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Check out Bill Grosso’s lecture on “Taking Virtual Economies to the Next Level” at Casual Connect 2010.

Lecture Description: Virtual goods are one of the most important monetization strategies for game developers today. In this presentation, Bill goes in depth on the metrics, measurements, and merchandising secrets that developers and executives alike need to understand and master in order to run a successful virtual economy. An author on economics and a well-known software engineer, Bill melds a rare combination of economic know-how and cutting-edge technology, resulting in monetizaton strategies deeply seeded in market-proven wisdom yet creatively adapted for next-generation gaming.

To watch the video and download presentation materials click here

The online gaming industry sells $2 billion a year in virtual goods through micro-transactions. What if they sold newspapers?

Today, CNN’s Fortune Magazine published an article titled, How Mafia Wars Will Fix Media By John Patrick Pullen which focused on the booming business of the free-2-play and micro-transaction based business model and how that model could be applied to traditional media like the New York Times.

Live Gamer provides the leading enterprise-grade monetization platform for games, social networks, toys, and digital entertainment properties.  Although this type of model has yet to be applied to the publishing industry – it is in fact a viable model that could revolutionize the way traditional newspapers and magazines do business if they offer exclusive content that is compelling to their viewer base.

Live Gamer sees average revenue per paying user across all its titles is $28 per month across 85+ million users worldwide. Comparatively  speaking an average of 15.7 million users per month visit the New York Times‘, where they have free access to content. Only fewer than 1 million readers choose to subscribe at $20 a month. Pullen suggests (and we couldn’t agree more) that publishers need to tap into this competitive nature and other game-like experiences that are driving the gaming industry today in order to encourage free-model readers to pay for content they find vital.

Read the entire article here

Contact us to learn how you can apply micro-transactions and the free-to-play business model to your IP

Sony, Warner Bros. Drop Subscription Fees and Move into Selling Virtual Goods

Today, the Wall Street Journal published an article titled, First, Give Away the Game which focused on the growing adoption of the free-to-play business model in the Western market with major companies like Sony and Warner Bros. The model not only removes barriers to entry for gamers, but also provides them with the ability to self-select into an optimal price point resulting in a compelling high-margin business for game publishers and developers.

Sony plans to release a F2P version of “Everquest II” and Warner plans to release “Lord of the Rings Online” by the fall abandoning a $15 dollar a month subscription fee. Players will now buy virtual goods and items upgrades incrementally through micro-transactions.

Although the price point on many virtual items often seem small—$1 or $2 for many items— publishers are discovering they can really add up. Across the 145+ titles we power e-commerce for we see an average of 10% of players purchasing virtual goods spending at an average of $28 a month. “There’s no cap on what the user will spend on micro-transactions, unlike a traditional subscription model,” says Andrew Schneider, Live Gamer’s president and co-founder.

This published story follows last week announcements of new partnerships with EA, THQ, and Real Networks’ Gamehouse only solidifying that major Western publishers and IP holders are rapidly adopting this model. Total virtual goods sales this year are expected to reach $1.7 billion in the U.S., up from $278 million in 2008, according to ThinkEquity LLC.

Contact us to learn how Live Gamer can help accelerate your micro-transaction strategy.

To read the Wall Street Journal article in full click here

Electronic Arts, Inc. has selected Live Gamer to drive its global micro-transactions-based projects and accelerate the company’s online gaming strategy. EA will integrate our enterprise grade Element’s platform to its global IT systems to augment existing ecommerce capabilities for EA studios worldwide.

Live Gamer Elements offers EA a breadth of new payment gateways, advanced virtual goods merchandising functionality, deep analytics capabilities, virtual item gifting, support for fictional (earned in-game) currencies, item storefronts, robust catalog management, cash-in flows and much more.

This exciting announcement follows last week’s news of partnerships with THQ and Real Networks’ GameHouse. Please read our latest press announcement or contact us to learn how to monetize your business through virtual goods and micro-transactions.

Read Forbes Coverage

Read VentureBeat’s Coverage

Live Gamer’s Advanced Commerce Solution Offers Scalable, Cross-Platform Monetization Across the GameHouse Social Gaming Platform

At Casual Connect in Seattle we announced that Real Networks selected Live Gamer to power Gamehouse Fusion virtual economy. The announcement followed a few days after news of our THQ partnership.

Gamehouse Fusion is a social gaming platform with thousands of socially connected games across mobile, social networks, and scales hundreds of millions of players. With the new agreement Live Gamer’s enterprise-grade platform, Elements will power virtual currency systems, manages complex virtual item catalogs and storefronts, user policy configurations and advanced merchandising on a secure and scalable platform.

“The free-to-play, virtual goods-based business model has proven to significantly increase revenue in social games, but due to GameHouse Fusion’s scope and complexity, it was critical that we integrate a trusted platform that could scale and meet all of our needs,” said Matt Hulett, chief revenue officer of GameHouse. “We chose the Live Gamer platform because of its advanced toolset and track record in the industry.”

“GameHouse has raised the bar for social gaming online and on mobile,” said Andrew Schneider, president and co-founder for Live Gamer. “We look forward to helping optimize GameHouse’s revenue, increase ARPU, and offer its users the best possible microtransaction experience.”

GameHouse Fusion launched in May with support from large media and technology companies, and simultaneously unveiled GameHouse on Facebook, the first application to be built on the Fusion platform.

“In-game virtual items have become increasingly popular with gamers today, and not only offer them a more immersive experience, but also give game publishers a viable and profitable revenue stream,” said Martin Good, THQ Executive Vice President, Kids, Family, Casual Games, and Global Online Services. “Live Gamer offers the most complete platform for integrating a virtual economy into our games. We view this as a critical component of our complete online game delivery platform for THQ’s growing portfolio of online games.”

The deal marks a major shift with major US gaming publishers who are now embracing the virtual goods business model more than ever. The virtual goods business model allows publishers to offer their games F2P (free-to-play) and players pay real money for virtual goods such as weapons, booster packs, fashion, accessories, etc…

“We’ve watched this industry evolve since its inception and today, virtual economies have become the driving force in the online gaming business. THQ is at the forefront of game development across the globe, and we look forward to helping them grow their business model for years to come, ” said Andrew Schneider, President and Co-Founder, Live Gamer

For more information on Live Gamer, visit www.livegamer.com. To learn more about THQ, visit www.THQ.com.

Female gaming icon and Live Gamer’s Senior Director of Business Development, Stevie Case will speak at a special panel hosted by the Technology Council of Southern California on July 15th. The “How Virtual Goods Are Transforming the Game Industry” panel will focus on the trends and challenges of the Free 2 Play business model and the explosion of virtual goods consumption on Facebook, Smart Phones, and other popular gaming platforms.

Speakers:

• Andre Bremer, Studio CTO at Zynga
• Stevie Case, Senior Director, Business Development at Live Gamer, Inc.
• Jason Kay, Chief Operating Monkey at Monkey Gods LLC
• Brad Spahr, Founder & CEO at Fan Space Media
  (former Exec. Dir. of Digital Distribution, Sony Pictures Entertainment)

Moderator:

• Shalom Mann, Founder & Creative Director at OneLoop Games
  (former SVP & Studio Head, Sony Online Entertainment)

To learn more click here

To register now click here

In this presentation, Bill goes in-depth on the metrics, measurements and levers that developers and executives alike need to understand to be successful.

Check out his slides from the lecture below. To view additional presentations and videos from Live Gamer visit: http://livegamer.com/strategy/presentations/

The ability to identify user segments with the highest monetization potential is very valuable to the P&L manager of any new social game. If survey data suggests that, say, German gamers have the highest ARPPUs, one might be tempted to focus resources on acquiring German users and converting them to paying ones. One may even use these data points as guiding benchmarks for monetization initiatives. These geographic comparison studies are becoming more commonplace but can be very misleading.

They seem to convey information about a country’s gamers’ willingness to pay for virtual items, but are instead reflecting the nature of the composition of the survey set within a country. Specifically, the broad grouping into country categories ignores the following:

Nature of titles in survey set

ARPPUs can significantly vary depending on:

• Game genre (e.g. social, casual, MMO, virtual world): Users in social games value the social utility of their virtual item collection while an MMO gamer is willing to economically invest primarily to improve its characters’ ability to progress in the game.
• Business model (e.g. free-to-play, subscription, freemium): The same user can be paying $15/month to play World of Warcraft (subscription) and only purchase $3 worth of diamonds in Runes of Magic (free-to-play) every month.
• Platform (Facebook, web, mobile, console): Once Apple allows a virtual currency in its iPhone and iPad platforms, ARPPUs will spike.
• Drivers of purchase (e.g. gifting, self-expression, game leveling, content consumption): Typically, gamers spend more on gifting than on self-consumption of the same virtual good, as they are willing to pay a premium for communication enhancement.

Chart 1 illustrates how significantly ARPPUs can vary across game genres (and sub-genres) for several Live Gamer clients in the same country (Note: Game genres have not been specified to avoid identification of publishers).

Payment options offered by titles in survey set

According to Global Collect, the number of payment methods can lead to an increase of 22% of conversion for e-commerce. The payment methods offered in a game are typically a function of:

• Publisher preferences, driven by difficulty to integrate, perceived ability to increase conversion and reduce drop out during check out, processing costs and fraud
• Consumer preferences, driven by availability, convenience, cost and perceived security

The choice of payment method has a direct impact on ARPPU. For example, SMS payments typically have fixed price points, lower maximum prices and can include a premium of up to 40% (due to carrier charges) for the convenience of paying with your cellphone. At the same time, completion of surveys from offer providers does not require the user to open their wallet.

Chart 2 highlights how different the payment type distribution (based on transaction volume) can look between two Live Gamer clients: a European and a US publisher.

ARPPUs of titles are constantly changing

In the current trend towards Gaming as a Service, the game experience is constantly “tweeked” to revisit the balance between the “free” experience versus the value-add through purchasing virtual items. New features (e.g. user-initiated actions, expiration of virtual items, etc) are continually incorporated and even game design is altered to encourage users to micro-transact. Hence, games at different stages of their lifetime and with varying virtual goods commerce tactics will display different ARPPUs.

Chart 3 presents an ARPPU time series for one our client’s titles.

Recently a global developer asked Live Gamer for a country comparison analyses for their genre across four specific countries, hoping that we would offer them averages based on our unique database that contains ARPPU data since 2001 and covers 23 countries. Because of the reasons discussed in this blog post, we intentionally kept away from any form of aggregation, and instead presented them with Chart 4 based on the single title that we believe to be most comparable to theirs.

In conclusion, we strongly recommend game and other online social entertainment developers to dig into the survey sets of geographic comparison studies. In the cases where a characterization of the underlying data is not provided, the data points should be taken cum grano salis.

More importantly, it will ultimately be the ability to drill into user game and purchasing behavior that will provide the reliable insights to maximize ARPPU across the board, regardless of the country.