Money Games: The Middleware Opportunity

Payment

Payment platforms are literally where the money is, and business models are built around high volumes and high security. Again some companies manage literally hundreds of global payment providers internally, but there is a market for payment services competing directly with the big boys like Paypal.

Playspan serves publishers and developers of digital media, online games, mobile apps and social networks with payments and monetisation for virtual currency, virtual goods, and subscriptions. The company's solution enables payments via 85 payment methods in 180 countries, so is fairly comprehensive for most games companies. Playspan (the core of which was founded by a 12 year old in 2006, although his father is the CEO) took over $46 million in funding from Menlo, STIC International and Novel TMT and serves clients including Ubisoft, Facebook, Disney and Viacom. Visa clearly saw the value, buying Playspan for $190 million in February 2011.

Security

Security is a big deal in online and mobile games, and while the big boys like Tencent handle this sort of thing at world class levels themselves, it is an area where specialist service providers offer both technology and consulting services. Security solutions cover piracy (both games and game engines), theft and cheating in online and mobile games, with the protection of both games companies and their players the main priority.

Secureplay (part of IT GlobalSecure) provides standalone off the shelf games security packages and consulting services, while players such as Valve incorporate Valve Anti-Cheat as a component of the Steam platform.

The middleware opportunity

With so many subsectors, and the risk of any one company not becoming the dominant long term player in its own sector, you could be forgiven for thinking that games middleware presents a diversification problem of its own. How do you pick where to invest? Yet the fragmentation of sectors and companies present an opportunity in itself.

Today nobody offers a completely integrated middleware solution. Clients must instead manage multiple relationships, multiple APIs and handle the integration themselves, creating an unnecessary layer of complexity and cost between them and the market. Fine if you are a middleware provider, not so great if you are a middleware customer.

Integration, together with bundled pricing to lower costs, is one of the biggest opportunities in the games middleware market today.

Integration, together with bundled pricing to lower costs, is one of the biggest opportunities in the games middleware market today. A number of companies are thinking about how to achieve this in the next 12-18 months from different angles, and it is only a matter of time before someone pulls the trigger to invest in and acquire the different components to make it work. And they wouldn't even need to cover the field, just offer enough best of breed components in the most profitable subsectors to become the dominant provider.

For those who think about this from a production perspective, middleware (excluding development itself) is often integrated after much of the development is complete. At the point when tools and technology address most post-development challenges, the question becomes whether the major platforms will provide their own solutions, or whether an independent integrated player can emerge to take the field.

Someone could become the Oracle of games middleware, and when you're serving a market as large and high growth as online/mobile games, that sounds anything but boring to me.