1. Games 2.0 Web 2.0 Expo April 25, 2008 Jeremy Liew MD, Lightspeed Venture Partners www.lightspeedvp.com lsvp.wordpress.com jeremy@lightspeedvp.com

2. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 2 Birth of Web 2.0 has been driven by making costs variable Web 1.0Web 2.0 Development  Build everything from scratch  Open Source  Outsourcing Marketing  Superbowl ads  CPC and CPA Distribution  Multi year, multi million dollar portal deals  Social network platforms  Viral growth Content  Teams of writers and editors  User Generated Content Monetization  Internal sales teams  Ad networks

3. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 3 The games industry is starting to feel the same dynamics Games “1.0”Games “2.0” Development  Massive development projections  Fat clients  In browser gaming  Flash and other rich media improving Marketing  Offline advertising driving players to retail  CPC and CPA online advertising driving online play Distribution  Controlled by retail and big game portals  Social network platforms  Viral growth Content  Teams of level designers  Multi player is user generated content for games Monetization  Selling games in jewel cases  Digital download  Free to play supported by subscription and digital goods  Advertising

4. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 4 Development: “Low fi” games gathering more users Sources: Lazard Capital Markets, Adonomics, Press Releases, LSVP Estimates Halo 3 Power Challenge Zynga’s Texas Hold’em Friends for Sale SGN’s Jetman Development Costs ($M)Players (M)

5. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 5 Marketing: Online distribution allows CPC and CPA advertising $30M in marketing - Primarily offline 10M copies sold - 90+% through retail

6. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 6 Distribution: Viral growth and social networks allow games to grow virally * Not to scale TYPICAL AAA GAME New user growth (illustrative) Marketing campaign supports big launch, with sales declining thereafter SOCIAL GAMES Friend invitations drive increasing growth curve as user base grows

7. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 7 Content: Multiplayer is user gen content for games Source: Ian Bogost, Lightspeed analysis Single-player games -Need new levels to keep player interest -AI for NPCs to maintain challenge -vs. Multiplayer Games -Each game is different, keeping player interest -Other players have real intelligence, not AI Asynchronous Play - Large pool of other players - Easier to play against friends - Players playing in sequence, not in tandem. - Requires persistent state which all players affect, and which in turn affects all players. - Breaks between players are the organizing principle

8. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 8 Monetization: Online games market growing as revenue sources become more variable  Sale of downloads  Advertising  Digital goods  Self expression  In-game power  Extra levels/content  Attention  Convenience ONLINE GAME REVENUES

9. Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 9 If Web 2.0 is the social web, then Games 2.0 is social gaming Jeremy Liew: MD, Lightspeed Venture Partners Mark Pincus: CEO, Zynga Game Network Shervin Pishevar: CEO, Social Games Network Johan Christenson: CEO, Power Challenge Siqi Chen: CEO, Serious Business (Friends for Sale) MODERATOR PANELISTS