I would like now to move on to the second part of my talk, the one connecting online and offline behaviors.
Just like many of you, I was surprised when I heard about, or witnessed, some extreme behaviors:
- Flaming wars in forums
- Guys dying in Internet cafes
- Parents neglecting their “offline” baby in favor of some online thing
- People protesting online
- Bots mistaken for people and people mistaken for bots
- Even Chatroulette was interesting – though at that time it was not a surprise to me anymore. At least the creativity of people such as the piano guy, remains encouraging to witness, and stays alive as long as the environment does not reach a too high toxicity.

So what did I find in social psychology and social dynamics? I picked a few key things:

- People’s behavior is largely shaped by their environment. The simplest example is the “broken window theory”.

- People behave differently according to the likelihood of getting caught, or interacting again. There are examples from Zimbardo’s “Stanford Prison Experiment” to the abuses of Abu Ghraib, or simply “would you cheat a stranger if you knew you will never meet him again”. The depressing answer to this is: many people would. You can study Stanley Milgram’s “Obedience to Authority” experiment to see the reality of it.

- There are mechanisms to socialization and even seduction. I studied the research done by various social coaches, and looked into ways to engage and interact with total strangers. I even advised a startup who was developing an iPhone app just for that purpose.

Unfortunately, I don’t have time to go into details about those mechanisms but in short, they mean that as a service operator or “virtual world” builder, or a “resident”, there are ways to improve dramatically socialization and behaviors within digital environments.

Which leads me to the conclusion of my talk: what about the future of digital socialization, and the business around it?

There is enough research and proven cases out there showing what people are happy to pay for, so the business aspects I am not worried about. It is more about the pace: things like the semantic cells around “virtual” and “game”, payment systems are hurdles to overcome to help the market grow. It is getting better, but is still slow.

More interestingly, I actually think digital environments are one of the solutions to a real social problem. With neighborhoods disappearing and the prevalence of the “car” or “commuter” culture, we, as social beings, are very isolated, constantly in contact with vast numbers of strangers. The beauty of online environments – and they can be text-based, 2D, 3D, Stereoscopic and what not – is that those spaces – and I call them spaces in an architectural sense – can help us create new neighborhoods.

Some of you might be familiar with the concept of “third place” – the collection of places aside your home and workplace. Those are often essential to us to be social, creative and enjoy our life. A city with lots of them is very enjoyable to live in. What I am looking for – and working on with the company Cmune as an early iteration of that – is the creation of those “digital third places”. Second Life has been a great inspiration and raised awareness to a very high level, but is limited on many aspects: the business model, the clunkiness, the client install and more generally the poor social design and lack of “fun”. I am looking forward to seeing the next generation of services tackle those challenges and enrich our lives with old and new experiences in digital places.

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+8* | Plus Eight Star believes in a better future online, as proven by Asia. Follow us at @plus8star or @benjaminjoffe for more.

We received nice coverage from:

• Virtual Goods News: “Asia Driving the Virtual Goods Marketplace“
• VentureBeat: “Asian Venture Goods Market is 7 Times Bigger than US“
• VentureBeat: “Video of Day Two of the VGS – Updates on Asia, Facebook and the iPhone“
• Inside Social Games: “The $7 Billion Asian Virtual Goods Market in PowerPoint“.
• Gamasutra: “VGS 09: Asian Virtual Goods Worth $7 Billion in 2009″
• Dave McClure: “Virtual Goods in Asia – The US Gold Rush Begins”

Key points:

• Virtual goods market in Asia over $7bln
• 9 Online gaming companies listed on Nasdaq and HKSE
• Total market value is $52bln, twice as much as Blizzard + EA + Ubisoft + Take Two
• With similar maturity as China, the US VG market could shoot up to $35bln
• Mobile already making hundreds of millions with virtual goods in Japan

To download the presentation, please fill in your contacts below.

Ladies & Gentlemen, Mark Suster.

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What We Must Learn from Asia
August 11, 2009

I run a monthly meeting called the VCA that represents the majority of Southern California venture capital firms. My goal is to bring in informative speakers who stretch our collectively thinking on topics that will influence our investment strategies and use it as a way for us to share our experiences in ways that I hope benefit the Southern California technology ecosystem.

In the past 6 months we’ve heard from Dmitry Shapiro on the future of online video, Ian Rogers on the future music model, David Sacks on the future of social networking and Michael Crandell on where Cloud Computing is headed.

All have been fascinating. This month’s presentation was truly mind boggling so I wanted to be sure to share the entire presentation with all of you. This was one of the most fascinating presentations I’ve seen in a long time and a must read – although you’ll see clearly better in person with commentary. Benjamin Joffe (the author), a Frenchman who runs a consultancy in China that tries to help non-Asian investors understand the innovation occurring in Asia as a way to bring ideas to their local markets. He also consults companies in Asia.

I lived in Europe for 11 years and in Tokyo for 6 months so the idea that innovation is happening outside of our 50 states in not new to me. I’m sometimes surprised how little people here in the US want to try to learn from what is happening elsewhere. I find that a shame. When I reached out to Benjamin at the suggestion of Dave McClure who told me what a great guy he was I was fascinated.

To see the deck click —->HERE (sorry, I can’t do embeds yet, I’m migrating from WordPress.com to WordPress.org in the next few weeks). As I mentioned, some pages unintelligible without commentary but well worth a read to get to the nuggets.

My take aways are below:

1. Wacky, weird and low cost: Before diving into what I learned in the deck I want to share something crazy. Motorola gave us in the US the RAZR (before they stopped innovating). But China literally gave us the Cell Razor. Benjamin brought in a cell phone where the bottom pulls out and you have an electric razor. No joke.

2. Film innovation – If Benjamin’s analysis is right – even many of our most successful films have been adaptations from Asian films. I knew some were but the scope was surprising. Especially Star Wars & The Matrix.

3. Internet users in US – 225 million, mobile 260MM. China Internet: 340MM, Mobile a staggering 650MM. Don’t bet that China won’t innovate in mobile. (slide 29)

4. 70% of Korean population has Internet speeds > 5mbps (and avg = 15 mbps) – don’t bet that the Koreans won’t innovate on online content (slide 30). Larger onlinegame market ($1 billion) than Japan despite 1/3 population and 1/2 GDP per capital (slide 99). Way ahead of the US on mobile gifting.

5. More than 90% of Japanese mobile subscribers are on 3G networks (vs. 20% in the US) (slide 30), More than 50% have mobile TV & NFC chipsets (slide 87). Mobile ARPU = a staggering $110 / month for content and commerce alone (slide 88). Massive fall-off in ringtone and massive uptick in full songs (slide 89) —> still think we shouldn’t be watching what’s happening in Asia? Sales of avatars in social games nearly 50% of total revenue eclipsing revenue from affiliate transaction, ads or paid games (slide 97). Mobile game content revenue > PC game revenue (slide 98)

6. China’s leading social network (Tencent, who’s product is QQ) already does more than $1 billion in revenue. That’s 2x Facebook estimates. Tencent market cap on public market is $21 billion, Facebook’s is a theoretical $3-15bn (slide 52). China is innovating in many of the categories that the US is trying to solve now including mobile

couponing, vertical social networks, Internet TV, etc.

7. Free-to-play gaming with micro transactions has become huge in Asia with very nice profit margins. EA and others in the US are copying this success (slide 71)

When I lived in Europe in the 90’s we all texted people on mobile phones. I was surprised when I came back to the US and the only people texting were 13 year olds. When I worked in Japan it was crazy how much people were using mobile content on the i-mode phones. Now they have TV & NFC chips. I have been looking at a South Korean online start-up and am blown away by the innovation in this company relative to the online models I see in the US. It is a global world – I plan to make sure I’m tapped into Europe, Israel and increasingly Asia to know what trends I can look for here in California.

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+8* | Plus Eight Star researches Asia’s proven innovations so you can focus on using them to grow.

The 10-days tour, aptly named “Geeks On a Plane” would stop in Tokyo, Beijing and Shanghai and include various events to meet with the local technologists, entrepreneurs and investors. We co-organized things in Beijing: full-day conference, start-up pitches, Great Wall hike and more.

This turned out to be a pretty intense experience, as strenuous as rewarding. Here is the talk we gave at Startonomics in Beijing on “Innovations Models in China“, including our “5C of innovation” (video, 20 min). The event was well attended by over a 100 participants with many high-profile and insightful speakers such as Google China’s CEO Kai-Fu Lee.

Here is some reporting on the tour:

Tokyo | Tokyo 2.0, Startonomics Tokyo, More Startonomics and Interview with Mixi CEO Learning from Tokyo

Beijing | Startonomics Beijing, Videos

As there is no good trip without surprises: one participant got quarantined in Beijing due to Swine Flu risk (fortunately after the Startonomics event ^_^). He reports on his hilariously mundane days in quarantine here – TechCrunch’s take on how social media can make your life better, even (or especially) in quarantine.

Other events, such as Startup2Startup Beijing, TEDxShanghai, Barcamp and more were part of the tour. More details here.

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+8* | Plus Eight Star helps companies learn from what works in Asia’s web and mobile scenes and apply it to their market.

We have attended this event several times and for its 10th anniversary session in May, we got the chance to be invited to present Cmune – our partner company building the “Next Generation Social Game Platform“. In short: multiplayer 3D games in the browser, social networks and Apple Widgets. (Disclosure: +8* is an investor and partner of Cmune).

We learned there about Mixi’s plan for an open platform (Mixi is Japan’s largest PC-based SNS), met with the CEOs of both DeNA and GREE, two mobile gaming communities making hundreds of millions with a MOBILE SOCIAL NETWORK using the virtual goods business model. Both companies are worth over 1 billion USD on the Japanese stock exchange.

For your enjoyment, here is the 6-minutes pitch of Cmune in Japanese with English voice-over.

Most of the other sessions are here, including invited speakers from RockYou, AdMob, MochiMedia and Animoto.

The session on Next-Generation Interfaces is here, covering various aspects of augmented reality (AR) and more (English voice-over starts after 2 minutes).

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+8* | Plus Eight Star lives on the grid in Asia and brings the digital future to its clients worldwide.