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Analysts: Microtransactions To Rise In Social, Traditional Online Games

Analysts: Microtransactions To Rise In Social, Traditional Online Games

October 13, 2010 | By Leigh Alexander

October 13, 2010 | By Leigh Alexander
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"Sticky" online games show no sign of slowing down, with current players planning to spend as much -- or more -- time playing this year as they did last, says a new survey from Lazard Capital Markets. And this applies equally to traditional online titles as well as Facebook games, the analysts say.

"Both traditional browser-based online games as well as social games are showing stronger usage growth as compared with console gaming in our survey," says Lazard. "Specifically, 86 percent of online gamers plan to spend at least as much or more time playing games online this year. Similarly, 88 percent of social gamers plan to spend as much or more time playing Facebook games this year."

According to Lazard's extensive survey, which also covered console gaming trends, the only downside to the online play data was that those identified as infrequent online players plan to play even less frequently this year.

"These trends are also notable given that one of our surveys sample criteria was video game console ownership, which likely results in some bias toward consoles," says Lazard's report. "The trends also suggest a fraying at the edge of core console audience since consumers have a finite amount of time to dedicate to game-play (i.e., time competition). We do not think this will materially impact the core console gaming audience, but it may hinder the growth of console usage among more casually-inclined gamers."



The online trends are consistent with what Lazard previously observed in the core market -- that the active plan to stay that way, but the less-active are seeing attrition.

Lazard also looked at the monetization of social games, particularly those on Facebook -- according to the research, 21 percent of Facebook users are buying virtual goods. This is high relative to other reports, a discrepancy Lazard explains by noting it surveyed console owners, creating a sample base of more active gamers from the start.

"Nonetheless, from a trend perspective we note that virtual goods consumption is increasing," says the report. "We believe this also corroborates the growth of Zynga and other social game publishers, which generate almost all of their revenue from virtual goods transactions on Facebook. "

Such trends should be taken as good news by console and PC developers too, the report adds, because they suggest a friendliness toward microtransactions in traditional online games.



However, according to Lazard, the area of fastest growth is on mobile devices, thanks to increasing penetration for tablet devices and smartphones. 92 percent of smartphone owners in the analyst survey said they will spend the same or more time playing games on their handheld devices -- 33 percent said they expect their time to increase.

Interestingly, while again Lazard's survey focused on console owners, only half of them reported owning a smartphone. "Given that smartphone unit growth is significantly higher than console unit growth, this suggests to us there is significant headroom for mobile gaming growth," the report says.

"However, we also note that traditional publishers are likely not generating the profit margins they are historically accustomed to on console platforms, in particular given the rapid price deflation of mobile game apps."

But Lazard says mobile gaming is likely to complement, not threaten traditional play due to the "significant difference in gameplay and user experience," according to the report: "We do think they may form part of a broader game ecosystem in which they participate as peripherals."


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