Posts Tagged ‘virtual goods’

Virtual Goods market still on the rise in the U.S. – $2.1 Billion predicted for 2011

Wednesday, September 29th, 2010

Released yesterday by the Inside Network, 2011 looks to be a bumper year for the virtual goods biz. The Inside Virtual Goods report is forecasting some mighty big numbers for virtual swords, costumes and mounts, as founder Justin Smith and Virtual Goods Summit head Charles Hudson predict a gain of 40 percent – up from $1.6 billion in 2010.

“If 2010 was the year that virtual goods made a splash in western markets, 2011 will be the year that these markets begin to mature as the collective opportunity across social games, online games, virtual worlds, consoles, and mobile games reaches the $2 billion dollar mark,” said Smith.

However, Smith and Hudson do not go so far as to see the (virtual) world only through rose colored glasses, as they point out that while a large majority of this growth is/was due to Facebook, the recent restrictions on communications and updates that the social networking platform has put in place are bound to put the brakes on unlimited growth. They point out that while 2009 and 2010 saw huge growth rates, 2011 will see such an explosion in numbers.

In a CNN report, Forrester Research analyst Nick Thomas finds it difficult to put a hard number on the virtual goods market, as he finds online purchases of digital goods still outside the mainstream.

“There are a few companies doing this very well and executing this very well, so by the time you factor in ‘World of Warcraft’ and one or two others, then you’ve probably got a fair chunk of the market,” he said. “There are not hundreds and hundreds of companies doing this well.”

If by one or two others, Mr. Thomas is perhaps referring to Electronic Arts’ purchase of Playfish for up to $400 million, and Disney’s recent acquisition of Playdom for up to $763 million, then he’s right on the money. However, let’s not forget about Zynga, and their plans for global domination, as well as the hundreds, if not thousands of other successful virtual goods offering gaming firms out there today. And Android and iPhone apps – all to be considered under the virtual goods umbrella? Oh, and did I mention Xbox, PS3, and Wii?

Another page to consider under the “still outside the mainstream” argument is the notable shift to free-to-play over the past year. Spearheading this movement at the moment is Turbine. They began with flipping Dungeons and Dragons Online to a free-to-play model, and only to report massive virtual currency sales, ahead of it’s public launch date. Building on this success (and a Warner Brothers acquisition), Turbine then repeated the formula with their flagship title Lord of the Rings Online.

To summarize, Smith and Hudson’s numbers, as well as reasoning appear to be well founded. Barring any catastrophic events, it appears as though 2011 will be a great year for the virtual goods market.

 

Mother’s Day brings home the bacon for Social Games

Tuesday, May 11th, 2010

If the question of “Do virtual gifts hold real world value?” was still on the table, this past Sunday’s Mother’s Day landslide of virtual goods sales should effectively put this question to bed. For good.

b5180034-3f87-4b47-ba81-77f7f338ab7eTrialPay conducted a study over the past weekend to measure Mother’s Day campaigns launched by a number of social games on Facebook.

According to TrialPay’s research, the week leading up to Mother’s Day (May 2 – 9), saw about $1 million per day generated by “gifts for mom” promotions that saw offers from online flower merchants reward in-game virtual goods and/or currency. This represents a 5x increase in normal social gaming revenues, with the added bonus 40 percent of purchasers were first-time buyers. If this wasn’t enough good news for publishers, TrialPay also found that visitor conversion rates were doubled. It’s a fair statement to make that virtual goods and gifting have reached the tipping point.

Mother’s Day saw attention from more than 40 percent of the top 50 social games on Facebook, garnering in total, approximately 80 million daily users’ eyeballs in the week preceding the holiday event.

“Seasonal campaigns around holidays can present a significant source of revenue for game publishers. Mother’s Day is the 2nd-largest gifting holiday in the U.S. – our study shows that social gaming companies took advantage of this opportunity to convert more of their users to paying customers,” said Alex Rampell, CEO of TrialPay. “Social games companies have been primarily focused on engagement and viral sharing, and they’re just starting to experiment with monetization, so this is an early indicator of big things to come.”

 

There.com rises again –ThereNewWorld.com

Thursday, March 25th, 2010

As you’ll remember, early this month, Makena Technologies, which operated There.com for 12 years, pulled the plug and shut the virtual world down. Makena Technologies cited dwindling revenues as related to the current world economic climate. Enter stage left – Utherverse, who’s technology is involved in one way or another in over 16,000 online worlds. In less than 48 hours, Utherverse created ThereNewWorld.com.

ThereNewWorldIn just under a week Utherverse garnered more than 800 former There.com users (Therians), but more importantly, Utherverse has converted approximately 50 million Therebucks to Rays (Utherverse’s currency). This conversion and introduction of an external currency supply raises a number of questions surrounding an in-game economy. Remember your basic economics: the rule of Supply and Demand. As Utherverse has taken in a massive amount of new currency (as well as digital properties, i.e. virtual goods and services), it should be interesting to see how the economic balance within the game prevails.

“That’s really the shame in all of this,” said Brian Shuster, Utherverse’s CEO. “If you spent years as a Thereian acquiring virtual goods and assets … all that just disappears.”

There.com acquired roughly $35 million in venture capital since it’s inception in 1998. On the other side of the coin, Utherverse. Which was founded in 2003, has taken the organic growth route. According to company CEO Shuster, Utherverse has registered over five million people, has around 600,000 active users, and it pulling in around 200 new registrations per day. In the finance area, Utherverse generates over $10 million in annual revenue and is currently experiencing an annual growth rate of 25%. No word if the new comers from There.com are factored into this growth.

While Utherverse’s main IP is a freely distributed software platform, the main revenue generator is VIP subscriptions that allow virtual world developers better tools for designing virtual worlds. In addition, the company licenses out it’s technology to businesses, online advertising firms, and renting virtual real estate, as well is utilizing a microtransaction income method via virtual goods sales.

Since all of Utherverse’s ‘child’ virtual worlds are based on the same platform, residents of one world can freely move to another.

Looking forward, Shuster compares Utherverse’s network of virtual worlds akin to a 3D version of the internet in it’s early days. He says that five years down the road there will be one singular virtual world or a singular network of virtual worlds.

“It will replace the web as we know it,” he said. “The 2-D web is going to become a library within the 3-D space.”

Source: Business In Vancouver

 

Sony takes the Facebook plunge

Tuesday, March 9th, 2010

Sony announced yesterday that they’re getting into gaming outside the PC or console/handheld world. This marks the first time in over a decade that SOE has announced a title outside their own comfort zone.

PoxNoraThe popular turn based strategy game PoxNora is now available on Facebook. Obviously capitalizing on their own gaming expertise, not only is Sony jumping into the Facebook gaming world with PoxNora, but they also planning on bringing a number of additional games to Facebook based on existing franchises and new intellectual property.

PoxNora is a mix of strategy game play and a collectible card game. Set in a fantasy world consisting of mystic creatures, relics, and spells, Sony’s acquisition of PoxNora in January 2009 has since expanded and has reached over 2.5 million users to date.

“The Facebook platform offers gamers a new and powerful way to interact with and tap into their social communities,” said John Smedley, president of Sony Online Entertainment. “With the launch of PoxNora for Facebook, we are leveraging the expertise SOE has gained bringing entertainment to the online gaming community for over 10 years.”

Naturally when speaking of Facebook gaming, one must think of the microtransactions monetization aspect. To this end, SOE has customized the Facebook version of PoxNora to appeal to a wide social networking platform based audience. I.e., Sony’s obviously had a close eye on what current Facebook gaming superstars (Zynga, for example) have been up to, and will obviously adapt a similar approach. The current PoxNora version features some common social networking features including friend invitations and accomplishment updates. Presumably, Sony will roll out additional features to not only catch up to what a number of startups have been using to their advantage for a while now, but hopefully, innovate some new ones.

Sony points to Facebook’s virtual goods business as a major factor in the decision to jump on board. An interesting move to bring a relatively unknown title to a major platform. On the other side of the coin, perhaps bringing a relative newcomer to a major table may be a very smart way for Sony to test the waters. If PoxNora does well, then Sony is already building a playbook of what to do with a major title, and likewise, if it fails miserably, at least they’ll know what not to do with one of the “number of additional games” that they’ll soon be bringing to Facebook.

 

Another world bites the dust – There.com to close

Wednesday, March 3rd, 2010

Virtual worlds are having a tough time thus far in 2010. You’ll remember that as of January 1st, Raph Koster’s Metaplace closed it’s doors, and now virtual world There.com has announced that they’re pulling the plug as of March 9th.

avatar_couple_2A project of Makena Technologies, There.com announced that they will continue on with “some exciting educational projects in process, which [it] will continue to service,” but that the entertainment arm will close. What’s striking about the announcement is that, at least from afar, the company looked to be on track – inking deals with Coca-Cola, CosmoGirl, Bebe, K-SWISS, and SPIN. There.com garnered revenue through both these brand partnerships as well as virtual goods sales. In the official announcement, CEO Mike Wilson says that although There.com worked to maintain a broadly accessible platform, it’s users were hit hard by the recession.

“While our membership numbers and the number of people in the world have continued to grow, there has been a marked decrease in revenue, which, in these economic times, is no surprise. At the end of the day, we can’t cure the recession, and at some point we have to stop writing checks to keep the world open,” comments Wilson. “There’s nothing more we would like to avoid this, but There is a business, and a business that can’t support itself doesn’t work. Before the recession hit, we were incredibly confident and all indicators were ‘directionally correct’ and we had every reason to believe growth would continue. But, as many of you know personally, the downturn has been prolonged and severe, and ultimately pervasive.”

Ironically, just over one year prior, Wilson had a completely different view, “Despite tough economic times, the virtual goods market continues to flourish as people look for inexpensive forms of entertainment.”

“NBC and our new partners understand both the expanding opportunity in the virtual goods category and the importance of branded merchandise as a form of self-expression for our members.”

What a difference a year makes.

As of the release of the announcement, There.com has suspended new registrations, billing, and member program upgrades. Developer submissions have been shut off, and the company is now in the process of refunding any virtual currency (Therebucks) purchases that were made between February 1st and March 2nd. Again, as of 11:59 PM PST March 9, 2010, There.com will be no more.

 

5 acquires Six

Friday, February 26th, 2010

After hi5 came close to calling it a day altogether, it seems as though they’re on one heckuva rebound, and obviously putting the social networking chips in the gaming basket was the right call. Announced on Wednesday, hi5 has acquired Austin, TX based social gaming company Big Six. Announced separately, Big Six’s founders Kevin Gliner, Monty Kerr, and Chad Hansing will now join hi5’s management team. These three will now also join one of hi5’s most recent acquisitions, Alex St. John.

hi5logoThe main draw for hi5 is/was Big Six’s proprietary commerce platform. This new acquisition will allow hi5 to expand their commerce in virtual goods and games sales. hi5 currently employs a commerce system that includes a universal virtual currency that can be spent in any of their titles. This acquisition brings new technology to hi5 in terms of payment processing, fraud detection and conversion optimization. As an added bonus to the deal, Big Six have also designed a social gaming platform that will now become part of the core hi5 site.

“The Big Six team and technology are a perfect complement to what we have already developed at hi5,” said Bill Gossman, CEO of hi5. “Over the last two years, we have made a substantial investment in building out the industry’s most robust commerce infrastructure for virtual goods and gaming and this acquisition will considerably augment both our commerce platform and domain expertise.”

“We are excited to be joining a company that shares our philosophy and vision for how social gaming will evolve,” said Kevin Gliner, co-founder and CEO, Big Six. “This deal is a perfect match because it enables us to accelerate our go-to-market plans by leveraging hi5′s huge global audience.”

 

Games industry to balloon to $64.9 billion by 2013

Monday, February 22nd, 2010

A new report issued by Strategy Analytics, Inc. this past Thursday forecasts that the global video game software market will continue it’s growth in the coming years. According to Strategy Analytics, 2009’s revenues are in the $46.5 billion ballpark, and will continue to grow to a massive $64.9 billion by the close of 2013, indicating a 40 percent growth rate over 4 years.

new-playstation-store-frontThe report predicts both physical game software (console, handheld, and PC) growth, and digital download activity, IGA, sales of virtual goods, and subscription services. The online games revenues sector is expected to have a compound annual growth rate of 18.7 percent, reaching $24.8 billion by 2013, accounting from more than 38 percent of total video game software recenues.

“Strategy Analytics predicts more revenue growth from online sources instead of from traditional physical game sales as broadband adoption continues, which is similar to other media sectors. More gaming devices and games are being connected online and new online revenue models are appearing on the market,” said Martin Olausson, Director of Digital Media Research at Strategy Analytics.

The big winner in Strategy Analytics’ research is virtual goods sales in social networking based games. As to be expected, the Asian market is expected to lead this consumption, however North American and European markets will experience accelerated virtual goods sales growth.

Jia Wu, Analyst in the Strategy Analytics Digital Media Strategies (DMS) service and author of the report, added, “New online revenue streams, such as in-game dynamic advertising and sales of virtual goods, will spur rapid growth in online game revenues in the coming years.”

The Strategy Analytics “Global Video Game Market Forecast” is available from StrategyAnalytics.com and includes information on online gaming revenue streams, electronic sell through, subscription services, IGA, and virtual goods sales data. The report also includes country specific data from a wide range of markets including Argentina, China, Demark, Germany, Mexico, Russia, the UK and USA.

 

Open Feint launches social features for free-to-play iPhone games

Thursday, February 18th, 2010

Announced late yesterday, Burlingame, CA based Aurora Feint officially opened their private beta of OpenFeint X, a solution for developers to have the ability to create free-to-play games, including those stocked with microtransaction based virtual goods. The company positions the product as a logical adoption, given the runaway success of free-to-play games on social networking platforms.

openFeint_logo“OpenFeint X is by far our most ambitious and transformative effort,” said Jason Citron, Founder and CEO of Aurora Feint Inc. “We know that there is tremendous interest in creating the next Zynga, CrowdStar, and PlayFish of the iPhone. We also know that developers who aspire to these ambitions want the platform on which they can build these kinds of lucrative businesses. OpenFeint X is exactly that platform.”

Launched in conjunction with strategic partner DeNa Group, OpenFeint X will be rolled out in phases over the coming months. Core services of OpenFeint X will be fee to developers. The up side to using Aurora Feint’s toolkit is the exponential exposure devs will gain from the community. Social features include a chat wall, similar to Facebook, a newsfeed showing recent in-game activity, and game nudges, again all taken from the Facebook platform page here. Most notably, OpenFeint X includes tools for developers to fully integrate a full virtual goods store, detailed analytics, a game-specific currency, and downloadable game assets.

“OpenFeint X is the culmination of bringing the best of Xbox Live and Facebook’s App Platform to the iPhone, and extending the multi-billion dollar virtual goods social gaming economy to mobile,” said Peter Relan, Executive Chairman of Aurora Feint. Relan also holds the same position at CrowdStar, the #2 Social Game developer on Facebook, which makes huge hits such as Happy Aquarium, Happy Island and Happy Pets.

Relan concludes, “OpenFeint X is the platform on which the next big social gaming companies will be created.”

The existing OpenFeint platform currently powers social gaming services for over 12 million users, and has a monthly growth rate of 25%.

 

Zynga clearly Serious about their Business

Friday, February 12th, 2010

Announced yesterday, social gaming giant Zynga has acquired Facebook social games developer Serious Business. This announcement arrives hot on the heels of Zynga’s recent announcement of the opening of a Los Angeles development studio.

seriousbusiness2-sBased in San Francisco, Serious Business was one of the first social games companies on the Facebook scene, and is most noted for their “Friends for Sale” title. The acquisition hails a major experience and knowhow intake for Zynga, as Serious Business has 32 people on staff, 20 of which are new hires added in Q4 of 2009. As is normal with an acquisition like this, the terms of the deal were undisclosed.

“We’re very excited to gain an experienced team that is committed to building social games,” said Vish Makhijani, chief operating officer at Zynga. “We are impressed with Serious Business’ entrepreneurial attitude, speed, and innovation in developing social games and welcome them to our team.”

Serious Business reports that they’ve been profitable since the beginning of this year, drawing 90% of their revenue through the microtransaction based sales of virtual goods. Obviously, a good fit in the Zynga family. However, this acquisition isn’t without precedent, as Zynga acquired GoPets back in October, only to shut it down a few weeks later. Given “Friends for Sale”’s longevity and place in the social gaming scene, it would be unlikely for Zynga to go for a repeat on this one. In this case, it should be interesting to see what and how Zynga will incorporate Serious Business’ ideas, methodology, and technology.

 

Bad for Apple, good for Devs: Pirates make microtransaction purchases

Tuesday, January 26th, 2010

While Apple reports that it’s lost an estimated $450 million from mobile application pirates, it looks like these same pirates, while skirting the actual app purchase, are willing to make in-game purchases.

Tapulous_iphonePresented at this past weekend’s Midem Music Conference in Cannes, Tapulous (makers of Tap Tap Revenge) head of business development Tim O’Brien, revealed that while Tap Tap Revenge has seen approximately 2.5 million downloads within its first two months, about 1 million of those downloads were from pirates. Certainly, a situation that would presumably make any developer justifiably nervous. Tapulous, however, is looking at the situation differently.

“We know who they are,” comments O’Brien. “We’ve started running ads to the pirate users more aggressively. Some of those users, because we sell virtual goods, have become high-volume users.” O’Brien fully admits that while the application itself may be pirated, the sales of virtual goods (i.e tracks and avatar customizations) within the application can still remain profitable. For the developer at least (remember Tapulous has reported revenues of over $1 million per month)…in this case, Apple is the one left holding the bag.

Tapulous currently has around 25 million users through it’s various iPhone games. Given that Tap Tap Revenge saw 2.5 million downloads within the first month, of which 1 million were pirated downloads, if we apply this example to Tapulous’ overall figures, that would put them more in the ballpark of 35 million users. Their current iteration of money maker Tap Tap Revenge (3) launched only last fall for $0.99. Tapulous primarily monetizes through sales of in-game tracks and avatar customizations ranging from $0.99 to $2.99, and states that they’ve been profitable since June 2009.