Beginning in the first quarter of 2010, social sites IMVU and MyYearbook will launch a virtual currency exchange allowing users from either service to exchange currency between the sites.
Currency Connect is billed as a "cross property virtual currency exchange" system similar to how you would change U.S. dollars into euros if you were traveling in Europe. Users simply swap their currencies depending on what site they are on. Overall this is not a bad idea as I still find it surprising that users pony up real money for virtual money that can never be taken out of a specific site.
But, it does make me wonder when a bigger payments vendor, like PayPal, will get into the game and offer more of a de facto universal virtual. It's all well and good that two large-ish sites have launched this effort, but it can't be long before other social sites like Facebook join the fray. And, ultimately the site or currency with the most users is likely to be the one with the most users.
This opens up an opportunity for other sites with large user bases such as Google and Yahoo to offer a currency program. If users are already joining multiple social-networking sites, there is no doubt that they are also using search engines and instant messaging.
On the technical side, the service uses a simple set of REST APIs that implement the various checks and balances of the system. Security is maintained through tracking methods and server-to-server connections, which will initially limit how many sites can participate in the service. Again, a larger online service might have an easier time deploying a fully distributed, trusted service that didn't require point-to-point connections.
It's clear that virtual currencies have become an important part of social networking and gaming infrastructure. But, sooner or later fickle users will change their allegiances. A currency exchange offers a palatable escape method but still doesn't ever let you turn your virtual currency back into real money.
(Via VentureBeat)
I attended the Virtual Goods Summit on Friday and walked away struggling to figure what topics might be interesting to write about. My net takeaway is that not much has changed in the year that I've been writing about social gaming and virtual goods, with the exception of two facts:
1. Virtual good providers are being lauded as the next big thing to replace advertising
2. There's something weird going on with the ads and offers that have taken over the more traditional banner advertising role
There is no question that virtual goods have become an integral part of social network revenue streams. And the mainstream media has finally started to catch on.
But, I didn't realize the oddities of the way users are being monetized until I attended the event and saw the heavy emphasis not just on monetizing users but on doing so in a way that was transparent and non-intrusive. Theoretically, it's a good idea, but in practice, many of the "offer" providers are purposely or inadvertently running Ponzi schemes.
TechCrunch's Michael Arrington arrived at my second point above and took the theory much further with data that shows many social gaming offers and advertising practices amount to little more than a complicated scam that gets people in the door for free only to take advantage of their lack of understanding of what they've technically agreed to in the various offers.
In short, these games try to get people to pay cash for in game currency so they can level up faster and have a better overall experience. Which is fine. But for users who won't pay cash, a wide variety of "offers" are available where they can get in-game currency in exchange for lead gen-type offers. Most of these offers are bad for consumers because it confusingly gets them to pay far more for in-game currency than if they just paid cash (there are notable exceptions, but the scammy stuff tends to crowd out the legitimate offers). And it's also bad for legitimate advertisers.... Read More
Gamers are not just making purchases to enhance their gaming experience but also selling virtual assets to other players, according to new research from video game market research firm VGMarket.
Sales of virtual goods are expected to reach $1 billion this year and already generate near $4 billion annually in China. But there are some challenges, primarily the fact that once you convert your real money to virtual cash you can't readily get the dough back out.
The research revealed that in-game currency is the most frequently sold digital good from player to player and that two out of three sellers sold in-game currency in the last 12 months, earning a median of $22. PlaySpan, a provider of monetization and payment solutions for games and virtual worlds and sponsor of the research, considers that to be good news as its platform enables game developers to provide player to player marketplaces for their players. In addition, the PlaySpan Marketplace currently provides a secondary market for IMVU players to buy and sell goods as well.
One out of two sellers made a sale in a social network game over the last 12 months and earned a median of $50, while one out of four sellers made a sale in a free-to-play game over the last 12 months, with their median earning being $98, or nearly double that on social networks.
Eric Hartness, chief marketing officer at PlaySpan, told me that the secondary market is a boon for games, adding value, real and perceived, to all players by associating a real world dollar value on their playing time, game accounts, and digital items.
... Read MoreNew research from video game market research firm VGMarket sponsored by Playspan reveals that gamers are actively making purchases to enhance their gaming experience, with free-to-play games leading the way to monetization. Playspan is a provider of monetization and payment solutions for games and virtual worlds.
Three out of four virtual goods buyers purchased in-game currency in the last 12 months and spent approximately $50 each. This statistic is interesting to me as I am always surprised when users buy in to currency that only works on one site. But, I suppose if it's the only option then you will eventually give in.
Of further interest in the report is the fact that free-to-play games may actually be monetizing better than MMOs (massive multiplayer online games) and social networks.
- 58 percent made purchases in free-to-play (F2P) games over the last 12 months.
- 34 percent made purchases in MMOs.
- 23 percent made purchases in social network games.
- The average respondent is currently playing three online games and 80 percent report buying digital goods for their own use while 20 percent said they purchase for gifts.
According to the study, "12% of the overall population surveyed reported that they had bought virtual goods in the last 12 months. However, a closer look at the digital entertainment habits of virtual goods buyers reveals that virtual world visitors are the heaviest virtual goods buyers, with 46% of these consumers buying virtual goods (from virtual worlds, games or social networks) and nearly one third of iPhone owners buying from the same platforms."
Virtual world users, social gamers, and iPhone owners all made more purchases than hardcore gamers, which suggests that casual players are likely more comfortable spending money on goods as the games they play are generally free.
Key points from the survey results:
- 12 percent of Americans spent an average of $30 last year on virtual goods purchases, with 15 percent of those who made purchases saying they spent at least $100 or more.
- Females ages 25-34 represent the largest demographic of those who made purchases (17 percent).
- Of those surveyed, Asian Americans represent the largest ethnic segment (16 percent), followed by Latinos (14 percent), Caucasians (12 percent), and African Americans (10 percent)
- 46 percent of those who've made purchases are virtual world users, with nearly 30 percent coming from iPhone users.
Sustainable revenue from virtual goods is not a foregone conclusion, but the options for monetizing goods are growing and providing new possibilities.
Follow me on Twitter @daveofdoom.
Funding for virtual worlds has grown dramatically over the last year and companies need to find sustainable revenue models. Transactions of virtual goods allow for new cash flow into both subscription and nonsubscription sites.
But some users don't like the idea that you can simply buy something to affect the game in your favor. Accordingly, games need to be very clear about the purchased goods unfold into the game.
The team at Champions Online have outlined how microtransactions will surface in the game in their State of the Game blog post.
... Read More
China has unveiled the first official rule on the use of virtual currency in the trade of real goods and services to limit possible impact on the real financial system. The Chinese government also spelled out the definition of "virtual currency" for the first time, which includes prepaid cards of cybergames, according to a joint announcement from the Ministry of Culture and the Ministry of Commerce Friday. It said:
The virtual currency, which is converted into real money at a certain exchange rate, will only be allowed to trade in virtual goods and services provided by its issuer, not real goods and services.
The ban is primarily aimed at "gold farming," an Internet-age phenomenon in which players in less developed countries collect and sell virtual gold (common to games like World of Warcraft) to wealthier gamers in the developed world. This enables gamers who have the means to buy virtual gold to get ahead in the games without actually having to accomplish the grunt work.
The trading of virtual currency for real cash generates between $200 million and $1 billion annually, according to a 2008 survey conducted by Richard Heeks at the University of Manchester.
... Read MoreStart-ups peddling virtual goods raised $69 million in funding in the first quarter of 2009, holding at a steady pace from the previous two quarters according to data from Show Initiative LLC.
I've long held the stance that virtual goods and services are an interesting way to make money online. What's not clear is what business models work and what segments of user populations are the best targets.
The amazing thing about the 10 financings listed below is how large they are. This indicates that VCs are betting big, or that the companies are giving away a lot of equity for the dollars. Nonetheless, it's good to see entrepreneurs raising money in a down economy.
First quarter 2009 financings:
- IMVU - $10,000,000
- ngmoco - $10,000,000
- Nurien - $10,000,000
- Offerpal Media - $15,000,000
- Ohai - $6,000,000
- OMGPOP - $5,000,000
- OneSeason.com - $3,500,000
- Scrapblog - $4,000,000
- Viximo - $5,000,000
- Three Melons - $600,000
Somewhere down the line these sites and perhaps more importantly, the platforms they've built for distribution and commerce, will have a great deal of value to larger players. It's still too early to tell what bet to take, but there are dollars out there somewhere.
Follow me on Twitter @daveofdoom
In a recent report, research firm Screen Digest says that in-game advertising will hit $1 billion by 2014. Not bad, but nowhere near virtual goods, which may already be worth $5 billion in Asia alone.
Virtual goods have a low barrier to entry but a huge swath of virtual-world competition is trying to monetize users. Game play, branding, and the overall offering have to all mesh for virtual goods to sell well.
In-game advertising is complex and there are a few major players that control the games, consoles, and monetization, putting up some serious barriers to entry. To date, most in-games have been custom deals that are lucrative but don't scale well.
I've written in the past that standards will drive in-game advertising growth as it's currently too difficult to deal with the varied walled-gardens of both console and online games. And there are some interesting experiments under way, including a recent IGA deal with Posterscope to simultaneously run in-games on billboards. I'm not convinced it makes sense, but it is a cool attempt to bridge the physical and virtual worlds.
The next big innovation will be when in-game ads and virtual goods merge--allowing users to interact with ads to purchase products.
Follow me on Twitter @daveofdoom
Virtual goods are providing very high-margin sales for many internet companies. According to PaidContent.org, Chinese portal Tencent pulled in nearly $1 billion last year from the sale of virtual goods, while Facebook earns between $50 million and $100 million (your mileage may vary on these estimates). Recently Hi5 Networks made the move to include far more virtual goods as part of its social-networking site.
Obviously every site is a bit different, but there are two common threads of items that people seem ready to pay for:
- Customization of the environment -- page decorations and other things that provide some kind of status in the game
- Enhancements to games -- if you can't beat them, you can just pay for items
Of course, there are many other possibilities--virtual gifts play a big role in Facebooks' revenue and I believe there is a huge market for goods such as baseball cards and other tradeable real-world/virtual world crossovers.
Looking at three of the top virtual goods companies, Rory Maher outlined how they make money.
... Read More
