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SGS Panel: Who's Paying And Why In Virtual Worlds
by Christian Nutt, Staff [PC, Console/PC, Casual]
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June 13, 2008
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At the ongoing Social Gaming Summit in San Francisco, a panel of virtual world execs representing companies like NeoPets, K2, and Nexon got to the heart of why casual virtual worlds were blooming, how developers can make money off of free to play games, and what percentage of players might actually pay.
Virtual World News editor and moderator Joey Seiler asked the panel why the casual MMO trend was happening now. Responded K2 marketing VP Patrick Ford, "As a consumer, I have a bookshelf full of $40-60 games that were cracked open once or twice and maybe put back and I didn't get a good experience from it... but when my son asks me for $5 for a premium package [in an online game], I know it's money well spent."
Added NeoPets senior VP Kyra Reppen: "We obsessively follow what our consumers are doing, and it is just so apparent to us that gaming is the entertainment experience across the board, but particularly in the youth space."
"The term is still funky," she added. "I think the big revolution is that gaming is entertainment for this generation and focusing on all of the aspects and iterations of it is important."
Said Nexon marketing VP Min Kim: "Most of the market that we target has been completely under-served. When you talk about MMORPGs, most of them are subscription models. Teens are the most social animals out there, but they have no access to the money you need to do that... they're desperate for that type of [free to play] content."
The burning question then becomes, how do you get those free to play users to spend money to keep the games afloat?
Said Reppen: "It's really important you build a community so it makes it meaningful to buy into that. That's got to be part of this equation... There's $60 billion in disposable income kids are walking around with from allowances and gifts, and it's not as easy as buying a comic book or a candy bar."
Added Kim: "A lot of people think they can make money off of casual games where people play a couple of hours a week. I don't believe that. When people get engaged with the social experience then they'll buy items. You need to understand the psychology."
Reppen continued: "For us, it's all about a sense of ownership that our audience has. There's a real sense that it's their game... The identity component to virtual worlds is so important, but there's so many other things going on in the meta games around earning points, acquiring wealth, shopping and customizing and creating your own experiences... It's part of a mix."
Seiler then asked what percentage of each company's virtual worlds they were actually making money from.
"Nobody puts their numbers out," said Kim, "but I would say the general rule is if you're doing 5 to 10 percent of your active user base you are doing pretty damn well."
"People say it's a bad business model because you're only making money on 10 percent of your player base," he concluded, "but I come back and say my userbase is 10 times the size of yours."
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Size matters in this particular venture and the business is there, so I'll say it's here to stay and might surpass subscription-model games as the interfaces, world-options and customization of gaming experience gets refined and evolves according to the teen market.