Posts Tagged ‘microtransacions’

Facebook still flirting with Microtransactions

Thursday, March 26th, 2009

In yet another ‘fanning the flames of desire’ move by facebook, the social networking’s “game guru” Gareth Davis confirmed that they are in fact “looking at” developing a true virtual currency system.  Davis specifically choose the phrase “looking at” to indicate that facebook may or may not be hard at work on this project at the moment, but also reserve the right to shelve the project if they see fit.

If you remember back to the beginning of the year, we reported on facebook’s previous flirtations with microtransactions, and how they’ve still yet to take the plunge and put something out there.  Likewise, a few months after the social network announced their developer platform in 2007, they hinted at microtransactions, and even made the high profile move of bringing Benjamin Ling on board.  Ling is credited as the lead Google engineer in getting the Google Checkout product up and running.  But, less than a year later, Ling packed up his office and headed back to Google (no hard feelings, eh?)

“Clearly, it’s something that is a large undertaking,” said Davis in an interview at the GamesBeat conference in San Francisco. “So it has to be done carefully.”

Maybe facebook is really working the ‘build ‘em up, and only make ‘em want more’ strategy, but they’re also riding quite close the ‘boy who cried wolf’ line as well.   Davis would not confirm any specifics on the platforms plans for virtual currency, but he did comment on the main benefit for consumers would be the removal of friction from virtual goods transactions (I can haz cupcake?) on both the central platform and independently developed client applications.  Specifically, Davis’ pros and cons:

The con: Virtual currencies are vulnerable to fraud. If Facebook sells currency, it would have to police transactions to prevent scams.
The pros:

  • A Facebook currency would let its 175 million active users buy virtual items and game features more easily. Right now, users need to fork over their credit card information every time they want to spend money with a different application developer.
  • Like iTunes, the currency program could turbocharge sales by allowing one-click purchasing, which would result in more money flowing to third-party developers. Facebook also could decide to take a cut of the sales.
  • A system of virtual currency could make sales of as little as 25 cents viable since the currency would be purchased in chunks of $10 or $20, then spent in smaller increments over time. Currently, a single credit card transaction for a few pennies would cost developers more money than they would make.

(Source: latimesblogs)

Note the number of pros vs. con?  Another note worthy tid bit to notice here is that late last year, facebook itself switched the terminology on their own in house offerings.  Instead of pricing virtual goods at price points in Dollars ($), they chose the name ‘credits’, thereby making it easier for the site to charge more or less than it’s long standing standard of $1 per virtual item.

So there you have it casual games/facebook fans.  Another ‘hey baby, come here often?’  or serious commitment from facebook?  In a $1.5 billion global industry, wouldn’t it make sense for facebook to jump in on a piece of the action, and the future of gaming?  If fraud is the only thing holding facebook back, why not simply outsource the financial mechanism to a microtransactions service provider and be off to the races with real world testing, 100% platform integration, and dramatically reduced time to market?


Wall Street meltdown is good for free-to-play gaming

Monday, October 13th, 2008

Unless you’ve just arrived from Caprica, chances are you’re probably well aware that the global financial market is in a freefall right now with some of the largest banking names going under, and others receiving a massive federal bailout.  Both the Dow and NASDAQ are riding somewhere in the North Atlantic aboard the Titanic, and it doesn’t take an advanced degree in economics to understand that a recession is looming on the horizon.  Lose all hope and head for the hills?  Heck no.  NOW is the time for free-to-play gaming to go in, guns blazing.  Let’s see how and why:

Let’s take a step back for a moment and think about the last recession that we saw.  The 2000-2003 recession, while not quite accompanied with a multi-tiered sub prime mortgage fiasco, was quite harsh on retailers worldwide.  BUT  some industries and specific companies actually manage to thrive in poor economic markets.  Those that buy advertising (as opposed to selling it) are the ones that make off like bandits.  Obviously, given a recession, ad buyers are able to snatch up much higher profile and/or wider reaching advertising that previously affordable.

Online gaming companies, ecommerce companies,  and lead generation firms for example are all buyers of online advertising.  In our last round of ‘oh crap, where did all the money go?’ companies such as Expedia, Zappos, Lending Tree, Lower my Bills, Netflix, and were all able to grow to over $100 USD in revenue thanks to the ultra cheap media.

There is however, a notable difference this time around, and it comes to us via Consumer Confidence.  In the 2000-2003 recession, consumer confidence was higher than this time around.  In order to highlight this, let’s take a look at ‘In-Market Automotive Shoppers’. talked about consumer confidence back in September with this article and graph:

Obviously, an in-market buyer is someone ready and willing to make a purchase.  Clearly, times for the auto industry have seen better days.  Granted, a car and a free-to-play game (microtransactions included) aren’t even in the same ballpark, but I note this to point out that ‘considered purchases’, big ticket items including cars, homes, etc. have showed a noted decline, in part due to consumer confidence.

Taking a look at small purchases, Seeking Alpha is quick to point out that even the morning cup of Joe, normally purchased at Starbucks as seen a decline:

There was a time when getting a coffee at Starbucks Corp. (SBUX) – whether a basic “tall bold” or a souped-up venti concoction – was considered a relatively cheap treat, though those of us with a daily Starbucks habit might think otherwise.

However, a report from RBC Capital Markets analyst Larry Miller indicates that even that daily cup of store-bought java is one of the victims of the credit crunch. Mr. Miller lowered his 2009 earnings estimates – to $0.90 from $0.95, and said:

[The move] reflects our proprietary survey work, which suggests Starbucks sales continue to weaken as consumers are changing their habits and brewing more coffee at home.

And now for our bright shiny star in the midst of a seeming dark financial future: Games.  The gaming industry has traditionally bucked the financial trends, and thrives in time of discontent.  Perhaps folks are looking for a way, if only momentary and fleeting, to forget their bank account issues or missing 401k by blasting their way through level 27, or purchasing that shiny new outfit for their head banging Guitar Hero.

A certain amount of any game development budget is dedicated to new customer acquisition.  If free falling advertising rates can still maintain the same amount of pre-recession eyeballs, free-to-play games may be in the perfect position to cash in on advertising fiesta.  And given the price…who could resist something for free?

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