This fictional case is the property of Dr. William Carter (University of Baltimore) and is intended for student assessment purposes only. March, 2022.

Marcade: Scoring Points in Social Gaming

Founded in 2007 and headquartered in San Francisco, Marcade is a leading developer of social-based video games played on individuals' digital media devices (primarily mobile phones, but also desktops, laptops, and tablets). As the use of social media (e.g. Facebook) and mobile devices have both grown exponentially in recent years, the social game development industry has emerged as a rapidly expanding arena. Social games on digital platforms allow players to enjoy a gaming experience almost anywhere, anytime. Gamers can also choose games or play styles that are independent and are played alone or games and styles that involve many players potentially from around the globe.

Marcade's mission is to connect the world through games. They were founded on the premise that it is more fun to play games with other people. Their games, therefore, are designed to emphasize social features that deliver a higher quality entertainment experience with increased levels of player engagement and retention. The company offers a full scope of game options ranging across common casino, card, and puzzle games to auto racing and virtual world adventure games all playable on all mobile devices using the Apple or Android operating systems as well as desktop computers using leading web browsers (e.g. Firefox, Explorer, Chrome). Marcade strives to offer a wide range of gaming experience in which players can play alone, against a friend, or among massive online communities. Their games are designed to provide entertainment through competitions, problem/puzzle solving challenges, and strategic decisions for building, collecting items. The graphical designs specific to each Marcade game (game logos, design themes, and in-game characters) are valuable branding visuals that add to the entertainment experience. Several game characters have even achieved widespread 'pop-culture' popularity.

Distribution of games is channeled through the 'app stores' controlled by Apple and Google. As these channels offer a global reach, Marcade designs their games for global appeal including features allowing users to translate text to multiple languages. Social media networks (e.g. Facebook, Instagram, etc.) are major platforms for marketing to attract new users. New users are recruited using viral and game sharing features to probe and connect into users' social networks. New users are also recruited via paid advertising in other apps and on social media. All their games can be downloaded and played for free. Revenues are generated in two ways: through the sale to players of in-game virtual currency and game items, and through in-game advertisements. Virtual currency and game-play items are not required for playing the games, but they can increase the speed or playability of certain game features. Historically only a small portion (approximately 3%) of players purchase such items (these are called 'payers'). This 3% figure is relatively constant, thus growing the absolute number of engaged players is important to the growing revenues and success in this business.

Like most other leading social game companies, Marcade targets adults aged 45-65 who are active social media users and who have the time and discretionary income to support the business model. As the user base grows, the firm can attract more in-game advertisers and increase advertising rates. Marketers can reach Marcade players within the game through banner-typ ads, and engagement offers (example: players answer survey questions, watch videos, or sign up for third-party offers in exchange for game items and bonuses). Marketers can also pay to put their brand on in-game virtual items and insert other brand logos and messages within games.

The company operates several game design and development studios and has expertise in using data analytics to design and enhance games and users' experience. Because the pandemic ignited a major transition toward more people working from home, Marcade has moved to make this work design a permanent feature of their organization, at least for those positions where it is feasible. Erin Hawley, the firm's Chief Technology Officer, led an effort early in the pandemic to develop and define Marcade's approach to distributed work and the firm has been recognized for their ability to increase employee satisfaction, creative collaboration, and overall productivity through shifting to a largely work-from-home culture. The studios continue to be used, however, as physical locations for important collaboration and market research meetings as well as for new game launch events.

Although the firm has acquired other gaming firms, most of its success has derived from games designed in house by their talented product development team. Several members of the team have been with Marcade from its founding and these veterans have been recognized in the industry with numerous game design awards. To support continued product innovation, Marcade has developed proprietary development technologies and cloud computing capacity. With the rapid growth in all forms of digital and mobile technology use, the competition for good design and programming talent has increased almost to a crisis point. The increasing shift to digital technologies coupled with a net decline in skilled developers and designers coming into the employment market, however, has severely decreased the availability of skilled designers and raised the compensation levels. Hiring and retaining quality design staff has thus been a challenge, but Marcade has navigated this successfully. To attract and retain top design talent, Marcade offers attractive stock-based compensation incentives to certain R&D engineers and designers and strives to promote an exciting, entrepreneurial, and flexible work arrangement culture.

With the investment in proprietary games, designs, and technologies, the firm is active in protecting its intellectual properties and defending them against rivals and those trying to enter the market. Because interest rates are expected to remain low and because the level of venture capital for high-growth technology firms is increasing, Marcade's leadership considers further acquisitions as a way not only to grow scale, but also as a means for acquiring the top design talent necessary for success.

Figure 2 on the following page provides one analyst's assessment of the industry's competitive forces.

FIVE FORCES INDICATOR SHEET Yes No THREAT OF NEW ENTRANTS 1 Can new entrants compete effectively without having to build scale? X 2 Have buyers shown a low level of loyalty to existing producers? X 3 Are the costs of entering and competing relatively low? X 4 Can new entrants easily get distribution and access to buyers? X 5 Are legal and regulatory barriers minimal or nonexistent? X 6 Does the industry seem to be growing and attractive to new entrants? X THREAT OF SUBSTITUTES 7 Are substitutes readily available and affordable? X 8 Do substitutes offer a similar or superior cost/benefit solution? X 9 Can buyers easily switch to and learn to use substitutes? X 10 Have buyers shown a propensity to switch to substitutes? X BARGAINING POWER OF BUYERS 11 Can buyers easily switch between producers? X 12 Are there only a few large buyers? X 13 Is the demand weak such that it is a 'buyer's market"? X 14 Could buyers easily produce the goods themselves? X 15 Are purchases relatively large, infrequent, and important? x 16 Are producers' goods pretty much the same (i.e. commodity-like)? X BARGAINING POWER OF SUPPLIERS 17 Are most suppliers goods unique and differentiated? X 18 Is it difficult or costly for producers to switch suppliers? X 19 Are there a limited number of suppliers or is supply limited? X 20 Does the supply account for a major portion of producer costs? X 21 Would it be quite difficult for producers to make the goods themselves? X RIVALRY AMONG PRODUCERS 22 Are there a limited number of producers of about the same size? X 23 Is customer demand declining or moving away from producers? X 24 Is it easy for buyers to switch between producers? X 25 Have buyers shown a low level of loyalty to existing producers? X 26 Is it difficult for producers to adjust production if demand changes? X 27 Are producers' goods pretty much the same (i.e. commodity-like)? X