#EngageExpo/Trip Hawkins, PlaySpan Virtual Goods Market Study

01Oct09

Last week was also a big week for exploring virtual goods and in-game monetization as Engage! Expo (Virtual Goods, Social Media, Digital Law, 3DTLC – 4 conferences in one) landed in Silicon Valley.  An event praised by attendees for being a more intimate venue with far greater access and better schwag than most.  Speakers included Best Buy, H&R, Comcast, Wal-Mart, Intel, Playfish, Playdom, Zynga, hi5, MySpace, Bunchball, Live Gamer, Second Life, NVP, Habbo, Viximo, MyYearbook, Storm8, SGN, Gaia, IMVU.  I was in NYC covering NYTVF, IFP, ADWK, MIXX, OMMA, but not wanting to miss Engage!, I was able to somewhat piece it together thanks to a call/email from Trip Hawkins, my client PlaySpan, and of course the Twitterverse. Here’s the scoop:

Trip Hawkins, CEO, Digital Chocolate
Headlined by the magnetic iconic gaming legend, founder of EA, 3DO and now Digital Chocolate, Trip Hawkins kicked things off with a rocking presentation, telling the tale of a not so dismal economy, with ARPUs liberating marketing in an era of win-win growth in gaming. He talked about the omnimedia revolution moving from 100mm gamers to 1B.  Factoring out Wii and Guitar Hero, spending on console gaming is down.  Growth is coming from the social value phenomenon, people willing to pay 10x more for social value than for pure entertainment. And as friends go social, hardcore gamers are taking the $70 FPS spend and putting it toward VG.  He referenced the 5B phones, disruptive products, virtual economies – big media not leading the way in web or mobile. Virtual goods as a sizable untapped market.  Digital Chocolate with its 40mm iPhone downloads making up 6% of all downloads, 6 charting at #1, 1mm+ customer reviews, 100mm web game sessions, now moving into XBLA, proudly pioneering the way without any advertising spend – and yet only 1% of the market penetrated.  He talked about the importance of designing with viral, social, items and cross-platforms in mind.  Then with all the drama of Steve Jobs, Trip Hawkins posited the following: “With the short life of these games, low emotional value of objects, and issues of investment, why not use tried and true trading card game principles with online virtual computer characters that turn into different virtual items in different social games?”  And then he unveiled the lush artwork of NanoStars, acquirable virtual characters that live across games on the NanoStars platform, tradable in secondary markets.  Here’s a great writeup from:  Virtual World News.

Michael Gluck, President, VGMarket
Collaborated with PlaySpan leader of digital goods for this study of 2425 PlaySpan Marketplace, Spare Change and Ultimate Game Card customers.  Looked at:
I.  Buyers buying from 1st party – directly from game publisher
II. Buyers buying from 3P marketplaces – like PlaySpan
III.  Buyers buying from each other – seller to seller
3 out of 4 engaged in at least one VG transaction in last 12m did it in in-game currency, spent $50 median with 1p sites with the publisher, $29 in 3P. Buyers spending more in free2play than in any other genre $75 median 1p, $40 through 3P.  In-game currency is the most frequently sold virtual good – 66% of sellers have sold in-game currency to each other in last year earned $22 median.  1 out of 2 sellers made a sale in social network game in last 12 months and earned $50.  1 out of 4 made a sale in free2play earned $98 median, twice as much as social network games. People who buy from publisher:  73% bought in-game currency, 30% subscription codes.  1st party by genre 58% free2play, 34% MMO, 23% social network.  Most exchanged in free2play.  20% are gifting to someone else, not entirely different than tangible goods.  Median expenditures higher 1P than 3P.  Marketplaces are important, a lot of $ being exchanged there.  Looking by genre in 3P, free2play and MMOs top sellers, median $40 grossed per in last 12 months from 3P, social networking, PC and casual trailing from there.  What do some avoid 3P sites:  fear of violating TOS, afraid site will take $, fear-based reasons, not that they don’t want to buy, they’re afraid to buy.  Sellers – in-game currency top purchased items 69% sold at least one VG in last 12m, weapons 49%, wearables 34%.   1 out of 2 seller in last 12m sold something in social network and made a median of $50, 1 of 4 sellers transaction in free2play, it’s a $98 median, twice as much exchanged by half as many people in free2play genre.  The majority are people do not sell – 40% said they would be interested.  Tremendous opportunity for 1st party publishers to monetize through digital goods, can’t just set up a marketplace and assume people will buy whatever you put out, what is the genre of game I am in and what kind of content can I sell.  Each digital good and genre has a unique level of demand, influence your marketing decisions and make more money.

Philip Rosedale, CEO, Linden Lab
Second Life $1B hours, $1B served.  May start charging a small commission on virtual transactions in the future: games.venturebeat.com/2009/09/22/second-lifes-users-have-spent-more-than-a-billion-hours-in-the-virtual-world/

Walmart, Intel, Kodak, Best Buy
Intel social media strategist @britopan stresses the importance of one-on-one relationship between brand and consumer.  Make your brand nomadic in social media, interact where your customers are, with the tools they already use.  Best Buy rallying 1800 employees across the country to engage with consumers online with Twelpforce.  Less than 6% of total $4.4 B US Retail Market is digitized, recession is boosting virtual consumption.  Your best marketing department is customer service, you just have to tap into them.  For companies to be successful with social media, the entire workforce must be involved in service of customers.Best Buy SM strategy is to lead by customer care not marketing.  (16% ROI measured for social media programs)

Sulake, MyYearbook, Playdom, Zynga, Facebook, SGN, Gaia…
70% of unique visitors visit the virtual goods store at 6 Degrees Games – 30% repeat. Males 1.5x more likely to buy virtual goods, even in Habbo Hotel.  Gifting and donating are powerful VG purchasing motivators in MyYearbook.  12% of Americans bought VG last year – Playdom.  VG is 5y away from bing a recognized, successful, mainstream industry – SGN.  A lot of Facebook’s predicted $500mm revenue for next year is VG.  iPhone games need to be more social to have a longer life and more reengagement so you can cross-promote and upsell.  Virtual points are menaningful, the game is the thing.  Trends in VG – branded goods, new payment systems to serve markets, acceptance as online business model.  China #x the ARPU on VG, 1/6 the income. What drives VG – status, gain advantage, communicate better, self-expression – Viximo.  Typical conversion first 6m 5-10%, 9-12m 11-15%, $50 ARPU – Outspark. Worldwinner.com tracks age buckets to 90+.  Users spend on VG and it scales – Zynga.  Ashleymadison.com does great selling expensive VG ($15-20).  Zynga, Playdom bringing VG to broader markets.  Players who spend are higher quality by default – Gaia.  Acceptability of brands in virtual worlds still mixed.  New users react better to brands.  It’s better to sell branded premium virtual goods to advertisers as part of marketing than to sell to a user as part of retail. Virtual goods as a test bed for new product development (e.g. sports brands).  Paid branded goods are limited, but sponsored goods are huge, best way for brands to participate in virtual worlds.  Check out this from:  InsideSocialGames.com.

Twofish, Offerpal, Zong, Super Rewards, BOKU, Jambool
Payment trends among younger users – mobile, prepaid, cards and cash. Videos:

www.youtube.com/user/theMIXagency#play/uploads/4/RzJdRV68vtM

www.youtube.com/user/theMIXagency#play/uploads/5/t7lxWHwkM5k

www.youtube.com/user/theMIXagency#play/uploads/3/Z1FxCuUE5Mw

www.youtube.com/user/theMIXagency#play/uploads/2/6InRurm92PA

www.youtube.com/user/theMIXagency#play/uploads/1/egsgUcG6JG4

www.youtube.com/user/theMIXagency#play/uploads/0/A4qj70MkvH0

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One Response to “#EngageExpo/Trip Hawkins, PlaySpan Virtual Goods Market Study”


  1. 1 #EngageExpo/Trip Hawkins, Brands in Virtual Worlds, PlaySpan VG | Console Gaming

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