Last week’s GDC conference in Austin spilled out a ton of information not only about what’s up and coming in the gaming industry, but also the current state of affairs. One of the most interesting sessions saw EA, Turbine, K2, Linden Labs, and IMVU pony up and lay down some eye opening, if not eye popping, facts about their microtransaction and virtual goods monetization business models.
EA, perhaps the biggest and oldest games makers now involved in the freemium market reported that after initially only selling character customization options, sales were simply OK. Specifically speaking to Battlefield Heroes, once EA instituted Boost packs, these items/options quickly shot to the top of the list. Learning from this lesson, and perhaps overcoming the initial public balk, EA is now trending towards introducing these options into all of their freemium products. The focus here is on in-game advantages that drive higher conversion rates over that of purely cosmetic items. Using this formula, EA expects a 7-8 percent conversion rate in it’s freemium games, but realizes that rates may be driven down to the 5 percent range, do to the influx from social network traffic.
Turbine is looking good with what at the time raised a few eyebrows when they announced that their long time subscription title Dungeons and Dragons switched to the free-to-play model. Turning more than a few heads, Turbine execs announced that the free switch has significantly increased subscription rates, as well as concurrency rates. To be fair, Turbine is offering a subscription/freemium hybrid model, which the company believes to be the optimal solution, capturing both hard core, play all the time fans, while also hooking the players that only want to pay for what they want, and not for what they don’t. Subscription players are given a dedicated monthly allowance of virtual currency, and free players are given the option to purchase virtual currency with RMTs. Both allow players to unlock a variety of in game content.
K2, publishers of Knight Online, Red Stone, War Rock, Global MU Online, and Sword of the New World, report that every single cent of their revenues are derived from in-game item sales. Citing their key focus on community management, K2 claims an extremely high ARPU. “ARPU is high, relationships is long and persistence is everything.” Given that their revenues are items sales driven, K2 is aggressively pushing for expansion in Turkey, Brazil, and Eastern Bloc countries, areas were the freemium model has thus far been tremendously successful.
Linden Lab, publishers of perhaps one of the most well-know Virtual Worlds, Second Life stated that their annual revenue was over $80 million, and that they’re closing in on the $100 million mark. The company monetizes in one of three ways: Currency sales, premium subscriptions, and a hosting package that allows users’ 3D items to persist throughout the games. Given Second Life’s rocky, sometimes controversy filled, track record, the folks at Linden are now focusing on plugging the holes, and retaining active users as opposed to seeking out new Second Life residents. Linden Lab execs say that the largest stumbling block they’ve encountered is in-game fraud. Remember, Second Life allows users to create their own items for sale within the game, sometimes leading to a removal of currency from the virtual economy. The company considers this fraud/loss risk a basic price of doing business.
Rounding out the top 5 on parade at the GDC Virtual Worlds Monetization talk was IMVU. The firm says that 80 percent of their revenues come from sales of virtual items, and 20 percent from advertising. While 20 percent is a sizeable contribution, IMVU says that this revenue is only possible due to it’s expansive virtual world. They stressed importance on non-paying users, as they add to a large community, and encourage others to be drawn in. Comparing themselves to eBay, IMVU execs cited it’s catalogue of over 2.5 million virtual items made by 20,000 users. The top designers of virtual items within IMVU properties annually earn over $100,000 annually, however, the IMVU market functions on the long tail model, whereby the top 10 catalogue items only account for .2 percent of all sales.
Thanks to Ada Chen for outstanding notetaking.
Tags: Battlefield Heroes, dungeons and dragons, EA, gdc austin, imvu, k2, Linden Lab, Turbine
