Posts Tagged ‘revenue generation’

MySpace to release microtransaction platform – perhaps beating facebook to the punch

Sunday, November 9th, 2008

MySpace COO Amit Kapur revealed at last week’s Web 2.0 Summit that MySpace is indeed working on it’s own microtransaction monetization platform.  Given the current state of advertising rates and associated revenue generation, both developers and social networking platforms are looking for a new way to monetize.  A casual glance at the gaming industry makes this a no brainer for Kapur and Zuckerberg.

While Facebook has it’s own virtual gifts system in place, they’ve yet to open it to developers (although 3rd party developers currently power a massive slice of facebook’s virtual gift economy).

We’ve already seen proof that the second a social network begins charging for an application or virtual gift, usage drops.  However, the overall value of the app is in direct correlation to the number of people using it (and their friends, and their friends of friends using the app).  Obviously, a high profile, well-developed application or virtual gift with a large number of users, will fair well in a microtransaction economy, and hopefully lead to elevating the entire industry.

Whether Facebook and/or MySpace users are already used to, or have already used some form of microtransaction is up for debate, but given the overall general demographics of both platforms, I’d be willing to make the bet that 75-80 percent of these users have made an iTunes song or iPhone application purchase within the last 12 months.

If either MySpace or Facebook manage to get their microtransaction payment systems houses in order, they could be set to revolutionize not only the social networking platform, but also the microtransaction industry as a whole.  This development has a number of positives for the free-to-play; microtransaction based gaming economy as well, thereby predisposing a much larger audience to the concept.  Exposure leads to understanding.  Understanding leads to acceptance.  Acceptance leads to interest.  Interest ultimately leads to development and creation of better and better products.

Oh and MySpace and/or Facebook…if you’re listening…fatfoogoo has already been down this road, and we’re here to help.  Zuckerberg and Kapur…call me.

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Nokia does iTunes one better; could it be the future of gaming?

Monday, October 6th, 2008

A quick search of a few various Torrent trackers turns up a surprising number of pirated, readily available video games.  I shouldn’t really be surprised I guess, as piracy in gaming has been running rampant since computer owners were able to insert disc+cntl c+ctrl v+wait a few hours and insert new 5.25 floppy when the first disk is full.

Bruce Everiss from bruceongames.com recently posted an excellent article concerning what the Nokia 5310 phone/mp3 player is doing for the music industry and what it might mean for games.

One answer that the gaming industry has come up with to fight digital piracy is the (dreaded) DRM or Digital Rights Management.  The recent EA/Spore DRM fiasco has brought to light the incredible downside of DRM – pi$$ing off customers.  While the DRM covers the ‘sales’ side of games, there’s obviously a growing number of alternative revenue models in place including microtransactions, in-game advertising, and subscriptions.

Unfortunately (or fortunately, depending on how you look at it), DRM doesn’t really apply very well to the music industry, as regulating a DRM across the entire scope of the internet is relatively impossible.  Combine that with an mp3’s relatively small file size and ability to be shared across a variety of media, and any possible revenue generation is, quite literally, lost in the wind.

Bruce and I seem to agree that Apple’s solution to the problem could and should be seen as the flagship of the microtransaction industry: iTunes.  What Apple did with the introduction of iTunes is take it’s wildly successful mp3 player, the iPod, and provided users with an ultra-slick interface providing them with features and availability that they could get elsewhere for free: but didn’t.  Tack on the added usability and convenience of a mobile iTunes store, and you’ve got a winning combination.

Taking this winning philosophy a step further, Nokia has implemented the “Give it to ‘em for free for a while, get ‘em used to it, and THEN charge ‘em for it later down the road,” model.  They’ve created a music store with over 2M tracks that users can use for free.  Yes, you heard that right, users can download as much as they want, whenever they want.  For free.  The cost of said service is cleverly built into the perchase price of the Nokia 5310 XpressMusic phone (the world’s best selling mp3 phone).  Once your one year quasi pre-paid subscription runs out, then, and only then, must you fork over a fee.  And will users pay for the service?  Of course they will.  They’ve grown accustomed to it, and will want to continue their enjoyment with said service.  Please note, I’ve specifically NOT said music, but service.  This is the crux of the entire model; users are not paying for a product, but rather a service.

Know any other industries that specialize in digital content delivery with a growing interest in a microtransaction business model?  It’s quite easy to see how this formula could very easily be applied to the gaming industry.  As more and more publishers and operators shift towards a pure digital delivery method and ‘boxed game’ sales move more and more into the history books, perhaps a monthly/yearly subscription to one (or more than one even) games provider(s), that would allow users to download and play their game of choice.

Bruce points out that EA Chief John Riccitello has suggested this theory in the past.  Perhaps Battlefield Heroes is more than just a testing of the microtransaction waters, but also an experiement in free-to-play and just how and where EA can drive this vehicle.   Perhaps the Spore debacle could even be a driving force in EA’s further investigation into the model?

We already know that David Perry’s a big fan of free-to-play fighting piracy, Alex St John says only microtransaction based games have a future, and Riccitello has been floating the idea around; perhaps it takes a mobile phone service to actually throw a bit of ‘proof positive’ on the fire.

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ION Game Conference in Seattle: redefining online

Tuesday, May 27th, 2008

ION Game Conference in Seattle: redefining online

Under the motto “Redefining Online”, the Annual ION Game Conference took place in Seattle, WA ion between the 13th and 15th of May. The global gaming industry converged at ION to discuss the future of Online Gaming, exchange news, and set new goals for the coming years. Besides industry titans from both the US and Asia such as EA Games, Bigpoint, Crytek, and Epik; fatfoogoo was one of the few European companies present. We were here not only to represent Fatfoogoo, but also to get a view of the newest developments in online gaming. How these developments look, and where they will be taking the next generation of Online Gaming, we proudly present to you here:

Free Games with downloadable content and additional services

The first Trend that’s abuzz in the industry is the increasing alternatives to drive revenue generation. Publishers will sooner or later move further and further away from costly subscription fees and expensive stand alone games, and more in the direction of a “Free to play” platform, i.e. the game is free to download and play, but it’s also self financing by additional downloadable content, services, and micro-transactions between player to player or publisher to player. An excellent example of this concept would be South Korean publishers Nexon, who with Court Rider and Maple Story have banked over $230M in turnover, or German publisher Bigpoint whom already have over 10 million users. On average 8%-30% of these users have already, or will in the future pay for additional functionality and levels.

Outsourcing

The second trend amongst game publishers deals with competition in the global market and the often negative feelings/opinions associated with outsourcing. In order to spend more time in developing games, publishers are increasingly relying on third technologies; game engines, sound creation tools, and/or micro transactions (the selling and/or trading of objects, items and services within a game), between players or between publishers and players. The time and money saved with outsourcing should be reinvested in the core components of manufacturer; game development. There’s already a prime example of a masterful use of outsourcing in Epik’s Unreal 3. Unreal 3′s engines are pretty much the same as any 3D shooter, but they employ various sound engines from the Dolby Engineering labs, or micro-transactions from operators like fatfoogoo. The already existing cooperation with second and third line suppliers of engines and services should be worked out in the future. At it’s essence this will free up game publishers to do what they do best: Develop and publish games.

The merging of (suppossed) opposites

The third trend focuses on the fusion of the various different pieces of Social Networking and Gaming. The border between PC and Console, virtual worlds, games and personal net applications, mobile and casual games is becoming more and more blurred each day and should interoperate with each other – technically, functionally and economically. The platforms will be open to each other, and offer the end users several different levels of interaction. Nevertheless, the challenge for this kind of openness in technology lies not only in the tech sector, but the judicial as well. Copyright and tax laws vary from state to state, country to country. The challenge of a functional multinational system is a priority not only for software and hardware manufacturers, but for politicians as well.

Final Thoughts

Final thoughts and personal observations from Martin Herdina, our foogoo on the ground at ION:

A letter from America

Martin HerdinaBeing back in Europe the jetlag still doesn’t allow me much sleep at night but – and what’s a lot more relevant – I am looking back to a super exciting week at fatfoogoo.

Listening to the industry legends from EA, THQ and NCSoft talk about micro-transactions as the future revenue model for online gaming and to the success stories around Nexon’s “Cartrider” in Korea ($ 250M p.a.) has been extremely interesting and demonstrated once again that fatfoogoo is serving exactly the right market segment at exactly the right time.

Apart from these business aspects I met a full crowd of great people from the US gaming industry, enjoyed some super cool US Ska music at night (check out http://www.myspace.com/dealsgonebad) and was successful at avoiding all business-development meetings taking place in one of Seattle’s strip clubs.

Best,
Martin

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