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  SXSWi 2008 Notes:  ‘Casual Multi-Player Online Games: Serious Revenues’  
 
 
Posted 2008-03-11 by Tony Walsh
 
 
     
 
Following are my rough notes from the SXSW panel "Casual Multi-Player Online Games: Serious Revenues," featuring Michael Smith (Mind Candy), Adrian Crook (FreeToPlay.biz), Joe Hyrkin (Gaia Online), Jeremy Liew (Lightspeed Venture Partners), and Nabeel Hyatt (Conduit Labs)...

Moderator: What constitutes immersiveness for a virtual world? 3D? 2D? HTML?

Crook- A casual MMO is like Puzzle Pirates, in terms of delivery platform, java, etc. Facebook and Travian are other examples. For me, a Casual MMO is a place where people gather online with some kind of game structure, like Club Penguin with a loose game structure. A casual MMO is an online world with reduced barrier to entry in terms of price or platform.

Hyrkin- A range of categories apply. Casual MMO success depends on the community and engagement between users.

Smith- Presentation matters, we've stayed from avatar-based virtual worlds. At the last SXSW, I heard a lot about avatar-based worlds, but that space is getting very crowded now. Room for other types of games, such as PMOG.

Hyrkin- Not being 3D has a lot of benefits; nothing to download, easy access, reduces barrier to entry. MTV has 4 virtual worlds, built around their shows, they came top us and asked for a Gaia-like experience. We had huge success with Virtual Hills in Gaia.


Mod: So presentation doesn't matter... community matters more. Is Yahoo! Groups a virtual world?

Hyatt- I don't know or care whether we are a virtual world or MMO. Immersive is the right word to focus on, anything can have engagement. These expeirences have more immersion than a typical web page, doesn't have to be 3D, it's about what happens in your brain... a text MUD can be immersive, it's all about a sense of place.

Crook- Graphics don't matter, the mind models the situation (Crook quotes Daniel James from Three Rings)

Mod: demographics?

Hyrkin- Gaia 13-24 6% [60%i think he said] of total user base

Smith- Moshi Monsters 7-12 yo primary audience, secondary audience of teens, mums, grandmums, [everybody, in other words]

Hyatt- We are 16 to college age kids interested in building social presence. After high school there is a big drop off in online game play for youth oriented worlds as kids begin to get jobs, prep for college, get drivers' licenses, etc... We plan to mix the mainstream gaming demo into the web based experience... some of these web based worlds have been enjoyed for quite some time, we want to take this to the next step...

Mod: landscape over time?

Crook- Outside of the game world, people don't understand virtual item transactions, there's a generational distinction between real and virtual worlds. 20 and under ages don't care about that distinction so much. There are also lots of different roles to play online, but one unifying element is there is no difference to these kids between real/virtual.

Hyrkin- We need to find ways to do more than what we are now to retain users.

Mod: geographic differences?

Hyrkin- Good broadband is responsible for adoption in Korea, VWs have started off a bit niche in America, starting to blend Asian and American game styles, all of us are starting to figure out how to get broad adoption here in USA.

Mod: users are experimenting with identity play; some hypothesize that the popularity of VWs is due to ID play...

Hyrkin- It's difficult to get outside your culture in China for example...

Smith- Fast virality with young users... our product is a casual MMO around a mainstream subject, as opposed to fantasy or sci-fi, these are going to seem pretty niche as we go forward... smart developers in the west need to think about more mainstream subjects...

Hyrkin- Gaia demographic split 55% female, 45% male

Smith- developing more female-friendly games as well

Mod: MMOs outside of core (male, hardcore) audience...

Crook- Barbie girls got 9.5M users in the first 9 months... I agree with Michael...

Mod: Build a Bear 3M users in 3 months, Webkins, we're seeing people taking their brands and IP from offline into VWs and getting to massive scale very quickly -- what do you do as a startup?

Hyatt- Another reason we focus on our age group is that there's an opportunity there... going for younger users, the market is too crowded... flooded by Big Media, it creates a rough landscape for 2-3 years... we are trying for an underserved market... as long as you have a very distinct focus on a specific value proposition... the more focused the better...

Smith- Agree with Hyatt... our product is designed to make money with microtransactions, virtual item sales... [interrupted by moderator, sheesh]

Mod: What's the market landscape look like?

Smith- I'd much rather compete in a tight market than an untested one. Major toy companies are getting involved, most with spacious 3D worlds, our differentiator is an emotional connection between user and their online pet [hello, Pokemon]... there's an educational component in the form of puzzles... parents and teachers love this concept, it's a way to get them to pay

Hyrkin- Big brands are good at marketing, but that doesn't mean a VW is a good way to build the brand... repeat usership is the path to success... non-licensed VWs are about more than just the brand that are very difficult to maintain repeat usage over time... MTV is a great example, scaling and building and providing ongoing engagement is a challenge...

Mod: Let's get back to what Michael was talking about. How do we make money?

Crook- One of my more popular blog posts is about revenue models for online games. The most common two are advertising and virtual item sales. Some of the more recent ones include merchandise (webkins, barbie), info-sale model (foodfight on facebook), affiliate sales model (facebook uses this)... varying degrees of intrusiveness...

Smith- Webkins could be the next Beanie Babies, they've basically made a cuddly pre-paid game card that you have to renew after one year [I had no idea, man, that is frikkin evil].

Crook- Build a Bear is interesting, you can build it in the store and redeem it online [offline avatar customization]

Smith- Bella Sara is a leader [will be a leader?] in this space, it started as a product like Pokemon for girls, but with horses, like a My Little Pony CCG... they are making a virtual world to go along with it, there are about 1M registered users

Mod: virtual goods...

Hyrkin- Our virtual goods sales have radically spiked over the last few months... community-driven sales... feature-driven sales... we used to have a free model with the exception of 2 monthly collectible items... 4 months ago we introduced items only available through real cash, cards available at WAL-MART, we are doing about $1M in item sales monthly, such as clothing, accessories, evolving items (change over time [cool idea!]), the range of items has been increased... retail availability is extremely helpful... 100,000 transactions daily on auction site... multiple avenues of engagement (presumably auction is one of these)...

Mod: how do you maintain scarcity and value?

Hyrkin- We don't have an absolute answer, still experimenting... limited time availability for some items... some items don't need to be scarce... the auction component adds some additional sophistication... we will be introducing item decay and consumables, one-off animations [again, brilliant and evil. $1 per fart? yikes]... we used to get cash in the mail, had to count coins, we still get cash in the mail... users need to pay for things on time, one user sent $5 in a $15 FedEx envelope...

Smith- Subscriptions work for younger users, microtransactions can be problematic for youngsters, it's easier for the child to ask for one monthly fee over small payments...

Hyrkin- Under 10, subscription makes more sense, but on the teen space, teens want to be able to do things themselves, want to make their own decisions... 40% - 50% of our revenue comes from gift cards...

Hyatt- The good thing about a web company is that it's small and agile, with a retail component, it's very large, complicated...

Hyrkin- Advantage of game card is it can be used for anything in the game...

Mod: Diversity of payment methods is a non-trivial problem with no easy solutions, easier as your user base gets larger.

Hyatt- The key for any microtransaction based game is the engagement loop... [i.e. why would players buy/use the items, what makes sense to sell and what doesn't] What is the core engagement loop-- in Guitar Hero, it's not clothes, it's music.

Smith- Clothing is a huge part of Audition Online... 75% of virtual items in Korea are gifts with no impact on the game--these strengthen social relationships...

Mod: advertising and sponsorship... what works?

Hyrkin- We launched sponsorship a year ago, we went from one movie studio to dozen[s?]... there is a balance between user engagement and pushing things on our users too much... we try to create sponsorships that provide value to the users... Scion is a great example, all of a sudden cars were available... 7,000 Scions acquired over 1 year... in almost every movie promotion, there are more trailers viewed at Gaia than anywhere else on the web [how would he know? weird.] The vast majority of sponsorships use the same sort of templates now, rather than earlier when every campaign was quite unique (Mimsy promo took 6 - 8 weeks)... we make 75k - 200k here per month on sponsorships [for each sponsor?]... we're starting to see deals in the 6-figure range, launching campaigns with major brands, i.e. Nike... more engagement than other places...

Q&A

Q: I run virtual relay for life... in the creation of your communities, is philanthropy a component that you look to at?

Hyrkin- We would look at those kinds of things, there's a message board that is user-driven based on interest...

Q: Do you ever allow users to create content?

Hyatt- There are a cadre of startups purporting to allow this, I'm a skeptic... players don't modify the core mechanic, and it shouldn't be messed with... our product will be highly customizable, but users can't change the basic experience...

Smith- I'm interested to see what's going to happen with Raph Koster's Metaplace... we will give users some customization... user-created puzzles...

Hyrkin- the majority of Gaia is user-created engagement... user-created plays... user-created banks...

Hyatt- The core mechanic of Habbo is role-play... how do they augment and extend it...

Crook- WWE promo in Habbo was based around RP...
 
     
 
   
 
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Dinozoiks wrote:
Wow! Thanks for that Tony. Just posted a bunch of other tips here... http://www.dino.co.uk/labs/2008/45-tips-when-designing-online-content-for-kids/ Hope it helps someone... Dino...
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