What can you learn from Procter and Gamble?

Eric Ries was a co-founder and Chief Technology Officer of IMVU.  He shares some of the challenges you will face when you make your game available for retail download at the Apple Store or another game portal.

I’ve also been playing around with the App Store. From a technical point of view, it’s amazing. You just install app after app after app, and it just works…

But from a customer experience point of view, I’m not yet sold. Figuring out which apps are going to be any good is almost impossible. Even with only a few months of development, third parties have crammed every single category in the store full of apps. Most of my time in the store is spent scrolling through endless lists. And what distinguishes a good app? I can’t really tell.

I think this is a major challenge for companies that hope to build dominance in some category on the iPhone …

Browsing the app store is an awful lot like shopping in a retail grocery store. You see row after row of tiny boxes, each vying for your attention. They can’t present much information…

So what is the solution? Eric points out that you should look at the lessons learned in the retail industry for selling consumer packaged goods.

This is what brand marketers and consumer packaged goods companies have been studying and refining for years: how to win the battle in your mind before you ever set foot in the store. Once you have come to think of Crest as the #1 toothpaste, and, more importantly, your toothpaste, it’s unlikely you’re going to pay attention to the other boxes on the shelf, no matter how shiny they are.

…  we may revert to the retail model, where good positioning and good branding will win. When I’m scrolling through the endless list of games in that category, the icon that I’ve come to associate with “that company that makes amazing iPhone games” is going to get a disproportionate share of my attention.

You will have to think about, what differentiates/distinguishes my game from the competition? What can I do to capture the customer’s attention when she finds my game?

jgc

Technorati Tags: IMVU, Apple, iPhone, consumer packaged goods, marketing, positioning, branding, online gaming , Procter and Gamble

Monetizing VW’s & MMOG’s : “Show Us the Money”

Note: VW = Virtual World, MMO= Massive Multiplayer Online, RPG = Role Playing Game

Second Life is a virtual world that made virtual business transactions using a  virtual currency popular. There are several other MMO and RPG, such as World of Warcraft, Mob Wars, King of Chaos, Kongregate, that have wide participation and are successfully generating revenue. The following post from Adam Martin  provides a perspective about monetization models that are very different from the run of the mill ad-based monetization schemes, and is meant as food for thought for casual game developers based on what is working for other online gaming businesses.

Background

I’ve been in MMOs in some form or other for ten years, and I’ve seen VWs arise as a viable product, but the companies I meet seem to often haveserious lack of understanding / plans of how they are going to make anything more than trivial revenues. Each year, the average technology of new companies (both presentation/graphics, and back-end/servers) seems to improve, but each year the monetization plans of new companies seem to get poorer, on average.

This is quite disappointing, so I wanted to do a session on ways to monetize VWs, and show that there’s no excuse to merely say “advertising”, or to stick to one or two plain derivative revenue models.

Reference points

How much revenue should we be talking about here?

2008 FaceBook – $300m
2007FaceBook – $150m

2008 MySpace – $800m
2007 MySpace – $550m

So … if your monetization method tops out at a million dollars a year, forget it.

How can you monetize a VW or MMO?

Here I opened it up: in the few minutes before the presentation, I had thought up 9 different unique methods of monetization; how many could the audience come up with?

My ones (shared afterwards)

• virtual item sales
• dual-currency systems (currency-sales)
• physical merchandise
• lead-generation advertising / research
• sponsoring
• marketplace ownership
• subscription
• event fees
• consumable / rentable resource fees (LAND, also INGREDIENTS)

Audience ones:

• subscriptions
• virtual item sales
• ad-supported
• sponsorship
• merchandise
• event fees
• physical goods sales inside virtual worlds
• currency exchange fees
• be a deposits bank
• licensing in-world businesses
• tax

…I liked the “licensing” and “become a deposit bank” in particular .

We then ran through them all and shared what our estimations of the total amount of money people across the industry were making using that particular monetization model. I can’t remember exactly what we said, and it was heavily influenced by me (because I’m quite up to date on figures for global public companies for this – its something I’ve researched a lot and tracked for the past few years)

Something in the region of $5 billion for subs, $3 billion for virtual item sales, a guesstimated $1b or less for advertising (really really unsure of this one – I was guessing blind basing it mostly off CPM figures for ad-driven games – I hoped someone else present would know a real figure for this), a few billion for merchandise.

But … Villi shared a figure he had researched formally for a report last year: $2.1 billion for the worldwide revenue from virtual-item sales. I reckoned that is looking like $3billion for 2008 (going off the projected revenues of the Chinese operators and how much they’ve gone up).

An interesting comment…

“Many VW’s don’t think about the problem of getting physical money into the world in the first place – the use of payment providers etc”

Think about that. Think about it until you understand what it means, what it implies for those “many VWs” – and how it relates to the current real-world financial crisis.

Summary

Companies are spoilt for choice when it comes to VW monetization, really.

And there are half a dozen forms of monetization that – straw poll – are already producing billions of dollars revenue across the industry.

And … forget “advertising”: there are better things out there, each of which is as good or better than advertising.

Technorati Tags: online gaming, gaming revenue, virtual world, MMO, game monetization, World Of Warcraft, King of Chaos, Mob Wars, Kongregate,

Online Gaming and Payment Providers

Another interesting post from Adam Martin who is starting a MMOG company.

You (a game developer) can avail of several payment mechanisms including credit cards, PayPal, pre-pay cards.  Adam believes that pre-pay cards will become popular because of the convenience and security they provide.

Service providers have historically been very poor at handling your customer’s money in a secure way, leading to serious customer dissatisfaction and  loss of trust:

Ultimately, it could drive increasing numbers of consumers back to preferring to purchase their games and other online content via retail, where the companies and transactions are more trustworthy. OH, THE IRONY!

The knock on effects include:

• Good companies get tarred with the same brush (c.f. Daniel James frequent comments about the pain that Three Rings has been through with payment-processing, especially ridiculous attitudes to chargebacks, where the company regularly got shafted)
• Good customers stop paying for your service, and probably quit the service completely
• “could-have-been”customers stop paying for ANY online services before they even start using your service, and will never pay for yours
• Pre-paycards are going to get even bigger, much bigger than most mainstream games companies and MMO companies have realised

Brick and mortar as well as online businesses have become successful at retaining customers by ensuring that they remain satisfied with their  purchase, derive value from it and come back to buy more. Customer satisfaction builds the momentum that drives the flywheel for the growth of a business. The lesson is to choose a payment provider who cares about his brand and has a track record for upholding customer satisfaction. Yes, it may cost you more but the results will pay you back for the premium.

Sumit

Technorati Tags: online gaming, mobile gaming, payment providers, PayPal,

The rise of casual games

What are casual games?

Casual games are video games developed as a fun pastime with the general public and families as their target audience. They are easy to learn and play. The games are platform agnostic, meaning they can be played via the Internet, PC and Macintosh computers, Xbox, PlayStation, Nintendo DS, Wii and even mobile phones and PDA. They are nonviolent, arcade-style games that involve puzzles, words, board and card games, game show and trivia. Popular games are Mahjong, Tetris, Solitaire, Bejeweled, Cake Mania, Mystery Case Files, and Luxor.

Statistics from the Casual Gaming Industry

Hare are some interesting reports from the Casual Games Association, RealArcade and Microsoft games (2006 Summary Report, 2007 Summary Report)

Size

200 million people worldwide play casual games via the Internet. Yankee group estimates this number to rise to 700 million by 2010.

In 2007, the world wide connected casual games industry had revenues in excess of $2.25 billion on mobile, PC, Mac and Xbox LIVE Arcade platforms

Demographics

It is interesting to note that women are not onlythe pre-dominant casual game players but also pre-dominant paying customers for casual games

Gaming Demographic	% Who Play	% Who Also Buy
Female	51%	74%
Male	49%	26%
Over 35 years	62%	72%
Under 35 years	38%	28%

Major Publishers:

1. Big Fish Games, Seattle, Washington
2. Electronic Arts Casual Entertainment Group, Redwood Shores, California
3. Funkitron, Boston, Massachusetts
4. GameHouse, Seattle, Washington
5. iWin, San Francisco, California
6. Microsoft Casual Games, Redmond, Washington
7. MumboJumbo, Dallas, Texas
8. Oberon Media Seattle, Washington & NYC
9. PlayFirst, San Francisco, California
10. PopCap Games, Seattle, Washington
11. RealArcade, Seattle, Washington
12. Sandlot Games, Bothell, Washington
13. Zylom, Amsterdam, The Netherlands

Zynga

Zynga specializes in casual games you can play with your friends on social networks. Some of its hits include Texas Hold’Em (with four million hands of poker played daily), Attack, and Scramble. Al told, they attract 2.9 daily active users across Facebook, MySpace, and other social networks. On Facebook alone, Zynga’s games have 1.6 million daily active users (right behind Slide, RockYou, and SA Ventures).

In conclusion

200 million casual game players on the Internet in 2007 rising to 700 million in 2010, with 1.6 million on Zynga alone today. These are staggeringly large numbers. Add mobile phones to this mix and the market opportunity is HUGE!

Dude, how do we monetize this?

(*Starry-eyed*) Sumit

Technorati Tags: online gaming, mobile gaming, gaming revenue, Casual Games Association, game monetization

How can I make money? Who will pay?

This question is top of mind for every entrepreneur who starts a new business and every developer who has written a game for the Internet or mobile phones. The business model can be quite daunting for a game development company  that has yet to become a recognized brand and command the power to negotiate favorable distribution deals.

Console games

The nature of console gaming has changed irrevocably with the introduction of the Wii, although there are several popular titles available currently for the Xbox and the Sony Playstation also. The cost of entry and the risk for developing console games is very high for new entrants; the large software game publishers own the distribution channel and keep a sizeable chunk of any profits. Since the past couple of years, the market focus for gaming has shifted away from PCs and proprietary consoles to the Internet and mobile phones.

Internet games

Internet gaming has become a global social phenomenon thanks to the popularity of social networks, particularly Facebook, the subsequent growth of Orkut, and of late, Hi5. The Internet games are typically far simpler than their console counterparts so the cost of entry for a developer is low. However, the games are distributed through game portals such as Yahoo games, which is the 800 pound gorilla, Zenga, which promotes its games on social networks, and Zapak. These portals usually purchase the game outright for a few hundred dollars and host it as their branded product. There are other portals that sell games on the Internet and share the revenue with the developer. Of late, public consumer packaged goods companies e.g., Coca Cola, and retailers such as Wal mart have also been purchasing and hosting games on their sites to drive traffic.

Mobile phone games

The mobile phone is an emerging gaming platform thanks to the growth of the web-enabled phones and smart phones. The games have to be customized for these resource-constrained environments since their screen sizes are small and the amount of processing power and memory are limited. The cell phone carriers, e.g., Vodafone, T-Mobile, AT&T, Apple have a stranglehold on the distribution channel, since games can only be downloaded through their networks on to the phone. The revenue share can be very steep starting at 30% in Apple’s case to as high as 80% for the carriers.  

The business problem

The question then is how does a game developer make money from his invention? What are the revenue models that work consistently and return significant profit margins to the developer?

What do you think?

jgc

Technorati Tags: online gaming, mobile gaming, gaming revenue