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Social Gaming Summit | Virtual Models

Social Gaming Summit: Monetization and Business Models for Social Games

My laptop battery had already died, but the final panel at the Social Gaming Summit on monetizing social games was too good to not take some notes. David Perry, CCO, Acclaim, who's been putting together a hefty tome cataloging, if I remember right, as many possibilities for gaming as possible, noted that there are 22 ways to monetize a game. He didn't give a list, but there's certainly a range out there. For now, though, the most prominent for virtual worlds and social games seem to be subscription, advertising, and microtransaction, especially when packaged around a free-to-play experience. You just have to make it clear that eventually there needs to be money exchanged, explained Mattias Miksche, CEO, Stardoll

"We've always said this is free and this is pay," said Miksche. "I think a lot of people are missing out by tring to build a big audience around entirely free content and then trying to flip a switch and start charging. You need to have something that people are willing to pay for from day one."

I don't know if that's entirely true. Neopetsm for example, certainly saw pushback from its users when it launched a premium service with a cash economy. However, it's since been fairly widely adopted and Neopets merchandising that gives users access to exclusive content is hitting the shelves alongside prepaid cards for virtual currency. There's always resistance to change--especially when money's involved--but it's not impassable.

Even while making it clear that there's money that needs to be changed hands, not every user will be receptive, though, so a mix of revenue streams comes in handy.

"Microtransactions and advertising go perfectly togetehr," said Miksche. "Microtransactions drive our business, but we will never have 100% of our users wanting to pay for that. Advertising is a good way to monetize that remaining X percent."

Advertising can also be a powerful motivator for microtransactions. Perry explained that the trick is always to get the credit card out of the user's pocket. Once he or she starts spending, it's much harder to stop.

"We're a little abusive with advertising," he said, because advertising can be turned off by simply purchasing one virtual item, even down to a $.10 good. Of course, said Perry, the company doesn't process transactions that small, so users buy a block of credit. The company is also experimenting with making ads optional. Users can turn them off, but they level up much faster with ads on. And since the ads are optional, Perry said the company serves 30% more to users who leave them enabled.

That makes sense. For Acclaim's casual games, Perry said it costs the company $30 to get a paying user. Once they're in, it's important to monetize that experience. It's even more important, he noted, to get them to bring other users in.

"If they invite their friends, they think for one second about who might like the game and invite someone," he said. "They're usually right and that person is more likely to pay."

As for who's paying, Perry expected most microtransactions to come from hardcore MMORPG playerskitting out the avatars with fancy armor and such. Instead, it comes from Dance. The game is a simple dancing activity, but because users spend so much time looking at their avatars, the appearance and identity becomes even more important.

That works well for Stardoll, a fashion-themed site, especially with trends that match the real world.

"We tracked our users that pay the most," said Miksche. "Not surprisingly, they're in London and Manhattan."

The users are mostly younger, though, which makes getting them instantly involved incredibly important. Perry pointed to his biggest loss points as the time it takes to register, download, and install any of his games. Even if users make it through the first two hurdles, they still may not actually install the program.

"We're One-Click Dressing," said Miksche. "You come to the site and instantly start dressing. For our users, young girls, that's very important--instant gratification."

The question of how to get their money is still one that's being sorted out. In Europe, Stardoll sees much of its money used to by virtual currencies coming from premium SMS accounts, which Miksche explained are often treated similarly to allowances and topped off regularly by parents. In the US, it's the pre-paid card--something which, according to Perry, may see more and more prominence in gaming of all sorts.

He explained that the future generations of even home consoles would propel the growth. Microsoft, Sony, and Nintendo will eventually lose the idea of hard media entirely and every game will be distributed digitally. Retail stores won't stock consoles, though, with big, bulky boxes that lead to lower margins if they can't also sell games in boxes for higher margins. The solution, said Perry, is walls of prepaid cards.

"I think prepaid cards are the future of the business," he concluded.

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