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Playing the Wii Aftermarket

They may not have invented the popular gaming console, but that doesn't mean these entrepreneurs can't make a profit on it.
April 16, 2007
URL: http://www.entrepreneur.com/article/177060

It's a giant among video game consoles, a brand name like almost no other, an entertainment product that needs no introduction. Ladies and gentleman, give it up for Nintendo Wii.

Some products and services are so well known, they hardly need an introduction. Nintendo Wii may not have the name cache of McDonald's or Wal-Mart. But it does have brand recognition that startups can only dream of.

That's why there's something to be said for the "aftermarket," the concept of tailoring your business to the customers of a much bigger, famous or already-existing product or service. For instance, think of eBay and the drop-off centers that have cropped up, companies that make products out of recycled materials or even the books published that analyze the phenomenon of the Harry Potter series and TheDa Vinci Code.

Nintendo Wii is just one of the latest products to inspire entrepreneurs to start new businesses or adjust their current offerings. For instance, one component of the Wii is the Mii, which lets game players create their own characters by choosing from an assortment of facial characteristics. Many online retail outlets are selling T-shirts, mugs and statuettes with Miis on them.

It's arguably a good business model, provided you or at least your company's infrastructure possesses the technical know-how to capitalize on the popularity of the Nintendo Wii. "To date, there has been a plethora of third-party add-ons and tools [that have] hit the market, ranging from adhesive console skins to rechargeable battery docks to PC-based Mii editors," says Chris Moorhouse, creator of WiiChat.com, the video game system's largest unofficial online community. "The potential for making money off the back of the console is very much untapped right now, and I'm sure it's proving very profitable right now for companies that are riding the wave of the console's success."

But don't quit your day job yet. One stock market analyst, Todd Mitchell of Kaufman Bros., remarks in an online report to his clients, "We are getting tired of what we believe is irrational exuberance about the Wii. Yes, it is popular, and yes, it is taking share, but one investor recently told us how he thought it would revolutionize the way Americans exercise." And Moorhouse, a web developer in the United Kingdom, admits, "Wii Chat does make some revenue via advertising that helps support the cost and upkeep of the site, but apart from that, it isn't really a great amount."

That, however, doesn't mean Nintendo Wii can't be a big business for some. Just ask the founder of StumbleUpon. Garrett Camp, now 28, created StumbleUpon five years ago, but it was only last December, not long after Nintendo Wii debuted, that his company began to see its true potential. StumbleUpon.com is, in the words of its website, a toolbar the public can use "to find great websites, videos, photos and more based on your interests. StumbleUpon learns what you like and makes better recommendations."

When Nintendo Wii came out, StumbleUpon stumbled upon the idea of customizing its technology to work with the video game console. Now, anybody using Nintendo Wii can go to www.stumble.tv, discover videos on the internet and watch the videos on their TV. With 6 million Wii users and counting, StumbleUpon has a growing base of consumers it can chase, and because these consumers obviously understand the universe of Nintendo Wii, explaining StumbleVideo isn't difficult.

"Our consumers are pretty well tech savvy," says Dave Feller, Stumble's vice president of marketing. "If we were trying to sell the Wii and StumbleVideo, it might be another story."

What also makes Camp confident is that if Nintendo Wii disappeared tomorrow, his company wouldn't. It existed on the web long before Wii, and StumbleVideo "will work in any device that has a browser in it. Wii is just the one we use, and that makes the most sense to use. It's a great device."

StumbleUpon isn't alone. The businesses thriving from Nintendo Wii are arguably the ones that existed before Nintendo Wii. Dan Diotte, 45, owns VenMill Industries, which offers technology--like the Skip-Away--that cleans and fixes compact discs. The company, which was founded in 2002, brings in about $4 million a year selling products that work for CDs, DVDs and, yes, compact discs for the Nintendo Wii.

"VenMill is placing about a third of its marketing and resources toward satisfying the need for maintenance and repair of discs in this marketplace," says Diotte.

And it's not just the hobbyists and medium-sized businesses that are leading the Nintendo Wii parade. Moorhouse mentions how G4, a fast-growing TV network aimed at video game owners, owned by Comcast, has a website targeting Wii users who want to browse the internet with their Wii consoles.

"This approach allows for webmasters to single out the Wii users and really tailor their advertisement inventory for maximum conversion among the targeted Wii-browser-specific traffic," Moorhouse explains.

The economics can be confusing for non-gamers, but with the Wii aimed at even grandparents and young children, chances are more and more people are going to be consumers not just of the Wii, but also the Wii aftermarket. That translates into something every entrepreneur can understand. StumbleUpon, which started out of an apartment and was self-funded until a year ago when it received $1 million in angel funding, has yet to turn a profit, but Camp says they're close. He believes StumbleUpon could eventually be the Google of video searching with the Wii.

If that happens, StumbleUpon may someday be a company that needs no introduction, which may also be the fate of VenMill Industries, or so its CEO hopes. As Diotte quips, "Thankfully, Wii has made us all breathe a 'Wii' bit better."