support taking it in house.

As we noted in our in-depth report on Inside Facebook today, we don’t know exactly what portion of offer revenues came from scammy offers, but we estimate it could be significantly more than the 20% of offers that offer networks now admit were scammy. We have yet to find any conclusive data on the scope of scam problems in offers, but we are continuing to investigate this.  Offer revenue will likely decrease in the short term as scams get continually rooted out, but it is clear is that industry-wide social gaming companies are deriving a large majority of their revenues through other payment methods.

Ultimately, the recent increase in media coverage of scam problems in offers could boost the fortunes of alternative direct payments, spurring developers to shift away from offers and integrate other direct payment methods more quickly. However, long term, we expect offers to continue to play a role in social game monetization, increasing in value as more large, high quality advertisers come into the space.

it looks like the average is 30% with some big developers at zero and some at 50%.

How Big Social Games Maintain Their Sticky Factors

By Eric von Coelln 6 Comments » Share

[The following is a guest post by Eric von Coelln, a social game consultant who occasionally contributes articles for Inside Social Games. Last week, he looked at how the number of daily active users correlate with the amount of money that a social game can make. This week, he looks at some ways that big social games try to keep their daily active user rates up.]

One of the more interesting applications of the social game “sticky factor” that I introduced last week is the ability to look at the life cycle of some of the most popular games and identify some of the key feature roll-outs that greatly increased engagement. The sticky factor is simply the daily active users (DAUs) of an application divided by monthly active users (MAUs).

Let’s take a look at two of the largest games on Facebook, by DAUs, that have been around over three months and also have a pretty accessible view of product feature launches: FarmVille and Mafia Wars, both from Zynga.

FarmVille1

First, it’s critical when looking at the data to not really pay too much attention to the first thirty days of data, especially when trying to compare different games: By definition the MAU requires a month’s worth of data. Also note that because of the growth in Facebook, an application launched in September of 2009 is going to be exposed to a lot more users more quickly than an application launched a year, or even six months earlier. So you can see after launch that the sticky factor had dropped down to around 32% one month after launch (July 21st). Over the following month, you can also see that FarmVille increased its sticky factor to somewhere between 37-38%. Let’s take a look at some of the main features launched in the game that might have impacted engagement:

  • On July 24th, Zynga launched its 2nd expansion of the farm (the amount of land you can plow, harvest and decorate) but this seemed to have little impact.
  • On August 7th, Zynga launched in-game achievements, with the ability to send a notice to your friends once you had earned the white, red, blue or yellow ribbon.
  • On August 18th, The sticky factor was at 37% and Zynga then launched tractors to help make game play a little less tedious on those larger farms

Of these three game feature releases, it would seem that achievements had the biggest impact. And of course achievements generally increase how viral a game is, helping to bring in new users into the fold.

Mafia Wars1

For Mafia Wars, I don’t have reliable launch data prior to March of 2009, so I can’t pinpoint what helped increase the sticky factor from late December 2008’s low point, but we can pinpoint a couple other key feature launches:

  • March 26th: Gifting of items is launched, allowing users to send useful in-game items to their “mafia” of friends, greatly increasing re-engagement and driving new users. FarmVille launched with gifting from the beginning, so we couldn’t see it in that comparison
  • April 30th: Achievements are launched, again seeing an increase much like we did with the earlier FarmVille example
  • The broad releases of the Cuba expansion (June 11), new Cuba achievements (June 18) and a daily lottery ticket (June 25) may have helped contribute a bit to the increase in the sticky factor to nearly 30% over the Fourth of July weekend, but that also may be due to the fact that during that weekend Zynga launched special loot that could only be earned by engaging with the game over that holiday weekend. This looks like it was a huge boost to re-engaging users and has been repeated nearly monthly (the next red dot was Labor Day weekend’s Loot event)
  • The launch of the Moscow expansion pack (September 25th) doesn’t appear to have had as much impact, and that may be because these expansion packs are focused as drains on some of the highest level users who are already extremely active.

There is no question that achievements and “gifting” have been enormous engines driving viral growth and re-engagement – the sticky factor analysis lets you visualize the actual impact on engagement those tactics bring and can be used as a benchmark for measuring the impact of future initiatives.

Does a More Viral Game Mask the True Sticky Factor?

One criticism of the sticky factor is that it can be greatly influenced based on how viral a game is – that the influx of new users skew the DAU number. That’s definitely true during the first 30 days (as mentioned in the FarmVille example above) or where there is a large promotion (huge ad buy or a cross promotion from another large game that drives a spike in new users), but after that I think this is somewhat mitigated by the fact that with a rolling 30 day MAU you are not going to see huge swings.

Ultimately, the sticky factor is an approximation of churn – the secret sauce that helps you understand your customer lifetime value and maximize revenues. As a developer, you’d have access to much more granular churn rates with an understanding of the differences of newbies you are acquiring virally and those that have been with you a number of months. Plus DAU really looks at JUST daily usage, where you may find quite a profitable experience with users that play every other day – to that point Playfish’s vice president of product, John Earner, mentioned at the Virtual Goods Conference on Friday that 50% of the users who ever played Pet Society are active each month, and that’s 65% for Restaurant City.

Still, I wanted to look at the impact of a game’s viral rate to drive new users, to see how much that can impact the sticky factor.

As an example, last week I mentioned that it looked like a 15% sticky factor was the breaking point for a game’s success. I took a pretty straight forward model assuming steady viral growth rates (e.g. of the users you have on the service x% will post something or invite a friend that induces another user to join the game) and a steady churn rate (you lose y% of your total users every day through attrition). These are the sticky factor curves based on a core churn rate and a viral rate.

Churn1

When you have a churn rate of 10%, you easily reach that break-away velocity (the 15% sticky factor), regardless of the viral ability of the game. But as your churn rate increases, you need increasingly more viral pull to reach that 15% sticky factor:

  • With a 12% churn, you need a 5.9% viral rate (1 in every 17 users bringing in someone new)
  • With a 15% churn, you need a 13.4% viral rate (1 in every 7.5 users)
  • With a 20% churn, you need a 23.9% viral rate (1 in every 4.2 users)

Generally, for every 1% increase in churn above 10%, you need a 2.3% increase in the game’s viral rate.

Viral Churn1

Again, this is a very simplistic analysis but I think it shows that while a game that is more viral can help mitigate churn, when that churn rate gets above 12%, it will take a great deal more viral growth to make it sticky enough to sustain that level of Stickiness.

Is the Facebook News Feed Change Impacting the Sticky Factor and Exposing Churn?

As I noted above, some of the big gains in the sticky factor for Mafia Wars came from gifting and achievements – two tactics that post to a user’s wall and would get replicated across their friend’s news feed prior to the recent changes to the Facebook news feed. Now that the changes have been in force for two weeks (and developers are exploring tactics to get these valuable cross-promotion and re-engagement tools back), what are we seeing?

Zynga Titles1

It’s only been ten days since the change and there is a lot of noise in the data, but roughly:

  • FarmVille and Mafia Wars actually look like they are up since the change, but there were a great deal of Halloween promotions (specifically limited item drops and Halloween design contests in Mafia Wars and FarmVille respectively) during the last week that may have temporarily re-engaged users.
  • Newer games (Café World and Roller Coaster Kingdom) are still coming off their launch highs and hadn’t found a stable sticky factor prior to the news feed change, so it’s hard to attribute the declines solely to the news feed at this point.
  • YoVille had been on a decline in its sticky factor prior to the news feed change and appears to have stayed on a similar trend since the change, so again, hard to attribute it solely to the news feed changes.
  • Texas Hold ‘Em had a fairly consistent sticky factor prior to the change and appears to definitely be feeling the impact of the change, trailing off in the last week.

At this point, the sample size is too small to really tell if the news feed changes have had an impact. Because viral tactics do support re-engagement, I would expect that higher churning games will see their sticky factors decline at a slightly faster rate over the weeks ahead. Until then, we can continue to look at the sticky factor as a strong indicator of user engagement and as a metric to measure the impact of initiatives on moving the engagement rate.

Eric von Coelln was the vice president of marketing at Oberon Media, a leading multi-platform casual games company, and most recently the vice president of Marketing at PowerSoccer.com. He is now a New York based freelance consultant to games, e-commerce and social media companies — including some of the largest social gaming companies on Facebook. While Mr. von Coelln does write about some companies for which he has done paid consulting from time to time, this post is based on publicly available information and in our view is an unbiased analysis of the industry. You can find his blog here.

To dig deeper into the virtual goods market, check out our new report: Inside Virtual Goods: The US Virtual Goods Market 2009 – 2010.

must read!!!

The Sticky Factor: Creating a Benchmark for Social Gaming Success

By Guest Post 5 Comments » Share

[The following is a guest post by Eric von Coelln, a social game consultant who occasionally contributes articles for Inside Social Games. Below, he takes a deep dive into the "daily active user" metric and how it ties into game growth and monetization. Important note: DAUs are now viewable on our AppData service. So read this post then go check out your favorite game to see how it's doing.]

The concept is straightforward: The more a user comes back and plays, the more engaged they are. And the more engaged they are, from my experience at PowerSoccer.com, the easier it is to monetize them. Why? A user who comes in and plays your game every day is much more likely to get to that point where they open their wallet, compared to someone who visits once or twice a month or plays twice and never comes back.

zynga-sticky-factor

So while Monthly Active Users (MAU) has been a metric that has been used to identify which games have been strong in getting reach (either virally or through advertising), the Daily Active Users (DAU) is the true base you should be able to monetize, weeding out the users that only come for a quick trial and don’t come back. A step further in this analysis is something I call the “social game sticky factor” (DAU/MAU) which allows you to benchmark applications’ ability to retain their users.

If your application has a 33% sticky, that means that for every new user you bring in, you have a 33% shot at turning them into a daily user. Compare that to an application with 20% Social Game Sticky Factor, and you can now compare the potential return-on-investment of a Facebook Ad campaign or further development of a game (either to make it stickier or focus your development on another game with a higher sticky factor).

A key for driving the sticky factor, besides great game play, has been the ability of the application to prompt users to reach out to their friends via the Facebook News Feed with stories and pictures. With several changes to the news feed being rolled out on Friday, including going from a real-time to algorithimic listing of top stories and a reduction in the number and size of images, there may be some significant changes in overall sticky factor metrics going forward.

I’ve looked at the top developers and their average sticky factors, but let’s break that down by game and over the last year (and prior to the newsfeed changes) to look at game-specific insights:

Zynga

Some highlights looking at the Social Game Sticky Factor for Zynga’s top games over the last 12 months:

  • You can see that all of Zynga’s older games (Mafia Wars, Texas Hold’em and YoVille) have steadily increased their Social Games Sticky Factor over the last year from the mid teens to the mid-to-lower 20s.
  • While Mafia Wars came close to 30% in early July, you can see it begin to drop off once FarmVille is cross promoted. FarmVille has sustained an incredibly high 36% Social Game Sticky Factor so far, which has helped it vault beyond the competition in total DAUs.
  • New games like FarmVille, Roller Coaster Kingdom and Café World often have very high Social Game Sticky Factors in the early weeks before settling to some sort of equilibrium
  • Roller Coaster Kingdom sunk below 15% post launch and then the game mechanic was altered (to a more “appointment gaming” model like FarmVille). When the game appeared to be approaching 20% again, Zynga began cross-promoting in their toolbar across applications, showing a quick spike in the Social Game Sticky Factor reminiscent of what we see when a game is launched.
  • We are still waiting to see where the natural Social Games Sticky Factors will lie for both Café World and Roller Coaster Kingdom, but it looks like they will be 30% and 20% respectively

playfish-sticky-factor

Playfish

Now let’s take a look at the 2nd largest Facebook game developer, Playfish:

Some key points over the last 12 moths:

  • In contrast to Zynga, Playfish started with high sticky factors in games like Pet Society and Restaurant City, but has actually seen those decline. Not included in this analysis are first generation Playfish games like Word Challenge and Who Has the Biggest Brain? which have Social Game Sticky Factors of 8% and 4% respectively.
  • For a good part of this year, Pet Society saw a Sticky Factor in the low to mid 30% range. Then Restaurant City launched in late March with a more compelling game play with early retention rates in the 40%. Pet Society almost immediately saw a drop of the Sticky Factor to the mid 20% range, which suggests some Pet Society users stopped playing consistently as their attention was focused on the new Restaurant City game. Zynga saw this same “cross-promotion-cannibalization” of its playing base with FarmVille and Mafia Wars.
  • New farm sim game Country Story looks like it’s settling into the 20% range, which is still strong, just a marked difference from the 36% FarmVille is seeing. Likewise, the other new title from Playfish, Crazy Planets, has had a difficult time building an audience (been flat around 250,000 DAU) and has been hovering around an 11% Social Game Sticky Factor.

fish-sim-sticky-factor

Fish Sim Genre

Fish Sim Games have jumped into the top 25 and a great deal of this has to do with the strong Social Game Sticky Factors across the board:

Collectively, Happy Aquarium (by CrowdStar), My Fishbowl (by TwoFishes Interactive) and Fish World (by Tall Tree Games) would be the #2 application on Facebook, with over 8.9 million Daily Active Users. All three games have launched since August and seem to have seen slow sticky-factor declines, except for My Fishbowl. This Chinese developed game has a cross-promotional toolbar (à la Zynga and Playfish) that seems to be shared with the #13 game, 開心農場 (Happy Harvest), that I first noticed around September 30th, when you can see My Fishbowl’s Social Game Sticky Factor stabilized and since has grown.

Is a 15% Social Game Sticky Factor the Tipping Point?

There undoubtedly can be a great deal more analysis, but it would seem that when your game application reaches a 15% Social Game Sticky Factor, you have an application that can maintain sustained growth. Below this, it appears harder for games to grow; when Roller Coaster Kingdom was revamped and finally passed 15%, Zynga appears to have turned on the advertising and cross-promotional muscle to push it into the top 15 by DAUs.

While there is a correlation of stickiness to monetization, I’m not suggesting that there aren’t other factors involved. You can have a game that everyone plays, but if there is no motivation for users to buy items (either through impacting game play or providing personalization), you aren’t going to make money. But I would suggest it’s improbable you’ll make money from a social game that no one continues to play.

Eric von Coelln was the vice president of marketing at Oberon Media, a leading multi-platform casual games company, and most recently the vice president of Marketing at PowerSoccer.com. He is now a New York based freelance consultant to games, e-commerce and social media companies — including some of the largest social gaming companies on Facebook. While Mr. von Coelln does write about some companies for which he has done paid consulting from time to time, this post is based on publicly available information and in our view is an unbiased analysis of the industry. You can find his blog here.


To dig deeper into the virtual goods market, check out our new report: Inside Virtual Goods: The US Virtual Goods Market 2009 – 2010.

must read!

RockYou Raises A Whopper – $50 Million In Venture Capital

Social Network application developer and advertising platform RockYou

has raised a whopping $50 million in a Series D round of financing from existing investor Softbank

, we’ve confirmed with the company. RockYou, which launched in November 2005, has now raised $119 million

in capital and has revenues rumored in the $30 million to $40 million/year range.

The company continues to develop and acquire social networking applications, but a big part of their business is serving advertising to their own as well as third party apps. And they are now taking a deep dive into the rather sensitive area of in-game offers. Last week the company spoke publicly about Scamville, saying that they would only offer Facebook compliant offers. When asked what types of offers that includes, the company said they’re looking at paying users to watch and respond to videos (like clips from upcoming movies), and getting them engaged with nonprofit groups like ASPCA and UNICEF.

There are 213 million monthly users of apps that RockYou owns directly or has advertising relationships with, says the company. And tomorrow they’ll launch a new virtual goods application on MySpace, called Gifts By RockYou, that lets users buy gifts for friends.

no offense to rock you, but the whole social gaming/virtual good space is way too frothy right now.