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Game over for Hangout and Ayeah, two Boston companies developing Facebook games

Posted by Scott Kirsner  May 4, 2011 03:36 PM

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Creating a hit online game sounds like lots of fun — after all, how hard could it be to replicate the success of Mafia Wars or Frontierville?

But two Boston companies have discovered that actually getting people to play your game in large numbers is extremely challenging. Hangout Industries has shut down after raising $12 million from local VC firms Highland Capital and Polaris Venture Partners, and Ayeah Games has switched off its sole game, FanSwarm, as the company evaluates its options. Ayeah had raised $530,000 from LaunchCapital, CommonAngels, and several individual investors.

Hangout had initially tried to build a virtual world akin to SecondLife, but one in which players would furnish their rooms with branded products. The intention was to use the virtual world to build affinity with stuff players would later go buy. But jumping into Hangout's 3-D universe required a software download that didn't always work well on clunkier computers. Later, the company started creating Facebook games like Fashion City, geared at young women who would organize virtual fashion shows in which models could wear digital clothing from real-world designers. (They could purchase some items using real money, to attain status in the game.) As with most Facebook games, the hope was that players would invite their networks of friends to play along with them.

The layoffs at Hangout began in 2008, and Hangout moved most of its team from Boston to California in 2009. The company last raised money — $2 million — in March of 2010, and had hoped to raise more. But Hangout's phone is now disconnected, its Web site gone, and founder Pano Anthos indicates on LinkedIn that his tenure at the company ended back in January. (Highland Capital's Bob Davis says he left the board of Hangout in 2010, adding that he'd "be really surprised if there have been any employees of the company beyond early fall 2010.") Anthos hasn't returned a phone call seeking comment, nor has Mike Hirshland, the Polaris partner who oversaw the Hangout investment.

Ayeah launched its Facebook game, FanSwarm, last Halloween; the game was touted as the first "social reality" game. By trying to predict the career trajectories of real-world celebrities, players could rise to the rank of "super-agent" or "studio mogul."

"Whether an actor scores a major role or freaks out in a hotel, it doesn't much matter, because players are scoring points whenever news is generated," the Hollywood Reporter explained. Players could also purchase virtual goods to decorate their pages on FanSwarm.

FanSwarm was the first game built by the Boston game development shop Disruptor Beam, which had a contract with Ayeah. (I covered that company's launch last March, and Disruptor Beam co-founder Jon Radoff recently published the book "Game On: Energize Your Business With Social Media Games.")

Ayeah founder Doug Levin confirmed today that he had taken FanSwarm offline. "We're trying to figure out what to do with it. There were significant challenges getting the game's monetization to meet our customer acquisition cost."

Levin said the game had some technical issues when first launched that required attention, and that it was hard to tell if players simply didn't come back (and didn't spread the word to others) after encountering problems, or simply didn't like the concept. FanSwarm attracted about 35,000 players, he said.

He says that it also proved challenging trying to introduce a new game genre — social reality — to Facebook.

Levin added that "there have been discussions about selling the assets."

Both Anthos and Levin have backgrounds in enterprise technology, not videogames. Levin was a longtime Microsoft executive who founded Black Duck Software, which helps companies manage their use of open source software code, and Anthos' last company, Pantero, was a "leading provider of semantic data integration software for Service Oriented Architectures." It was acquired by Progress Software in 2006.

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Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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