I drove past this work of art on a warm winter day in Texas and had to get a photo. There is something so magical about this premise and cryptic blue box. How do you think it works?

My little brother, an amazing trend spotter since before his voice cracked, spoke to me about the opportunity of mens pants years ago. Dockers – not cool. Gap – not dressy. Brooks Brothers – bad fit. And, so on. As for options, are khaki and navy our only choices?

The Bonobos brand has been built and continues to exist entirely online. Presumably, this modern approach to a haberdashery gives them tremendous ability to focus on the most important piece of a consumer business – the consumer. Let’s face it, this is where product development begins. And, judging from the conversation in traditional and social media they are constantly aware of exactly who their audience is (great video here - http://bit.ly/h867Ky).

Like any ecommerce company, they are certainly using omniture or some other analytics tool to refine their cart and improve conversion. But, they are likely using the same tools to inform new product decisions. Sure, this isn’t new. But, with a clothing business that exists entirely online there is less noise coming from the wrong channels (i.e. execs and buyers with loud voices who are trying to satisfy the consumer with instinct). And, when data informs opinions, instinct can be vetted, challenged or proven worth while.

Below is a fun pair of trousers. A novelty, yes… But also something that compels conversation. I think this is smart stuff. To top it off, the SKU is called the “Drunken Uncle Pants” to make sure the conversation goes way past the played out “Nice Pants” tagline.

To give credit where credit is due Levis is one of my all time favorite brands. And, I was awed as a kid when Dockers once did this:

From NYT in 1995 – “In a new advertising campaign promoting Dockers brand pants, Levi Strauss hung khakis usually priced up to $55 under plastic shields in 40 Manhattan bus shelters. Any New Yorker might expect that covetous vandals would pry open or shatter the shields and make off with the pants. Levi Strauss expected it, too: When the pants were stolen, an outline of them would remain, along with a message: “Apparently they were very nice pants.”

From a social media perspective, Bonobos does plenty of photo contests and gives referral code. Save $50 (even in philadelphia, that’s fifty bucks) on your first order here - http://bit.ly/ifNE2v A partnership with FEED demonstrates their understanding of cause-based marketing and its effect on purchase and brand building. Over the course of the past 18 months or so, Bonobos has added shirts, shoes, outerwear, accessories & suits to their line up.

Check em out… bonobos.com

Here’s to the great Neil Young. A conversation that I had last night reminded me of Time Fades away and On The Beach, two albums that didn’t receive the attention of Neil’s more well-known works. When I was in college (in the pre-napster era), we had to search for the vinyl of Time Fades Away to hear it. I have read he used the first digital mixing sound board (early signs of a risk taker with technology) to his producers chagrin. And, though it sold well upon release, he is not a fan and the album has been buried. That said I think it is a gem.

So Greendale. This is story-based entertainment with Yoknapatawpha county element to it… A group of people and their plight taken across mulitple platforms. Wonderful stuff. Accompanying this album (the expected format) was a film by the same name. Neil – aka Bernard Shakey – has directed quite a few. In fact, he has a new one coming up called “Le Noise”. Check out the trailer on his website – Neilyoung.com (the home page is classic)

To me, something more interesting from a business perspective than the film, is the graphic novel. I like this sector. This is fast, visual storytelling. Because of cost to produce, self-publication, digital distribution, graphic novels are one of the more interesting businesses opportunities in the entertainment business. Kudos to Neil for going this direction. Not sure how the deal came about, but would love to know. I hope he took a “partner” approach with the writer and artist. Check it out  – http://amzn.to/fdUHaK.

Would love to see a business article about Neil’s cross- platform approach to entertainment. The Lincvolt clean car topic could be addressed. If you find one, please send it my way.  Happy thanksgiving.

Last may, my friend Cory caught this fish in San Antonio Bay. We had a really good trip. Fish were all over the flats. In the heat of the day, when the airboat that we were on broke down, we went back into a lake. He found some black drum feeding and cast a brown and chartreuse shrimp fly to them. He then hooked and caught this fish. I took a picture of it and convinced him that drum weren’t good eating so he released it. That night a restaurant proved me wrong.

I need to give him this painting… once the wall fills up I will.

Source – http://www.openforum.com/idea-hub/topics/technology/article/a-guide-to-facebook-social-plugins-for-small-business-amy-mae-elliott

Jun 01, 2010 -

Despite some reservations expressed by open web advocates about the true “openness” of Facebook’s Open Graph API, Facebook’s new social pluginsoffer amazing sharing functionality (and therefore potential exposure) that small businesses can get excited about.

While Facebook social plugins are fairly simple to implement, understanding the practical uses for the different social plugin options can be a little confusing, especially in cases where the functionalities overlap.

To help you decide which options best fit your site (and to get you up to speed with the 100,000 other sites already signed up) we’ve put together this quick guide. If you’ve started using the plugins, we’d love to hear your thoughts about them in the comments.

1. Activity Feed

Overview: The Activity Feed box shows recent Facebook-related activity around your site as a stream, which includes how many people have liked or shared your content. The plugin prioritizes displaying activity from the reader’s Facebook contacts, turning it into a friend-only-related stream if there’s enough content (as per the screenshot above on the left), but fills any blanks with general recent activity (as per the screenshot above on the right) if there’s not enough content from your friends.

Who Is It Good For? For any site with an active Facebook following and regularly refreshed content, such as blogs, activity feed is a powerful tool that lets readers know what’s hot on the site.

This plugin has some crossover with “Recommendations” (see below), so it’s worth checking that option out before making your decision about which to implement.

2. Comments

Overview: The Comments feature allows publishers to add a comment box on select pages in which Facebook users can enter comments. . Users are also given the option to have their comment, with a link, published back to their Facebook walls and friends’ streams. This feature could potentially transform the web into one big Facebook wall for users to enter their two cents’ worth

Who Is It Good For? If a site does not already offer comment functionality, this is an easy fix to add into the mix. Those with a low-end comment system could consider replacing the system with this plugin because of the exposure value in users potentially sharing comments on Facebook that link back to your site.

On the downside, some moderation abilities will be lost as this commenting feature is a Facebook-run system. There are still moderation options available, with use of the “report” link and the option for a site owner to delete a post. If you choose to add a “report” link, you or others, can highlight offensive comments. If you do not add a “report” link, users can click through to a commenter’s Facebook profile and report them from there. It will be interesting to see if the use of authentic and therefore traceable identity leads to better self-moderation — Facebook certainly hopes so.

3. Login with Faces

Overview: Using the new JavaScript SDK, Login with Faces is just that — a login button that also displays the Facebook profile pictures of a user’s friends who have already signed up.

Who Is It Good For? If your site is looking for more users to sign up and engage with content, using a user’s social circle to encourage engagement is a great option. The plugin is resizable, so you can tailor it to best fit your site design, and it dynamically resizes according to the amount of faces it needs to display.

4. Facepile

Overview: Facepile is similar to Login with Faces but without the login part. It shows visitors the profile pictures of their friends who have already signed up for your site. If none of a visitor’s friends have signed up to your site via Facebook, it does not display.

Who Is It Good For? There’s no need to implement this if you opt for the Login with Faces plugin. However, for sites that offer a service that requires a separate login process, this is a nice alternative to show users which of their friends have already signed up. The plugin dynamically resizes its height, so it won’t look awkward if only a few friends are displayed.

5. Like Button

Overview: The Like button is a simple one-click icon that allows anyone who is signed into Facebook to “Like” the content of a web page, such as a product, item of media or article. As people hit the button, the “Like” count on the page goes up and a one line clickable news story is published to the person’s Facebook feed.

Who Is It Good For? The Like button makes sense for a site that offers a variety of items or elements of content that can be liked individually, such as e-commerce sites, blogs, apps/software or media sites. If you’re looking for your general brand to be liked, then skip the Like button and go for the Like Box, as explained below.

6. Like Box

Overview: Like the older Fan Box, but with updated terminology, the Like Box offers the Like button, a gallery of those who have already clicked (which will be personalized to a signed-in Facebooker) and the option to show the wall “stream” for the relevant Facebook Page. Clicking on the Like button will create a connection between user and Fan Page and users will receive updates directly to their newsfeeds.

Who Is It Good For? Use the Like box plugin if you want a static window for people to like your brand (as opposed to the Like button, which is more tailored to individual pages or items).Because this plugin is a simple promotion tool, it could work for anyone and everyone with a Facebook presence.

7. Live Stream

Overview: The Live Stream box allows Facebook users to comment on your site in real time.

Who Is It Good For? The Live Stream box is great for anyone streaming a live event. It is a great tool for real-time chat whilst something is happening. This tool is not suitable (and in fact could run the risk of looking a little lame) on your average static site. If you want people to comment on a static page then go for the “Comments” option, outlined above.

8. Recommendations

Overview: The Recommendations plugin is a list of the most liked content on a site. This is a potential area of confusion for new plugin users, because the Recommendations widget is similar to the Activity Feed (as illustrated by theDigital Inspiration screenshot above).

The “Activity Feed” is a more dynamic, active, social experience that acts as a stream of the most recent activities in a user’s network — great if the user has lots of Facebook friends interacting with your site. Recommendations, although also social and with personalized content, offers more of a generic “this is what’s being liked on this site right now” experience.

Who Is It Good For? Sites that have not added the Activity Feed should consider Recommendations. Because the two plugins are similar, they could potentially duplicate content. However, there is a difference between the two, so you might want to think carefully about whether you want “Activity” or “Recommendations.”

Either way, don’t underestimate how powerful it can be for someone to land on your site — perhaps for the first time — and see that tens, hundreds, or thousands think your site/content/product is worth sharing. It’s up to you to choose which option suits your site better, but both are great ways to show how Facebook users are interacting with your content.

Image courtesy of iStockphoto, Flyparade

Source:

Jason Kincaid

http://techcrunch.com/2010/04/29/six-months-after-acquiring-it-playdom-is-killing-off-lil-green-patch/

Last November, popular social game developer Playdom followed up its $43 million funding round with news that it had acquired two smaller game developers, Green Patch and Trippert Labs. Green Patch is best known for its game Lil’ Green Patch, a gardening simulator that attracted users by promising to contribute to the Nature Conservancy.  And now, less than six months after acquiring the game, Playdom is killing off Lil Green Patch and a handful of other games that fall under the Green Patch brand, like Lil Eco Racer and Lil Blue Cove.  The lone survivor will be Farmville competitor Lil Farm Life, which has around 3.4 million monthly active users.

Here’s the message that was posted to Playdom’s community forums:

After much discussion between the developers and the executive suite, we have sadly decided to close all Green Patch games except Lil Farm Life (which will remain and will be receiving much more attention). The main reason to discontinue these games, including Lil Green Patch, is that we no longer have the resources to support Lil Green Patch in the way that makes sense for us and for our players.

Our different studios are working on both existing and new games, and at this point, we are not able to support the Green Patch games to the degree that we expect of ourselves.

Logistically, you’ll see a pop-up added into the game that you need to check that you’ve read and understood. This includes the fact that any real currency spent in the game will not be refundable per our Terms of Service agreement. The final date that these games will be available on Facebook is June 10th, 2010.

If you do have any specific needs, please go to http://support.playdom.com/home, and the support team can communicate with you on a one-on-one basis.

As of June 10th, 2010, we will also be closing this forum as well as our support channels. Thank you for your support and loyalty through this entire process.

In its late-2008 heyday, Lil Green Patch was the top ranked game on Facebook. It’s since waned in popularity — as of today the game has 371,856 monthly active users.  But those who are still playing the game are understandably upset. One user tell us that Playdom “strung out the players of this game along for months and only recently started saying things like ‘we can’t integrate the back end’”.

Read more: http://techcrunch.com/2010/04/29/six-months-after-acquiring-it-playdom-is-killing-off-lil-green-patch/#ixzz0mt3LZttY

http://mobile.venturebeat.com/2010/01/22/revenue-from-mobile-apps-set-to-quadruple-from-2010-to-2013/

According to a new report from Gartner, worldwide revenue from mobile applications will total $6.8 billion in 2010, an increase of 60% over the $4.2 billion spent in 2009. Growth in revenue from mobile apps can be expected to continue at a rapid rate, as more consumers purchase smartphones and more apps become available. Gartner predicts that in 2013, 21.6 billion apps will be downloaded, generating nearly $30 billion in revenue — more than a fourfold increase over 2010.

Gartner forecasts that 82% of all downloads will be free in 2010, and that the share of free apps will increase to 87% by 2013. This leaves mobile advertising to make up for the loss in share for paid apps — Gartner claims that in 2010, 0.9% ($0.6 billion) of mobile app revenue will be generated by advertising.

App makers will be more dependent on advertising revenue as the number of free apps proliferates. Just from 2009 to 2010, average revenue per app is expected to drop by 11% — from $1.68 to $1.50. By 2013, according to Gartner’s numbers, the average revenue per app will be $1.36.

My prediction is that the explosion in the number of smartphone users and available apps will result in a short head of high-revenue-generating apps and an extremely long tail of free to low-revenue-generating apps. Just like any nascent business, the marketplace for mobile will mature over the next three years, with increasing consolidations and company buyouts. Indeed, it’s already begun with Google’s purchase of AdMob and Apple’s purchase of Quattro Wireless.

URL – http://www.businessinsider.com/iphone-virtual-goods-2009-11

Dan Frommer|Nov. 12, 2009, 7:00 AM | 8,689 |9

The red-hot virtual goods market is working its way onto Apple’s iPhone app platform, as developers hope to cash in on the iPhone’s relatively new support for in-app payments.

Prime example: The new, free game“Eliminate Pro” from Ngmoco, the iPhone gaming firm founded by ex-Electronics Arts star Neil Young.

Eliminate is an awesome, social shoot-’em-up game, meaning you’re running around, shooting at people over the Internet — whether they’re friends from real life, pals from social networks, or total strangers.

Eliminate launched earlier this month and has already blown past 1 million downloads. It’s basically a miniaturized, iPhone answer to “Call of Duty,” the hit console game. It’s very fun.

Click here to see 10 apps making money from virtual goods and in-app purchasing →

And it looks like Eliminate is making Ngmoco heaps of dough — by the iPhone’s standards, at least. As of Wednesday evening, it was the seventh highest grossing app in the App Store. This means only six apps — of more than 100,000 — were generating more revenue, faster, than Eliminate. This could be several thousands, or even tens of thousands, of dollars per day.

What makes this more impressive is that Eliminate is a free app to download. Therefore, 100% of its revenue is generated by in-app purchasing of virtual goods.

Here’s how it works. To earn credits in the game, which can be exchanged for virtual goods, you need to have “energy” to play. Energy drains quickly, and can only be replenished by waiting an hour — previously four hours — or by buying it back in the form of “power cells.” (So if you’re having fun playing, it’s going to cost money rather soon.) Credits, in turn, can be traded in for virtual goods, such as weapons, armor, suit decoration, etc. The most popular in-app purchase is a 99-cent pack of energy; no. 2 is a $9.99 pack.

Eliminate is one of the first games to take advantage of a new policy change Apple made, which allows in-app payments in free apps. Previously, only paid apps — minimum 99 cents to download — could offer in-app purchasing. This significantly limited the potential audience size — the vast majority of apps downloaded are free apps — and therefore limited potential revenue.

What does this change mean? For app publishers, more players and more revenue. For consumers, potentially more free, high-quality games and apps, with premium options available via in-app commerce.

Eliminate, as a free app, is probably getting about ten times as many downloads — well over a million — as it would be getting as a paid app. This means there is a dramatically larger audience to pay for in-app virtual goods. (A bonus is that it makes the game, which relies on a large community, even better, too.)

Ngmoco’s Neil Young would not disclose the game’s revenues, but in an interview, suggested that a long-term financial goal for the game might be to get about an average 5 cents in revenue per day, per active user. That could add up. If Eliminate could eventually get 500,000 daily active users, that’s a revenue run rate of more than $6 million per year, after Apple’s 30% cut. Not bad for one “free” game on a relatively new platform.

Another game making great use of in-app purchasing and virtual goods is “Tap Tap Revenge 3,” the latest rhythm/music game from Tapulous, an iPhone app startup. The Tap Tap Revenge franchise is basically the iPhone equivalent of “Guitar Hero” or “Dance Dance Revolution,” and has been around for a long time.

Tap Tap Revenge 3 launched in October, when only paid apps could use in-app purchasing, so it still costs 99 cents. But it topped the paid app charts for several days and likely has hundreds of thousands of downloads worldwide.

It, too, is using in-app purchasing for virtual goods: Mostly music tracks for users to play along with, such as song packs from Lady Gaga, the All-American Rejects, Blink-182, Lynyrd Skynyrd, etc.

Tapulous CEO Bart Decrem wouldn’t disclose the game’s total sales or downloads, but says the company has sold “hundreds of thousands” of tracks using in-app commerce. Sounds like another hit.

And while in-app payments will clearly be driving a new market in virtual goods within free iPhone apps, other developers have also found interesting, different uses for it.

One example: Navigon — whose $89 MobileNavigator GPS mapping app is the top grossing app in the App Store — uses it to unlock an add-on feature for its app. Via a $19.99 in-app payment, you can get livetraffic for your GPS app.

Expect to see more in-app payment opportunities to “unlock” things like this — ranging from add-on features, to unlocking levels and goods in free games, to using in-app commerce to manage subscriptions. The result: Ideally, more revenue for app makers (and Apple), giving publishers an incentive to keep investing in making more great iPhone apps.

Source: http://www.ivanwalsh.com/2009/09/success-stories-for-the-micro-transaction-business-model/

18 September 2009, 1:29 am

Nima Pourshasb and Laura Brown, at Live Gamer have published this article on the relative success of the Micro-transaction Business Model. As you can imagine, it has a positive spin and doesn’t work too hard to argue against its own case. Why should it? Others will do that anyway. Here are some of the key points.

The authors begin by highlighting that the ‘microtransaction model is a proven and reliable business model for online gaming, virtual worlds, social networks and other virtual environments.’

Stemming from Asia, the use of microtransactions is beginning to flourish in Western markets; over half of all MMOGs launched in Western markets use a microtransaction model and these revenues are increasing at a faster rate than subscriptions, according to Nick Gibson at casualgaming.biz.

Shanda is a virtual environment provider who switched from a pay-for-time model in 2006 to free-to-play supported by microtransactions. Desmond Lu from Shanda said at the India Gaming Summit 2007 that the change in business model had escalated the traction to the site several times over. The following are a list of some of the success stories that are testament to the strength the microtransaction model.

Zynga

- Estimated to be earning $200 million annually in revenue, mostly from virtual goods like poker chips in its Facebook Texas Hold’em poker application

-  41.5MM monthly active Facebook users (one-fifth of Facebook’s 200MM users

- 11MM active daily players across all its games, 2.5MM players per day on Texas Hold’em, with Mafia Wars seeing 1.6MM players per day2

- Both games are estimated to be adding about 150,000 new Facebook fans every week

- Majority of revenue comes from the 2% to 10% of users who pay $1 an hour to play premium games or buy virtual goods4

Sources: 1TechCrunch 2009, 2Business Week 2009, 3Virtual Goods News 2009, 4Business Week 2009

Playdom

- Estimated to be earning $50 million in sales per year from virtual goods

- Develops the #1 game on MySpace (Mobsters), and 8 of the top 25 games on the MySpace application platform

- MySpace portfolio: Mobsters (13.4MM users), Bumper Stickers (10MM), Own Your Friends (9.5MM), Kiss Me (2.8MM) Poker Palace (2.7MM), Heroes (2.1MM), Sorority Life (1.6MM), and Rockstars (1.5MM)3

- Poker Palace (in the Top 25 games list with 2.7MM monthly active players) and Sorority Life are on Facebook, with an iPhone Mobsters game to be released before year end

- 5.2MM daily active users and 21.8MM monthly active users, a 23% play rate, engages players for an average of 11 minutes a session with more than 5% of people who play the company’s games spend money on virtual goods4

Social Gaming Network

- Estimated revenue of $50MM1 mainly through virtual good sales

- Friends sees approximately $100K per month1 – since January 2008, (fluff)Friends has seen a 192% increase in revenue per spender, and a 143% increase in spend per transaction3

- SGN-owned games have been installed a total of more than 51.5MM times, representing a total of nearly 40MM unique Facebook users2

- 13MM downloads of its suite of games on the iPhone and iPod Touch3

iBowl, the company’s most successful game, was also recently named #6 on Apple’s Top 20 Apps of All Time list and awarded 24% of the iPhone and application market by ComScore3

- SGN’s games also command more than 1MM game players per day across multiple social networking platforms including Facebook, MySpace and Bebo3. On an average SGN games are on one in three of Apple devices, with a 25% user crossover with Facebook3

Sources: 1,2VentureBeat 2009, 3SGN.com

Gaia

- Browser-based anime-themed ‘online hangout’ with over 15MM registered accounts1

- Minimum age to play: 13

- Free to join

- Encourages and facilitates avatar customization

- Gaia claims that there are over 1B posts on the Gaia forums, 300,000 members log-in per day and on average a user spends two hours on the site

- Gaians can earn ‘Gaia Gold’, the in-world currency, by participating in activities such as events based around holiday celebrations and mini-games – Gaia claims over 190MM Gaia Gold is exchanged daily

- Gaians’ can also use real money to purchase ‘Monthly Collectables’

- Gaia Online allows third-party advertising

- Estimated 2008 revenue: $75MM2

- Sells more than $1MM a month of virtual goods3

Sources: 1Kzero Consulting 2009, 2Gaiam, Inc. Q4 2008 Earnings Call Transcript, 3TechCrunch 2008

WeeWorld

- Browser-based virtual world with over 26MM users1 (60% Female)

- Minimum age to play: 13

- Free to join

- Approximately 1MM users visit the WeeWorld site each month, and 80,000 login each day2

- Premium virtual goods and branded gear can be purchased

- WeeMees’ can be customized for free: body, clothes and accessories, however users can also buy ‘Points’, which can be spent on specific items

- WeeWorld users can share their personalized avatars across a number of services (including Facebook) with the primary distribution channels being AIM and Skype

- Money can only be converted into WeeWorld ‘Points’, not back again

- WeeWorld allows third-party advertising

- Estimated 2008 revenue: $10MM+3 mainly through virtual good sales

Sources: 1Kzero Consulting 2009, 2Tim Howgego – Virtual Goods, 3The Drum Online 2008

MapleStory

- Cartoon-style MMORPG for kids, using client install with 2D graphics – over 50MM players1

- Minimum age to play: 13

- Free to join

- Revenue is generated via the “NEXON Cash Shop”, where users can use real money to buy virtual currency to be redeemed for special, exclusive items for users’ avatars

- Players can also join forces with others on a small scale by forming a party of adventurers, or on a large scale by joining a “guild”

- On average, players are immersed in MapleStory for 200 minutes at a time2

- MapleStory does not allow third-party advertising

- Estimated 2008 revenue: $150-500MM3 from virtual good sales

Sources: 1MapleStory.com, 2Onscreenasia.com 2008, 3Virtual Goods News – DFC Intelligence 2009

Habbo

- Browser-based virtual Hotel with over 124MM avatars – 10MM active accounts1

- Minimum age to play: 13

- Free to join

- Has an in-world currency, ‘Coins’, available for purchase with real money and awarded as prizes (through mini-games)

- ‘Coins’ can be used for activities such as furnishing hotel guest rooms, adopting a virtual pet, clothing and accessories for avatars etc.

- Has a mobile version: Mini Friday (approximately 1MM users2)

- Habbo allows third-party brand marketing

- Estimated 2008 revenue: $50MM3 from virtual good sales

- 10% monthly players pay, $10.30/mo per paying user4

- Sources: 1,2,3VentureBeat.com 2008, 4Brinking – Nabeel Hyatt 2008

Club Penguin

- Browser-based virtual world with over 22MM registered accounts1

- Targeted at ages six – 14

- Two types of membership

- Non-member (free): can go anywhere in the world except member parties and can use in-game currency to buy a limited number of virtual items

- Subscribers: added benefits such as additional game items and characters which can be purchased with real funds via the game’s virtual currency

- Club Penguin is ad-free

- Estimated 2008 revenue: $50-$150MM2 – mixture of subscription and virtual good sales

- 25% monthly unique visitors pay, $5/month per paying user3

Sources: 1Virtual Goods News – DFC Intelligence 2009, 2VentureBeat.com 2008, 3Brinking – Nabeel Hyatt 2008

Whyville

- Educational, browser-based virtual learning world with over 5MM registered ‘citizens’1

- Targeted at ages eight – 15

- Each month, more than 2MM visits are made to Whyville2

- Approximately 60,000 new players register every month3

- Players spend an average of 34 minutes per login in Whyville, and 3 hours in total per month4

- In 2008 Whyville changed from a subscription to a microtransactions business model5

- Revenue is generated through the purchase of virtual items using Whyville’s virtual currency, ‘Pearls’

- Previously, the subscription fee was $4.95, now players can purchase ‘Pearls’ in $5 and $10 denominations

- CEO Jim Bower has reported that with the subscription model there was 5-10% uptake for active users, but the ‘Pearls’ were doubling this number

- Revenue is generated as a combination of corporate and institutional sponsorship and virtual items sales

Sources: 1,2,3,4Whyville.com, 5VirtualWorldsNews 2008

KartRider

- Korean 3-D casual racing game from Nexon, currently the most popular online game in Korea with over 17MM subscriber (1/3 of Korea’s population) and over 130MM subscribers in China1

- Free-to-play MMO with revenue generated from virtual item sales

- Similar to MapleStory (also owned by Nexon), revenue is generated via the “NEXON Cash Shop” where real money can be exchanged for virtual currency

- Co-promotional partnerships with the likes of BMW, for example, have seen sales of 2MM virtual BMW Minis in-game2

- Estimated revenue: $250MM3 from virtual good sales

Sources: 1Multiply.com 2008, 2Onscreenasia.com 2008, 3Intuitive.com

Tencent – QQ

- China’s largest internet services portal providing applications such as QQ IM and QQ games

- QQ Instant Messenger has over 900MM registered users, nearly half of which are active1

- The QQ Games portal has 5.8MM users simultaneously on-line2

- Has a virtual currency, QQ Coins, which are used on virtual items across all QQ services – coins can be earned or purchased

- Generated over $1BN in revenues in 2008, over $300MM in Q4 2008 alone3

- In Q4 2008, gaming revenue accounted for over $100MM from the purchase of virtual items4

Sources: 1,2Tencent Fact Sheet (as of May 2009), 3,4Tencent Annual and Fourth Quarter Results 2008

The authors close with the prediction that the microtransaction model, which has been so successful in Asia for nearly a decade, is poised to become the defacto monetization standard worldwide for online games and virtual worlds.

The removal of a subscription fee encourages a larger, more diversified user base, which in turn increases the overall number and willingness of players to trade in virtual goods.

In theory, there is no ceiling on the potential revenue that can be generated per user, unlike the subscription model, and the more the game developers enhance the game and community experience the less price sensitive players and the greater the reoccurrence of purchases will be. Virtual goods contribute to a continuously changing game and virtual world experience and provide a continuous revenue stream to match. While all of these points have some truth, they must be taken in context. The Asian business models are different that the US due to regulations, consumer habits and cultural issues. For example, in many parts of Asian teenagers and twenty-somethings don’t have credit cards. This means they have no option but to play ‘free’ game and generate virtual currency by working their way through the game and then using the virtual currency to buy things.

US game players are not so patient.

However, the acceptance of virtual currency and online credits is gaining popularity. How this effects nascent business models remains to be seen in the next 12-18 months.