IMVU (pronounced by the CEO as im-vyu) CEO Cary Rosenzweig showed up to keynote the afternoon portion of the Virtual Goods Summit London today, and quickly proceeded to list 12 lessons for game developers about how to turn free users to paying users.
Launch a social media campaign that will build your brand and deliver results in our online Social Media Marketing Boot Camp starting June 7. Speakers include Abigail Cusick (Bravo Digital), Gregory Galant (Sawhorse Media), Alex Leo (Thomson Reuters Digital), Jim Tobin (Ignite Social Media), and many more. Read the reviews. 
What virtual good earned $75 billion in revenue? Michael Kalkowski, co-founder of GameDuell humorously opened with this question and went on to list the 10 essential features that improve monetization in social games.
I’ve been attending a bunch of social games and virtual goods conferences lately, and have been struck by the level of insight that’s on display at these events. I thought I’d talk a bit about why I’m excited about this week’s Social Games Summit + Virtual Goods Summit in London.
O ne of the stand out presentations from this year’s Virtual Goods Summit was +8* (pronounced plus-eight-star) CEO Benjamin Joffe, who discussed the “Digital Goods, Real Billions” and the opportunity in the Asian market.
Deborah Liu from Facebook announced that they will be opening up Facebook Credits to more developers in the next 6 weeks, and starting today they’ll be supporting a variety of new ways to pay for Credits by partnering with PlaySpan.
Ben Smith, Director of Program Management for XBox Live, discussed how the XBox 360 team learned about the importance of virtual goods and Avatar
Three leaders of social gaming from Playdom, Crowdstar and Zynga discussed a series of topics related to the fast growing virtual goods market and International opportunities.
Christa discussed that it’s not trivial to add a social layer to a traditional game, as obvious by looking at Civilization, an extremely popular PC game that has been ported to Facebook with moderate success. Playdom’s game Wonderhill tried to simplify the experience and give players a player-vs-player (PVP) option, and people seemed to enjoy it.
Niren pointed out that it’s $7 Billion on 1 Billion people, $2 Billion on 100 million people in Japan and the US is far below that earning per person, and if the virtual goods and social games model continue to match those markets, or even get halfway there, we’re still extremely early on the total amount of revenue that can be gained from virtual goods.
The panel agreed that there is a lot of interesting opportunities in the social, mobile and location-based gaming, because those are the areas where new ideas and opportunities will evolve. We haven’t really touched the social side of things, and Christa pointed out that innovating the way people connect with each other will probably be a very important part of the future.
Christa was supportive of Facebook Credits, and talked about the day when Facebook Credit cards will be available in tons of stores and people will easily be able to just drop a few Credits into a game that they enjoy. Mark Skaggs pointed out that young gamers think nothing of buying XBox points and Facebook Credits, and that will be a big business moving forward.
Niren pointed out that “fish where the fish are” is the right strategy, and right now they’re on Facebook. He also pointed out that Facebook will probably become even more important as the core of the web, and that means more people on the web will be accessible through Facebook.
Niren explained that as people stop paying $50 for boxed software, they will pay incrementally, and the number of whales in free-to-play games will go up.
Day 2 of the Virtual Goods Summit started with executives from some of the largest free-to-play companies in the world discussing the importance of virtual goods.
Atul Bagga from ThinkEquity moderated the session and kicked off the panel by discussing how the per capita gaming spend in China is 50% higher than the US spend. If you look at the models, it’s pay to play in the USA and free to play in China, and Korea is a mix of both.
BigPoint CTO Jan Wergin explained that they opened a new SF market and feels that America is growing rapidly, and that their model of developing $200K games and determine whether it catches on or not, and if so, continue to add content. He pointed out how the virtual goods model properly adapts itself to gamers’ wallets: players can pay $1 or $100 depending on their budget and enjoyment. This is in contrast to the subscription model, where you put all users in one bucket, even though they’re not. He talked about how their psychological profiles found that European gamers tend to be a little “more strategic” than other gamers, and that means their game style should adapt.
Nexon CEO Daniel Kim explained how at this point, US revenues are still only 10% of their total revenues, but they’re seeing the US market expand rapidly as players adopt the free-to-play model.
Alan Chen, CEO of Perfect World USA, thought that the future is a unified type of ‘console’ or game playing system. That’s why they are aggressively pursuing browser-based games, and he believes that free-to-play is the natural extension. A free to play game is a service, and by its nature emphasizes user feedback to iterate on their games based on user feedback, and Alan felt that will always prevail over standard games.
Jan made an interesting point about customizing your game for the various locales, and one thing he found with BigPoint was that Americans tend to buy more shields and Europeans buy more swords, first. So they adjust their game markets to represent that.
Key Numbers:
5 small-sized social game companies took the stage at Virtual Goods Summit to discuss the various truths and falsehoods related to the social games sphere.
5 Experts in social media analytics sat down to discuss how to understand whether your virtual economy is healthy, monetizable and futureproofed.
Ian Swanson from Sometrics made some great points about their GameCoins product, which allows users to gain Gamecoins from all kinds of activity, and then can use those to buy Facebook Credits. He also discussed the fact that while a company is going to generate the majority of their revenue from the users that purchase virtual currencies, it’s important to understand the users that affect the buying users. Ian told a story about a woman player who spent nothing, but after they looked deeper into the analytics, they found that she was inciting other players to spend money and play more.
Nicholas Talarico from Leveraged moderated the session, and told the story about the importance of offers in the pre-Farmville ecosystem, but how that has diversified as the social gaming market has matured.
Mike Ouye from Crowdstar explained that seeded premium currency and purchased premium currencies are extremely different, and it’s important for a company needs to watch that split, and to understand where that premium currency is flowing through your economy. It’s the lifeblood of any virtual economy.
Chethan Ramachandran discussed dynamic pricing and dynamic virtual goods, and made great points that we’re going to start to dynamically alter prices and virtual goods based on the user that’s currently engaging the service. This is something I see in the industry myself, and while the companies that are currently succeeding are doing this manually, it would be incredible to build a system that used metrics to understand a user and then dynamically propose prices and virtual goods to them.
Albert Lai from Kontagent:talked about how to predict the lifetime value of a user. This translates to better ways to optimize media spend, as users can know who to target. He explained that many media buyers are coming into the fold with tons of money, and it means that users’ lifetime value is as much about who they will bring into the game as their individual spend.
Finally, Nicholas asked some great questions about Facebook Credits. How has their seeding program affected you, and will Facebook Credits kill whales? The panel agreed that seeding is going to be important, because it gives users a taste of premium content, and that the whales will be whales, no matter what.
