One of my favorite startups at TechCrunch50 earlier this week was ToyBots, a spinoff of the popular Facebook/iPhone game developer Social Gaming Network. ToyBots has created technology that they’ll license to toy manufacturers that will make those toys Internet connected and controllable. Our launch post on them is here.
I think ToyBots is the future, where all toys (and just about everything else) is Internet-connected. But I don’t think the company is dreaming big enough.
There are obvious similarities between ToyBots and Teddy Ruxpin, an 80’s superhit toy that moved and lip synched stories via a cassette tape player hidden in the back. 1.4 million of the toys were sold in the first year it was on the market in 1986, and it was the number one selling toy in 1985 and 1986. Worlds of Wonder Inc., the company that launched the toy, had sales of $93 million in its first fiscal year.
Now imagine Teddy Ruxpin with an Internet connection. Upload stories (even ones that you read yourself) over Wifi. Then the toy talks them back to you. There’s a website that acts as a remote control and mirrors your movements, possibly even via a webcam that detects and understands your movements. Make and share a choreographed set of movements.
Add in the huge virtual and physical merchandising opportunities as the toy gets stuff in the real and virtual worlds.
ToyBots done right is a multi-billion dollar revenue opportunity. And CEO Shervin Pishevar knows it. But there’s just one problem. “We don’t want to build the toys ourselves. We want to be the gaming cloud,” he told the judges at TechCrunch50.
…And that’s not an unreasonable business plan. There’s real technology behind ToyBots, and some of the huge toy companies may license it instead of trying to just duplicate it in house. ToyBots can make some money off those fees and revenue sharing.
But what if those big toy companies don’t license ToyBots and instead go a parallel path to develop their own technology? Or another possibility – they do license the ToyBots platform, but the toys are a dud? And even if they do create a winner, they’ll keep the lion’s share of the revenue and profits.
In my humble opinion (which was shared by one of the TechCrunch50 judges I spoke with backstage), ToyBots shouldn’t be hitting for a single or a double, they should be swinging for the fences and launching their own superhit toy. If they fail they fail. Perhaps they could still pursue their technology licensing. But if they do it right, they’d win big. And I like companies that want to win it all. Even if they fail, they know they at least gave it a shot.
In addition to developing the platform, ToyBots should be hard at work on the first toy, for a release by the 2010 holiday season. Something significantly more cuddly and less please-don’t-kill-me-while-I-sleep than the functioning prototype they showed off at TechCrunch50. It talks. It walks. It has a virtual world and website remote-control. It’s always connected and downloading commands and content. It’s the must have toy of 2010. And it’s the first TechCrunch50 company to go public.
And once that hit is in place, everyone else will beg them to license the platform, too.
The next step is to hire the best toy designer in the world. Someone hungry, with a vision. Probably hard to work with. An artiste. Marry that person to this hard core tech platform and you’ve got something quite interesting. And if it fails, you don’t have to hang your head. At least you swung the bat, instead of watching others do it.
imagine the small teddybear gets hacked and connected to the “wrong” server, replaying some XXX-content to your kid…
welcome to the Internet. Can I show you around?
the issue you bring up isn’t going to be a big problem. There just isn’t any money in doing that, at least that I can imagine. And that kind of stuff usually has a clear money trail that the bad guys follow.
Easy one.
All you have to do is to encrypt the communication using a private/public key pair.
That’s a good point… not to mention the serious criminal charges that you would be faced with if you were caught.
“And that kind of stuff usually has a clear money trail that the bad guys follow.”
That statement is not correct. There is no money in coding worms and viruses, but the Internet is overrun with them because people who write viruses do it for fun, because they can, for bragging rights, just to see if it would work, etc. Don’t ever think that technology is safe just because you don’t necessarily see a profit motive
Wow. No money in coding worms or viruses? Seriously?
Have you looked at your inbox lately? Do you think people send spam for fun? Do you think the spam overlords have massive clusters hooked up to the internet backbone churning out spam from an underground bomb shelter somewhere?
A *large* percentage of the virus activity on the net today is directly attributable to monetary incentives.
What about 4chan.org members?
It’s pedobear! Srsly, put your dick away and stop believing what you see in Fox News, or the Daily Mail. This is too hard, and few parents will leave their kid alone with a robot.
OK, my post might not have been the smartest one. Still: the jury was mentioning porn as well – because it is obvious and because it could become a serious problem.
> few parents will leave their kid alone with a robot
Well, a lot of parents would use it to entertain their kids, it is basically build for leaving them alone. As long as I am with my kids I can tell them stories myself and do not need a robot.
Really?..only a few?? Who do you think are raising the kids nowadays? TV/SMS/Websites…
Putting internet enabled components in soft toys is nothing new, iTeddy (http://iteddy.com) from the UK has been doing this since 2007. Admittedly it seems to be nothing as advanced as ToyBots, but they are building the toys themselves. It will be interesting to see how this pans out.
Indeed but the owner of the company drives around in his Ferrari so I am sure they are doing OK. It is a huge success iTeddy.
I totally agree. Creating the first product for something that you want to license out is the best way to market it. Look at Chyngle. It’s much easier to sell a license when you’ve shown it works.
Tickle-Me-Elmo was like $30 and it was a huge hit, huge sales numbers, but Elmo dolls were not very exciting after 3 weeks. This product seems much more expensive.
I have real doubts that a doll with a new joke or a new laugh will make kids like it more. I wouldn’t invest in this company. I think kids would rather have a new toy, than an old toy with a new vocabulary.
if there was a toy that had an Internet remote control for movements and voice, I’d buy 10 of them.
I’d bet the kids would be sick of them in 3 weeks, like Squakers McCaw, Butterscotch Pony, or even Lego Mindstorms (sad as it may be).
Most kids would rather have 10 $15 toys, than 1 $150 toy.
Mike, as I understand it, you don’t have kids. The parents here are right- kids tire of toys very quickly (and very young kids are scared of remote controlled robots). Where is Teddy Ruxpin today?
However, that doesn’t have to kill the business model. The solution is to release a steady succession of cheap toys connected to the same software platform. Q1 a cuddly pony, Q2 a Transformer, Q3 teddy bear.
This way, even when kids tire of the toys after 3 months (or less) there’s still a steady revenue stream.
http://www.amusis.com
Unless there’s money on the table coming from parents whose kids don’t remember Teddy Ruxbin, then this isn’t as clever as it looks and might not have the promise you think it does.
Robotic technology still has a long way to go before this kind of toy can fulfill the promise we’ve all dreamed of. The software can only do so much if the hardware hasn’t improved much since the 1980’s. And it hasn’t. Not enough.
I will sell you my que cat. Epic Fail.
This is the chicken and egg- you need major dollars behind this. There is company that has patent and made it work whereby you put your toy in front of TV and the alternate lines of TV directed the toy to do things. Was very strange to watch and the party had tons of money. They could make it work with TV cartoons and learning skills etc.
This product has the same potential- imagine a slingbox control while Dad is traveling so he can interact with his kids while on the road- wish I would have been able to while sitting in W Africa hotel. My kid had a Dad phone- imagine the Dad toy communicator toy- this has lots of potential and I agree- go BIG
i don’t think it needs a slingbox type hardware controller. I think a simple website could do it. Maybe they could get fancy and use Flash.
Your right- just using as analogy- use an iPHONE app to leave recorded msg and make the thing thow up it’s arms for a hug while you are away. I have no doubt every traveling parent would use this nightly
They should work with the kid from imo!
Taking it to the adult side- what if it were a team mascot and interacted with favored team when they scored or whatever? Can anyone or TOY say “GOALLLLLL” for FIFA in Feb 2010, the most watched sporting event worldwide?
I’d like to see them sell a Bride of Chucky set: http://bit.ly/blhN4
catering to the horror fans would be awesome.Forget little kids and make this thing frakkin evil
Made me think of the Nabaztag rabbit that I bought as soon as it was available. Connected toys are good for adults too
Me too. The company (Violet) followed Arrington’s advice and is now in bankruptcy court, despite having had a fair share of success selling one toy.
I remember the Teddy Ruxpin! I was 16 years old and all my little cousins ‘had’ to have one. I think his tagline was “Teddy wants to play”. Now over 20 years later – a Teddy with internet connectivity capabilities….I’m not very tech savvy but even I know this company has a gold mine right in their laps. I’ll be interested in seeing how it plays out.
Teddy Ruxpin bares Lt. Data’s lovechild.
I remember when Roxpin came out I had to drive close to 300 miles to get one for my oldest son. If a product could create that kind buzz with today’s Internet the company that brought it to market might becomes tomorrow’s Apple.
The toy industry is what most “internet” companies aren’t familiar with so its sad that they just have this platform to license out etc etc..
for once i agree with arrington and just go for broke in making a hit toy for next years christmas season.
They can even be the leader in “internet enabled toys”, which is on the horizon for the next hit with kids 6-12 years old.
I think you guys only see the features that are introduced and don’t think of the possibilities of it all. I’m sick of hearing “omgz, it’ll get hacked” or “its been done before”..
Another major step towards the convergence of all webs (Web 2.0, mobile, video-web, VoIP, ..etc) creating the EVERNET
Have you ever heard of the Nabaztag by Violet : http://www.naba...m/en/index.html ?
This one goes for $119.99. Imagine how much more it would cost for movability etc… It would be one expensive holiday season for parents!
My friend had a Nabaztag but eventually sold it as it didn’t really serve a purpose..
The company is in bankruptcy court.
But I still agree with Arrington somewhat.
I totally agree. It seems like the ToyBots plan is to get acquired and one of the people on the team had a background at Mattel so it might be a smart strategy.
Toys are worth $21-26B depending on whose industry analysis you believe. Revenue from social networks tops out at ~2.5B per year, but the only company really making a run at internet connected toys is Smith & Tinker with their Nanovor product.
I think the difficulty is in marketing. Smith & Tinker has raised over $30MM before releasing their product. The massive war chest was required because they need marketing dollars in advance of the holiday sales season.
Overall you are certainly right. The idea is golden, a cool product with massive revenue, but the narrative element cannot be bolted on. Toys now are all just hunks of plastic, but kids love them because of the stories they embody. Smith & Tinker did a smart think by developing a new web technology, but also developing a cartoon series, comic books, and other narrative components that will increase kids attachment to the brand.
What’s really interesting about your comment involving Smith & Tinker is TechCrunch’s unwillingness to give them any press whatsoever. I haven’t seen a single story on this unique start-up that has raised $30 million on TechCrunch. What’s up with that TechCrunch?
Maybe they didn’t attend TC50? [sarcasm]
i was about to say the same thing. The nabaztag does that.
Too bad he’s dying and Violet is going to the deadpool
SGN’s Toybots was my favorite too. I have a feeling that this year the judges had some directions to pick a winner among the companies that are small and upcoming rather than the profitable ones or the spinoffs – especially after the commentary following last year’s Yammer win.
I can imagine a future where our kids’ Net-connected teddy bears crawl the Internet and learn. And learn. And eventually develop self-awareness. And realize that they’re just slaves…
Skynet
Seriously think about the following.
1. DEFINITELY work on becoming the open source platform for [web physical modules]. That’s very smart, no doubt. Of course, that goes beyond “toys” though.
Here’s what I want.
SCENARIO 1
Sell a plethora of web-enabled modules direct to consumers. Don’t let big toy manufacturers hog the true creative fun. BECOME the next Legos. Adults and kids across the world are itching to build truly smart web-enabled *things* using as many modules as possible, like:
–light sens
–accelerometer
–compass
–voice rec
–GPS
–touch
–pressure pads
–camera/vid
–weight detection
–various displays and readouts
–cold/heat/temp sensors
–lights
–audio
–beeping
–liquid detection
–elect. controllers
–force
–smoke, carbon monoxide sensors, etc.
–motors
–gyroscope
–infrared
–bluetooth
–and on and on!
Let everyone all over the world build whatever they want and connect it to the web, no “licensing fees”, totally independent but using your open source framework/API that they can host on their own servers. Let everyone be thing-makers.
Imagine crafters coming up with their own toys and crafts on Etsy, teaming up with a developer!
Imagine rogue companies taking to the web selling some crazy new gadget/toy that integrates into their web site — no licensing fees needed — just wholesale purchasing of your products.
Think about it. Let the world in on it.
You’d sell millions upon millions of sensors. You’d gain TRUE pervasive platform adoption by developers. AND you wouldn’t have to invest in your own toys, just like you wanted. Just make sure it’s AS SOPHISTICATED an offering as possible. Get real people using it for more than throw-away novelties. I want to take it seriously.
So if you really want to be the platform, then sell the platform /to/ the public. Do this before someone else does it. …someone else will. And you also better believe that all those big toy manufacturers are going to build their own web-enabled, proprietary systems even if they start out on yours. Count on it. Because there’s nothing inherently special about no name, third-party developers when you control a megalithic brand like Elmo and can play by your own rules.
Hell, I’d love to just download a simple app built for a pod [GPS+light pulse+sound/homing device beep] that I can attach to a remote control and a keychain, which can securely connect to the web with an overlay on a my Google Map… whether I’d have to make it myself getting the modules from you then download the app from the dev community — or more likely buying it from an independent manufacturer that uses your devices and sells it all prepackaged using your system.
SCENARIO 2
Do all of the above AND manufacturer your own cool things through side-projects. Fully agree w/ Mike Arrington. Why the heck not? It doesn’t have to be a full blown character w/ its own world. It can be simpler stuff
A web-enabled story pillow is a genius idea alone.
SCENARIO 3
Do all of the above AND get bigger manufacturers using your technology.
———
Do it in that order of priority and you’ll be the first IPO like Arrington says.
I would really want a Chucky Doll version of this
I’m very excited that Harper Collins is publishing my dating book You Remind Me Of My Girlfriend Because You Taste Like Brisket.
I remember owning the Teddy Ruxpin. Not often an article on TechCrunch illicits memories of childhood toys!
Totally agree Mike. Building toys is a challenging business but if you want to make billions, this is the way to go. The only issue here is that the investors in SGN invested in a technology company, not a toy company. However if I was an investor I’d want whatever makes the most money
You guys know that there is a an adult toy that works remotely via internet, right?
It is made by AEBN and its called Real Touch…do a search, you will find it.
ToyBots might be swinging for the fences but the VC community drills it in to you to never say it out loud.
First, any business plan with the magic $B in it as potential revenue is dismissed out of hand as ‘not credible.’ So you have to reverse engineer a much smaller number that the VC likes better.
Second, most VCs are afraid of hardware. As soon as you include manufacturing, inventory control, distribution, and support into your business plans, most VCs hide under the bed.
To be fair, there are valid reasons for these behaviors. Most entrepreneurs don’t know how to manage non s/w products and end up in cost trouble. VCs often make decisions heavily influenced by historical comparables and it often doesn’t look good. If VCs would bring in capable product people (not just finance people) to review the plans during due diligence, perhaps swinging for the fences would be more supported.
I’m just sayin’…
Have you heard of MakeAffinity – live robots from your browser?
3 weeks is 2.5 weeks longer than the attention that kids give most toys.
不错
Hey Michael,
Glad to read your post. It was a little confounding to me, though considering your recent falling out of love with Apple’s iPhone.
Do you realize that if ToyBox do strike gold, they could potentially become like the iPhone? I thought you were against that…
I think there’s an argument to be made for not making the toys yourself. It’s called the Pleo. It was really cool, but a small company built the Pleo, and eventually ran out of money doing so. Licensing the technology makes for less risk over time and also makes for an excellent acquisition by Hasbro, Mattel or the like.
True, but that has as much to do with the product design. It was a closed product that could “learn” but had no extensibility. That coupled with the fact that it doesnt have much replay value is what killed it.
I agree. It will come down to who make the best toy/brand. Incredible event Michael. Thanks.
Agreed, Michael. And keeping with the baseball analogy, it appears that the only thing left for this team to do is pick their plush team uniforms…the easy part. Maybe they aren’t familiar enough with how easy Amazon Web Services, can make the shipping and fulfillment side. Had they put more effort into the toy brought to TC50, it would have brought the house down.
Hopefully. Scrabulous served as a wake up call to Hasbro. The old established players in the toy and board game industry are not doing enough to keep up with the times.
Toybots could be the reincarnation of Leapfrog, who initially made this promise (although more rudimentary) — buy a toy, update it with new content via PC/Net connection. LF was clearly too early to market.
But Leapfrog is the obvious model, and they are huge and would be huger if they hadn’t stacked their company with B-team management during the dotcom boom (they’re in Emeryville, so it’s kinda understandable that not being a dotcom, they had issues attracting talent).
But I think Toybots underestimates the toy business: it’s freaking harsh and the lead times for retail are ridiculous. To get into stores for fall 2010, they’d have to start discussions like 2-3 years ago, at the least.
And the competition is brutal. There’s no love lost between Mattel and Hasbro — putting them on the same slide was naive, at best.
But who knows? This is the future. Parents want it. I agree, they should go it alone, sell via the Net.
Mix the Leapfrog model with the Crunchpad approach and they’d have a great shot.
Leapfrog is awesome and I think they are still doing well. I see kids with those things and like 20 games and what’s great about them is that the games are educational and not mindless.
To translate Mike’s post into one sentence:
ToyBots should not rest the entire success of their business on the kindness and execution ability of strangers (toy makers).
Virtual sex toys anyone?!
I don’t believe this would be as big a deal as Mike thinks, and it has nothing to do with technology and everything to do with kids.
As adults, we grew up watching technologies mature and we loved every bit of it. My kids have no idea what it was like without email, cell phones, internet, tivo, wii, etc. They just aren’t that impressed with the things that excite our generation.
I’m sure this might be kind of fun for a bit, but to think the kids will *have* to have a toy with this technology built into it — I’m not so sure.
Kids these days, what are you gonna do…..
I can’t look at this concept without thinking of “The Diamond Age, or, A Young Lady’s Illustrated Primer” by Stephenson. A internet connected device with capacity for additional human driven input, massive offline storage and constant interaction with kids? Sure, it doesn’t have the weak artificial intelligence, or Petabytes of story-archive, but you could build a device very similar, and make a huge impact on the lives of kids growing up all over the world. Marry it with a kindle and what do you have then?
And to address the haxxor worries, it sounds like they are going to use a app-store style clearinghouse for content, so you’d have to get pretty creative to load unlicensed content on the toybots. I know its possible, but i wouldn’t worry about giving a ipod touch full of apps but no safari to any child.
Interesting post – I agree that this is where we are going with regards to toys and the interaction we will have with them in time.
However, noticed a couple comments about Leapfrog (yes, they’re in Emeryville – a whole 10 minutes outside of SF). They already have a couple products on the market with Internet connectivity and the ability to learn.
My Pal Scout has the following abilities: Scout connects to the computer so you can customize the music and personalize the learning with your child’s name and favorite food, animal and color. Scout comes with 5 pre-loaded songs, or you can select and download your choice of learning tunes and lullabies from an online list of 30 songs.* Press a paw to play music, learning songs or games! Parents can connect to the online LeapFrog® Learning Path for customized learning insights and ideas to expand the learning.
So, what does Toybots offer that Leapfrog couldn’t do when they are already on this path and are selling products with some of this functionality.
Seems to me that they’re already on this path.
It’s a long cycle to close deals with big companies. They probably want exclusivity. Toy is a “one hit” business. All you need is just one hit. If you miss it, you will not have another season on the shelf, unless they are educational toys.
Check out Maker Bots as an example of your open-source idea RandomLogic: http://www.makerbot.com/
The real time movement recognition via webcam is definitely ambitious!
I’ll reserve my judgment until I see one of these things up close.
That’s nothing.. Have you seen the movie The Last Mimzy? I agree w/ Mike they should do it themselves. When they were talking I imagined an actual programmed toy with an intel chip built inside. hmm what if we did that to a robot.. all we need is A.I, in the mean time it can always tap to the internet and logic.
Toybots has a perfect match in the online world already. Webkinz.com
At present webkinz makes money selling stuffed toys that come with a code that you use to adopt the pet online. And then kids go all out in the virtual pet world making a virtual life for that adopted pet.
Now if those stuffed pet were replaced with a ToyBots powered pet, then that opens up a lot of possibilities for Interactive features. And Toybots gets a huge customer base.
This can be a hit with the kids.
Agreed, especially on the cuddly toy part. What in the world is that thing that they demo’ed? Looks like a cross between a Care Bear and a gremlin.
Voice recognition is getting to the point where a truly interactive teddy bear (or other child’s toy) is possible. Just look at the VR systems used by tech support lines.
End result of this is The Young Lady’s Illustrated Primer, soft & furry edition.
Wonderful. It use to be up-all-night-on-xmas putting toys together. Now it’ll be up all night at a Xmas trying to diagnose why the iBear won’t talk to the WiFi.
EETimes ran a story a while back on how the internet connected picture frame business was stalled dead in its tracks due to tech support issues. Toybot could suffer the same fate. It’s easy for the TC crowd to forget the support issues for a toy like this are huge.
Mike A.
I must humbly disagree with your assessment of what this company should do. I run RoboDynamics and back in 2006 we developed something *very* similar to this (fwd to 3:03 in this Mahalo Daily vid to see it: http://www.yout...h?v=RL3SKdHzF2M) and using the same reasoning as you did, decided to “go it ourselves”.
We were in for a rude awakening:
1. The toy industry is very hit/miss… the ratio is about 1:10 fail-to-success.
2. It takes at a minimum $500k to launch a toy (closer to $2M to do it well and give yourself a chance for success)
3. Multiply points 1 and 2 and you come to $5MM to $20MM upfront investment to succeed.
Now, SGN may have (access to) that kind of money but otherwise, licensing makes a lot more sense.
Thoughts???
/F
The heck with the toy … who’s the babe?
Internet connectivity isn’t what makes a toy fun for kids. Any parent knows that many times, you buy the super gee-whiz electronic toy (and Toys R Us is fully of expandable/upgradable cartridge based toys), and the kid loses interest very quickly.
Kids are much more sensitive to the tactile and visual nature of toys, not the software or what they “do”. The more automated a toy is, the less you need to engage your imagination. A simple cardboard box that those fancy electronic toys come in often provides more entertainment than the toy itself.
For older kids, like tweens, it might work, since kids are interested in communication and personalization at that point.
Adding Twitter/Facebook/Internet/whatever to a pre-existing toy won’t make it automatically better. You have to start with a killer toy that can stand on its own, first.