Strategically Managing Organizations: Neopets, Inc. case - Essay Example

? Neopets, Inc. Industry Overview In 1950, the first electronic game was introduced by Willy Higinbotham, a physicist working at the Brookhaven National laboratories. It was in 1958 when he designed the simple little interactive game using the oscilloscope, an analog computer and some simple push buttons, the result was a game known as ‘tennis for two’. Since then the industry of electronic games has evolved so rapidly and increasingly by passing through various stages that now one can find a game in every house on every computer (DeMaria, Wilson, 2004). A major shift in the evolution of the industry of digital games incurred with the development of a text based adventure game called the ‘Advent’ in 1967. After that the era of consoles began which attracted a lot of children to the gaming zones. Afterwards in the industry, advancements were made so that home based gaming consoles could be manufactured, whose high demands were foreseen by the pioneers of that era. These demands were proven right when the first commercial home video system ‘The Magnavox Odyssey’ was launched. Though all these home based games were exceptional developments, but with the launch of World Wide Web, it became necessary to introduce internet access in the games, which was observed initially through the gaming consoles launched by SEGA like Dreamcast. Though SEGA had a short life span but it was nonetheless remarkable, besides SEGA the well renowned names of the industry today, include Japan’s Nintendo, Microsoft’s Xbox and Sony’s playstations (Rutter, Bryce, 2006). With the rapid change in technology the change in the gaming approaches has also been rapid. Now, the main preference of the kids or even adults all over the world is online gaming. Due to the lack of online functionality in consoles, besides SEGA’s Dreamcast, online games mostly have been PC based. Titles like EverQuest and Ultima, used to involve many players form all over the world to be simultaneously logged on into the gaming world (Kirriemuir, 2002). Now in the present era of technology, the options are not so limited, there are a vast variety of internet based games available at a much reasonable price, matching the likes of every individual in the world, whose developers manage gamers form all over the world, who logs onto the world of imagination and excitement during any time of the day and night with no restrictions. Video and web-based games are a very dynamic and rapidly growing industry. Governments all over the world have laid rules and regulations to monitor the development and operations of online games. These policies affect the online gaming industry in a variety of ways. These affects are more pronounced in the countries where there is high state involvement and low degree of transparency in the economy (Ernkvist, Strom, 2008). On June 1, 1999 President Clinton asked the Federal Trade Commission and Justice Department to conduct a study regarding advertisement of products to the youngsters through movie, music recordings and computer & video games industry. It was observed that controls over age restrictions regarding ratings, advertisements and contents were equal to being none. Since then various rules have been advised to monitor these industries. Regarding online gaming, it is mandatory that the games should be labeled with age and content-based ratings information, and that the rating information should also be prominent in the advertising campaigns. The Commission carefully monitors these ratings and the procedures have been applied so that the proper conduct of such operations could be carried on. Rules have been established to govern the distribution of violence oriented or mature content in the games among minors. The Commission after the request of President Clinton has been implementing procedures to make it happen, but it is their belief that these procedures should be self regulated by the industries. Restrictions have been laid to prohibit target marketing to children by establishing codes that would limit the sales of such material to minors. Secondly rules have been applied to increase compliance to the regulations on retail level. Most importantly, it has been deeply imposed that the parents should gain better understanding of the ratings and labels so that they could monitor the content and games accessed by their children (Federal Trade Commission, 2000). The major revenue earned by the games introduced online is through advertisements that are placed on the websites. Concerns have been raised by many critics and researchers as to what kind of material should be advertised through these websites as though even most of these advertisements are targeted towards adults still there is no way of controlling the access of children to the contents of advertisements. Many special policies have been applied by Federal Trade Commission to address this issue of advertising that is targeted towards children through television or web-based games (Campbell, 1998). The industry of web-based games has been progressing with every passing second. There are more numbers of online game players with every passing moment, initially the developers of online games used to generate revenue through advertisements, but now fees have also been charged for access to the games, which the players are easily willing to pay. Only this proves the interest, commitment and addiction of the gamers to the products and the industry. Virtual world is now considered to be a reality which is considered to provide stimulating environments for the researchers of many fields, so that they could pursue collaborative researches (Bray, Konsynski 2007). Even during the times of economic regression, the virtual world is expected to survive. Companies like Gaia and Habbo are showing increased activities on their websites strengthening the belief that as the real world is becoming weaker; the virtual world is getting stronger. Kids are reported to be focusing on virtual worlds like Club Penguins and Neopets. These virtual outlets have reported major increased activity over the last two years and have thus become the focus of many investing media companies. The subscription based virtual worlds have gone from the reported users amounting to 220,000 to over a quarter of a million (Irwin 2008, Forbes). Not only boys but girls are also reported to be gaining increased interest in the virtual world. Considerable increase has been reported through the number of females that are spending more and more time on the virtual world of internet games, further more the age of these females has not only been reported to be ranging from the age groups of 12 to 17, but from the age groups of 55 to 64 as well (Irwin 2008, Forbes). The importance of the virtual worlds is increasing so much that major fast food chains like McDonalds is also launching the Wi-Fi access on their facilities, giving their franchise a more modernized image. Such actions will not only benefit the customers and the online world but the franchise as well (Chmielewski 2004, Forbes). Firm’s Overview Neopets is one of the largest gaming worlds that is equally famous among children as well as adults. It has been reported to be amazingly addictive for its users. The website has a recorded user base of more than 25 million. This online entity allows its members to acquire, create and nurture virtual pets, which can be designed custom to the needs and likings of every user. The site was recently acquired by MTV Networks in 2005, which is owned by Viacom. Viacom is considered to be the leviathan of the media industry. The acquisition of Neopets and Nick.com has given the company a special competitive edge in the online entertainment world among kids and adults (Levine 2005, Forbes). Before that the website was owned by the Dohring Company. Neopets is considered to be the #1 stickiest youth entertainment site. The brand has created a strong affiliation with its users through its various characteristics, the games, contests and the stories. The operations of this website have been extended into merchandizes, publishing, wireless and other venues. The website, to-date, has been translated into 11 languages, generating more than 5 billion pageviews per month. The loyalty of the users is highly regarded by the website management as its users are found to be as loyal to the website as they are to their virtual pets (Neopets, Viacom). Under The Dohring Company, the main mission of the company was to increase its user base, by influencing and increasing the loyalty of its users. During that era of control, the company went under a lot of considerations as to how it can expand its operations all over the world. It expanded its operations in Asia through the Green Dot. The main objective of the company is to increase and maintain its user base in the currently highly competitive era and expand its operations worldwide by developing it with respect to each prospective region, but the website management is still very cautious so as to not compromise its quality. The website was first acquired by The Dohring Company in January 2000; it was just a home based website which was treated as nothing more than a hobby by the two British students, who were the developers of the website, named Adam Powell and Dona Williams. After it was acquired, the executives of the company started focusing on increasing the quality and variety offered by the website. New games and contests were introduced. Within weeks the company had turned the website into a profit generating segment and by July 2000 the company was totally profitable. Initially the revenues were generated through the advertisements placed by the management on the websites. With the passage of time creative, technical and support staff was hired by the company for the website based on their interest and loyalty to the website and its operations. Initially, Neopets was considered as a rapidly growing internet startup whose main focus was to resolve situations and making decisions regarding the expansion of its operations. It focused on expanding its business in Asia, considering the option of joint ventures, so that the website could be accessible to Asia based users (Eisenmann, Kind 2002). Then in 2005 the website was acquired by Viacom, for $160 million bringing it into the new era of technology as one of the leading web gaming sites (Ito, Horst 2006), which is among the leaders in the entertainment world. Now the website ahs been translated into about 11 languages with its branches in Asia among many other regions in the world. Recently, very high emphasis is being laid on the advertisement carried out through children websites. The main area of concern to many researchers and scholars is the contents of the advertisements and their affects on the children. As it is well known, that Neopets have been generating large amounts of revenue over the history of its operations through advertising various products through its websites, such concerns and any emerging policies as a result of these concerns can deeply affect the company’s operations. Even it is reported that the California based company generated more than $15million through advertising (Boese 2003, CNN Headline News). In 2006, the Institute of Medicine, conducted a study that showed that food marketing was a main reason to the contribution of obesity in the children in the United States. Their research showed that the advertisement of unhealthful diet through children websites increases the chances of children focusing on such diets and then eventually leads to obesity (Alvy, Calvert 2008). Similarly another researcher argued that product placements and use of popular characters for the promotion of products is deceptive especially when it concerns conducting marketing among children. As according to the company’s operations history, it has been seen that the company often uses its virtual stores to promote goods made by real life manufacturers. In the same way the website promotes advertisements by granting points for accessing the advertised websites. According to the researchers it is misconduct and such measures leads to taking advantage of the children and thus they should be prohibited (Campbell, 2006). Such increasing concerns in the worldwide community can deeply affect the income levels of the company. According to the spokesperson of Viacom plc, in one of the articles in Forbes, Neopets records the highest number of time that is spent by its users on the website per month (Hau 2008, Forbes). Neopets since its incorporation as a commercial site by The Dohring Company in 1999 has been a steady generator of income for its stakeholders. The customer based of the company has kept on increasing and it was reported to be the highest among the children based websites. The website’s increasing performance over the years led to the acquisition of the website by one of the media tycoons ‘Viacom’. Even though the immersive advertisement implied in the website is raising concerns in the community (Grimes, Shade 2005), still the website has been reported to be generating a steady growth in not only its customer base but its revenues too. Bibliography DeMaria, Rusel, and Johnny L. Wilson. High Score!: The Illustrated History of Electronic Games. New York: McGraw-Hill/Osborne, 2004. Print. Rutter, Jason, and Jo Bryce. Understanding Digital Games. London: SAGE Publications, 2006. Print. 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Grimes, Sara M, and Leslie R. Shade. "Neopian Economics of Play: Children's Cyberpets and Online Communities As Immersive Advertising in Neopets.com." International Journal of Media and Cultural Politics. 1.2 (2005): 181-198. Print. Read More