Success Stories for the Micro-transaction Business Model

I am often asked for “Success Stories” this article from the below blogger provides some good data points.


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

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.


– 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


– 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,


– 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


– 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


– 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:, 2008, 3Virtual Goods News – DFC Intelligence 2009


– 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, 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, 2008, 3Brinking – Nabeel Hyatt 2008


– 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,, 5VirtualWorldsNews 2008


– 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: 2008, 2008,

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.


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