Having a hard time understanding the Virtual World marketplace?
Think of it as Etsy for Avatars. The first time I heard this phrase I was instantly delighted with how clearly it sums up the potential for peer-to-peer selling in virtual worlds.
Virtual Worlds are a marketplace for selling premium services, "renting" real estate, selling customization services, monetizing advertising campaigns, empowering community-based fund raising and more - but what Virtual Worlds are perfect for - is peer to peer selling.
But instead of thinking of Ebay, think of Etsy.
So what is Esty?
While Ebay is a place where you can sell anything, Etsy is a place where pride in craftsmanship, artistic ability, and cultural acuity matter more than cut-rate prices. A community develops around the curatorial practice of selecting the best items, showing your top picks, and of course, hawking your own wares.
How big is this market? Here are two examples:
1) According to their website, IMVU has reached 40 million registered users, 6 million unique monthly visitors and a $25 million revenue run rate.
2) Second Life claims 250,000+ goods created each day.
So what are the barriers to success?
Ease of Use
The biggest is ease of use. It is still hard to create great content. Winners will emerge in the virtual goods market by finding a way to deliver higher quality goods easily. I faced this same problem a few years ago while working at DreamWorks. It is a lot of work to create high quality avatars or CG characters. The team of extremely talented designers and modelers and painters were working around the clock to create each new character. I found a way to automate the templating process to leverage 3D assets in the creation of 2D designs - the result was an elimination of the tedious set-up time that went into the design process. The artists were free to create based on actual geometry, rather than guessing, revising, and guessing again.
Curatorial Voice: Featuring Quality Goods in Open Marketplace
The second biggest challenge is featuring quality goods in a open marketplace. With so many virtual products being made each day, how can you best find the right avatar mod, fashion accessory, media appliance, virtual vehicle, or other item in the vast sea of product?
Let's first look at fashion retailing for some pointers. Two of the biggest fashion magazines are Vogue and W. They have teamed up to create Style.com. However, even with a huge fan base from the physical magazine, they are getting busted each month in page views by Polyvore.com and Lookbook.nu
How do these two underdogs do it? Polyvore features guest bloggers to give curatorial direction, but that's only half of the story. They have a very easy to search catalog of product and a super-simple UGC tool that makes customization of fashion collages a snap. These are then bloggable, and the whole cycle perpetuates itself.
Lookbook.nu looks gorgeous. It is a street fashion site with big numbers each month. But where they really shine is how clever their quality strategy is: they combine a velvet rope admissions policy with a remarkable innovation called "karma filtering"
With Karma Filtering turned on - you only see the good stuff - as demonstrated by the individual user's dedication to the community. They earn karma points for community involvement. With the filtering turned off - you see everything else. It makes for a much more enjoyable browsing experience to see page after page of great UGC.
Karma Filtering simultaneously energizes the core community while keeping the site looking fantastic. Those filtered out can still participate, and are encouraged (much like in the real world of fashion peer pressure) to try harder next time. Is it mean? Yes and No. Yes it is no fun to get filtered out, but you are filtered for karma (meaning community participation) not filtered for having a lousy look or unattractive features. To be honest, I think it is one of the most clever devices used to keep a site looking great without having to manually police every entry.
What about games?
Finally, let's look at Sony Playstation. They have a virtual world called Home, which is still struggling to find it's feet as a hangout/game launching venue. They will get there - as soon as they perfect the rewards/badges/achievements piece of the puzzle to drive use, game re-play, and longer/return engagement. They've taken the first few steps, and will make it happen soon. What I wanted to point out about Sony, however, isn't Home, but is the original programming featured on PSN. Watching Pulse or Qore presents entertaining, enjoyable hosts who lead you through the latest products.
Can templating, automation, and semi-automation play a role in the creation of customized goods and avatar services for virtual economies? Can virtual goods adopt curatorial, Karmic, and guided soft-touch sales and presentation methods? Absolutely!
This market is growing.
If you have a good story about a particularly great example of the selling, marketing or distribution of virtual goods - please leave a comment.
Links:
Esty
IMVU Creator
SL Wikitecture
SL Immersive Spaces
SL Relay for Life
SL economic stats
PSN Original Programming
Style.com
Polyvore
lookbook.nu
Wednesday, October 7, 2009
Sunday, September 20, 2009
Monetizing "Free to Play"
“Free to Play” is a great concept, but a terrible name.
The name creates a negative emotional response in potential customers who are skeptical about any endeavor being truly free. The concept of free, however, remains a huge motivator; everyone likes getting a good deal, and no one likes paying for something if they don’t have to.
As creators of casual and social entertainment, our challenge is to develop a product with a monetization scheme that overcomes the barriers to adoption, retains loyal customers, and generates a predictable recurring revenue stream.
Defining a winning product
A successful product is one that is entertaining, emotionally rewarding, minimally invasive, and offers a monetization pathway that feels like a welcomed solution to game play, rather than an annoying pitch or a cheap bait-and-switch.
David Chang, Executive VP of Business Development and Marketing at the online game publisher Gamescampus agrees with the problem of the “Free to Play” naming issue. He suggests instead calling the games "MTS Games" (Micro-Transaction Service Games) or even MTG (Micro-Transaction Games).
Micro-Transaction Game sounds a lot more respectable, but it loses the allure of free. Each company will have to decide which label is better for generating adoption and rewarding loyalty.
Mr. Chang may be onto something, however, with his suggestion. It somehow rings more true. Authenticity goes a long way in social media. Let's look a little further into his suggestions.
He goes on to list three requirements on an MTS or MTG game:
An MTS game would be a game that:
1. Requires no purchase to download and play the game
2. Does not have a level-cap or content-cap beyond which you need to pay
3. Is at least partially monetized by sales of in-game goods
The first two rules set out by Chang are simple enough. The third rule becomes more interesting. Selling in-game items is the core of most successful monetization schemes for casual and free games.
Selling In-Game Items
Customers are only interested in buying in-game goods if the value proposition of the purchase is clear. Different customers buy for different reasons. Our job as game creators is to lay this out clearly, so that the customer understands why they would want to buy.
Personalization
Some customers buy for the pleasure of personalization. In this monetization pathway, common in-game purchases are costumes for avatars, décor for in-game habitats, and virtual pets or accessories.
Leveling Up
Other customers are playing to win a mini-game or to level up. For them, the motivation to buy breaks down into either increasing their power, ability, or speed. When the clock is ticking away and a player is running out of time to complete a level in which he or she has invested a lot of time and effort trying to win, buying a booster or power item can be very appealing.
Repeat Sales
Getting customers to buy once, however, is not enough. Most successful monetization models have a pathway for repeat sales to customers. This can take the form of new assets to be used in personalization. Think of this monetization pathway as the casual gamer equivalent of fashion – every season it goes out of style, to keep up, you are always in a state of transition and mutation. The pleasure in fashion is to continue to change, while overall staying true to your own sense of style. This works well in personalization. Offer many different choices that still retain the overall identify of the player, just don’t offer them all at once. Roll them out over time and in limited quantities. Limited edition items rule the street fashion world, and they also rule the personalization of games. It seems counter-intuitive to inject basic supply-and-demand scarcity into the digital world – where any asset is a digital copy of another – but players are paying for exclusivity – the pride of owning a unique item – and so limiting how many people can buy a personalization item is welcomed by players, not shunned.
At the core, however, is the pleasure of self-identification. I once interviewed a hard core gamer who also hung out on casual sites. He claimed that at first he thought he would never buy a personalization item for his avatar, but then after playing a while he gave in saying, “What can I say? I wanted my avatar to look more like me.”
If your customer base is less interested in décor, and more interested in playing to win, then repeat sales are also possible. To these players, sell a power item or a booster item with a time limit – so that you are in effect “renting” it during key moments when the player needs extra help in order to level up. Not only is this a great motivator for a sale, but is also a way to incur the goodwill of the gamer. Instead of blaming you for charging extra for the booster or power item, they will blame themselves for not being able to get through the level without extra help. If you offer the item in such as way as to seem helpful, your sale will come as a welcomed solution, rather than an annoying pitch.
These basic ideas are just the tip of the iceberg in terms of creating solid monetization pathways.
I need your help:
I am working on a longer, more detailed report on monetization pathways for casual and free games, as well as new social media entertainment products. If you have a great example or story of a monetization pathway that worked well (or failed miserably) please let me know. email: james.buckhouse@gmail.com
Here are links that dig deeper into this topic:
http://news.cnet.com/8301-13846_3-10164614-62.html
http://en.wikipedia.org/wiki/Free-to-play
http://news.cnet.com/8301-13846_3-10282180-62.html?tag=mncol
http://lostgarden.com/2009/07/flash-love-letter-2009-part-1.html
http://www.flashgamesponsorship.com/advice/advice-from-industry-players/selling-premium-content-the-drunken-masters-experiment.html
http://www.gamasutra.com/view/feature/3924/wheres_the_cash_for_flash.php?page=1
http://www.gamasutra.com/blogs/GregMcClanahan/20090325/985/Nitpicking_Flash_Game_Summit.php
http://www.gamepoetry.com/blog/2009/02/27/interview-with-kongregate-about-sponsorships/
http://www.slideshare.net/capncleaver/metrics-for-a-brave-new-whirled?type=presentation
http://evolutionlive.blogspot.com/2009/06/ten-ways-to-monetize-your-flash-game.html
http://virtual-economy.org/blog/arpus_in_social_networks_and_s
http://www.heyzap.com/developers/guide
The name creates a negative emotional response in potential customers who are skeptical about any endeavor being truly free. The concept of free, however, remains a huge motivator; everyone likes getting a good deal, and no one likes paying for something if they don’t have to.
As creators of casual and social entertainment, our challenge is to develop a product with a monetization scheme that overcomes the barriers to adoption, retains loyal customers, and generates a predictable recurring revenue stream.
Defining a winning product
A successful product is one that is entertaining, emotionally rewarding, minimally invasive, and offers a monetization pathway that feels like a welcomed solution to game play, rather than an annoying pitch or a cheap bait-and-switch.
David Chang, Executive VP of Business Development and Marketing at the online game publisher Gamescampus agrees with the problem of the “Free to Play” naming issue. He suggests instead calling the games "MTS Games" (Micro-Transaction Service Games) or even MTG (Micro-Transaction Games).
Micro-Transaction Game sounds a lot more respectable, but it loses the allure of free. Each company will have to decide which label is better for generating adoption and rewarding loyalty.
Mr. Chang may be onto something, however, with his suggestion. It somehow rings more true. Authenticity goes a long way in social media. Let's look a little further into his suggestions.
He goes on to list three requirements on an MTS or MTG game:
An MTS game would be a game that:
1. Requires no purchase to download and play the game
2. Does not have a level-cap or content-cap beyond which you need to pay
3. Is at least partially monetized by sales of in-game goods
The first two rules set out by Chang are simple enough. The third rule becomes more interesting. Selling in-game items is the core of most successful monetization schemes for casual and free games.
Selling In-Game Items
Customers are only interested in buying in-game goods if the value proposition of the purchase is clear. Different customers buy for different reasons. Our job as game creators is to lay this out clearly, so that the customer understands why they would want to buy.
Personalization
Some customers buy for the pleasure of personalization. In this monetization pathway, common in-game purchases are costumes for avatars, décor for in-game habitats, and virtual pets or accessories.
Leveling Up
Other customers are playing to win a mini-game or to level up. For them, the motivation to buy breaks down into either increasing their power, ability, or speed. When the clock is ticking away and a player is running out of time to complete a level in which he or she has invested a lot of time and effort trying to win, buying a booster or power item can be very appealing.
Repeat Sales
Getting customers to buy once, however, is not enough. Most successful monetization models have a pathway for repeat sales to customers. This can take the form of new assets to be used in personalization. Think of this monetization pathway as the casual gamer equivalent of fashion – every season it goes out of style, to keep up, you are always in a state of transition and mutation. The pleasure in fashion is to continue to change, while overall staying true to your own sense of style. This works well in personalization. Offer many different choices that still retain the overall identify of the player, just don’t offer them all at once. Roll them out over time and in limited quantities. Limited edition items rule the street fashion world, and they also rule the personalization of games. It seems counter-intuitive to inject basic supply-and-demand scarcity into the digital world – where any asset is a digital copy of another – but players are paying for exclusivity – the pride of owning a unique item – and so limiting how many people can buy a personalization item is welcomed by players, not shunned.
At the core, however, is the pleasure of self-identification. I once interviewed a hard core gamer who also hung out on casual sites. He claimed that at first he thought he would never buy a personalization item for his avatar, but then after playing a while he gave in saying, “What can I say? I wanted my avatar to look more like me.”
If your customer base is less interested in décor, and more interested in playing to win, then repeat sales are also possible. To these players, sell a power item or a booster item with a time limit – so that you are in effect “renting” it during key moments when the player needs extra help in order to level up. Not only is this a great motivator for a sale, but is also a way to incur the goodwill of the gamer. Instead of blaming you for charging extra for the booster or power item, they will blame themselves for not being able to get through the level without extra help. If you offer the item in such as way as to seem helpful, your sale will come as a welcomed solution, rather than an annoying pitch.
These basic ideas are just the tip of the iceberg in terms of creating solid monetization pathways.
I need your help:
I am working on a longer, more detailed report on monetization pathways for casual and free games, as well as new social media entertainment products. If you have a great example or story of a monetization pathway that worked well (or failed miserably) please let me know. email: james.buckhouse@gmail.com
Here are links that dig deeper into this topic:
http://news.cnet.com/8301-13846_3-10164614-62.html
http://en.wikipedia.org/wiki/Free-to-play
http://news.cnet.com/8301-13846_3-10282180-62.html?tag=mncol
http://lostgarden.com/2009/07/flash-love-letter-2009-part-1.html
http://www.flashgamesponsorship.com/advice/advice-from-industry-players/selling-premium-content-the-drunken-masters-experiment.html
http://www.gamasutra.com/view/feature/3924/wheres_the_cash_for_flash.php?page=1
http://www.gamasutra.com/blogs/GregMcClanahan/20090325/985/Nitpicking_Flash_Game_Summit.php
http://www.gamepoetry.com/blog/2009/02/27/interview-with-kongregate-about-sponsorships/
http://www.slideshare.net/capncleaver/metrics-for-a-brave-new-whirled?type=presentation
http://evolutionlive.blogspot.com/2009/06/ten-ways-to-monetize-your-flash-game.html
http://virtual-economy.org/blog/arpus_in_social_networks_and_s
http://www.heyzap.com/developers/guide
Engagement Design
User Generated Content, viral content, and passionate social communities all seem ripe for monetization, but so far few companies have been able to do this well.
This fall is shaping up to see a renewed interest in tackling this problem. YouTube is hiring monetization designers, Pure Verticals got some great press in San Francisco Magazine, Adify has widgets as does SproutBuilder, and ShareThrough is looking to make a play, and it seems others are thinking it over as well. So what will make the difference between an interesting idea and success?
What are the barriers to success and what are the opportunities?
I believe the answer to both questions lies in user experience. Like being a good friend or expert conversationalist, social media requires listening to the user, who is both the customer and the audience, and respecting their pleasure; interrupting their enjoyment is a sure way to lose engagement.
The design, experience, messaging and targeted monetization all need to integrate with the user's pleasure, rather than destroy it.
Just as Google first got traction with their brutally simple (and ingenious) simplified homepage for search, the UI/UX does more than set the tone, it is the entire conversation.
This fall is shaping up to see a renewed interest in tackling this problem. YouTube is hiring monetization designers, Pure Verticals got some great press in San Francisco Magazine, Adify has widgets as does SproutBuilder, and ShareThrough is looking to make a play, and it seems others are thinking it over as well. So what will make the difference between an interesting idea and success?
What are the barriers to success and what are the opportunities?
I believe the answer to both questions lies in user experience. Like being a good friend or expert conversationalist, social media requires listening to the user, who is both the customer and the audience, and respecting their pleasure; interrupting their enjoyment is a sure way to lose engagement.
The design, experience, messaging and targeted monetization all need to integrate with the user's pleasure, rather than destroy it.
Just as Google first got traction with their brutally simple (and ingenious) simplified homepage for search, the UI/UX does more than set the tone, it is the entire conversation.
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