iPhone/iPod Apps Get Free To Play Virtual Goods, Sort Of

apple-free-appsApple is now half a step closer to allowing the virtual goods economy to flourish on iPhone and iPod Touch applications. Developers can now allow users to buy virtual items within free applications and games, as TechCrunch is reporting. However, virtual currencies are still not allowed.

For game developers that have bet heavily on the iPhone, this is still huge news. One of the major hindrances of the growth of the virtual goods economy on the iPhone/iPod Touch platform to date has been Apple’s Platform policies – until now, Apple has only let developers sell virtual goods in paid apps. Unlike social games on Facebook and MySpace, “freemium” business models have been restricted (though some developers have still been driving users to paid versions of their apps as a way to acquire virtual goods). This is a big step toward changing that.

As SGN chief executive Shervin Pishevar said on Twitter:

Twitter _ shervin pishevar_ ILOVEYOUAPPLE.ILOVEYOUAPPL ...

SGN has its games installed on 1 in every 3 iPhones and iPod Touches. With games like jet-fighter simulator F.A.S.T., it can now make money from users who use the free version of the game but not the paid version.

Apple’s note to developers reads:

In App Purchase is being rapidly adopted by developers in their paid apps. Now you can use In App Purchase in your free apps to sell content, subscriptions, and digital services.

You can also simplify your development by creating a single version of your app that uses In App Purchase to unlock additional functionality, eliminating the need to create Lite versions of your app. Using In App Purchase in your app can also help combat some of the problems of software piracy by allowing you to verify In App Purchases.

Visit the App Store Resource Center for more details about how you can add In App Purchases to your free apps.

And here are the relevant guidelines Apple is giving to developers. Note that virtual currency purchases are still not permitted.

1.1 You may use the In App Purchase API only to enable end users to purchase content, functionality, or services that You make available for use within Your Application (e.g. digital books, additional game levels, access to a turn-by-turn map service). You may not use the In App Purchase API to offer goods or services to be used outside of Your Application.

2.1 You may not use the In App Purchase API to enable an end user to set up a pre-paid account to be used for subsequent purchases of content, functionality, or services, or otherwise create balances or credits that end users can redeem or use to make purchases at a later time.

2.3 Content and services may be offered through the In App Purchase API on a subscription basis (e.g., subscriptions to a magazine, comic series, or financial reporting service); however, rentals of content, services or functionality through the In App Purchase API are not allowed (e.g., use of a particular game item or digital book for a pre-determined, limited period of time).

To dig deeper into the virtual goods market, check out our new report: Inside Virtual Goods: The US Virtual Goods Market 2009 – 2010.

Social Games May Be Helping Facebook Gain More Users in Asia

Over on Inside Facebook, we’ve taken a closer look at Facebook’s growth in Asia last month — countries like the Philippines, Indonesia and Taiwan grew by more than 1 million apiece, helping Facebook to grow by 6 million overall in the region. In recent weeks, we’ve also been covering the fast growth of games like Happy Aquarium, My Fishbowl, Happy Farm, and a range of other quality simulations built by Asia-based developers. The largest, Happy Aquarium, has more 12.8 million monthly active users — more than the largest Facebook-using country in Asia, Indonesia, which has 9.71 million.

Games and countries are two different things, of course, but the point is that these games are pacing Facebook’s own growth — or is it the other way around?

Anecdotal evidence from developers, plus the correlation we’re seeing between game and country growth in the region, suggest that games are actually helping Facebook gain new users. As one developer with a large social gaming company recently told us, “many of these users joined Facebook for the games, and don’t even realize that Facebook doesn’t actually own and host the games.”

Of course, Asia-built gaming apps are available all over the world, in many languages, while developers with big games on the platform also offer their games in Chinese and other regional languages. The overlap between games and regional growth is not entirely clear, and certainly more data is needed in order to prove that games are actually causing growth. Still, something to think about — especially for Friendster, which has been historically popular in countries like the Philippines, Indonesia, Singapore and Malaysia, where Facebook is growing fast.

Like Hi5 is already executing on, Friendster is now beginning to talk about plans for more gaming features on the site. Perhaps that will help it gain some of the users who are apparently moving over to Facebook.

Preview: Turn It Up to 11 with Rock Band on iPhone

Rock Band iPhoneThis past week, Electronic Arts revealed the upcoming iPhone and iPod Touch renditions of the exceedingly popular console game, Rock Band, at the CTIA show in San Diego. Long has this very social game filled the living rooms of pretend rockers, but now it will expand to the mobile area, bringing a whole new meaning to “world tour” mode.

Way back in January, we looked at another music game, Tap Tap Dance from Tapulous. With the current dominance of the Tap Tap series (namely Tap Tap Revenge), we wondered why the Rock Band and Guitar Hero developers weren’t jumping onto the iPhone. Well, it looks like the wait will be worth it, because this new rhythm giant could very well oust Tapulous from its #1 spot. In a word, it looks awesome.

The mobile rendition of Rock Band will bring most of the features the console version is known for. Okay, so it’s not the same as strumming a plastic guitar, but it is still quite fun. That said, the game plays more or less the same as the Tap Tap games, having players tap frets or beats as they scroll down the screen. However, on the iPhone, Rock Band punishes (for lack of a better term) missed notes by not playing that part of the track, thus adding a great deal of depth and immersion to game play (let’s face it, nailing those tough solos without a single miss is gratifying).

Drum TrackAs with the console version, the iPhone Rock Band game also has all four instruments for play. Yes, that includes guitar, bass, drums, and vocals (at least in the final release). Each instrument has a unique track to it and comes with the varying difficulty levels that veteran virtual musicians should be familiar with. Of course, with multiple instruments, comes the desire for group play and you can bet that this feature comes with the new title too.

Connecting via Bluetooth, players can rock out to up to 20 different release songs (see below) in local multiplayer mode. Furthermore, players can choose between playing a quick single song or a myriad of sets within the long and involved world tour mode.

If local play isn’t a possibility, and single player feels dull, EA is also making use of Facebook Connect, allowing players to log in and connect with friends within the social network. In fact, the new 3.0 software is also seeing action as the game makes use of push notifications whenever your friends invite you to play, and if the 20 initial songs aren’t enough there is all ready an in-game store selling downloadable content. Currently, the first content pack is two songs from the Smashing Pumpkins for only $0.99.

Long story short, Rock Band for the iPhone looks incredible, and thankfully, its release is coming soon.

Track List:

  • 30 Seconds To Mars – “Attack”
  • AFI – “Girls Not Grey”
  • All American Rejects – “Move Along”
  • Beastie Boys – “Sabotage”
  • Blink-182 – “All The Small Things”
  • Blondie – “Hanging on the Telephone”
  • Foo Fighters – “Learn To Fly”
  • Foo Fighters – “Everlong”
  • George Thorogood & the Destroyers – “Bad to The Bone”
  • Jethro Tull – “Hymn 43″
  • Joan Jett – “Bad Reputation”
  • Lynard Skynyrd – “Simple Man”
  • Motorhead – “Ace of Spades ’08″
  • Pixies – “Debaser”
  • Presidents of The United States of America – “Ladybug”
  • Rise Against – “Give It All”
  • Silversun Pickups – “Lazy Eye”
  • Smashing Pumpkins – “Cherub Rock”
  • Steve Miller Band – “Take The Money and Run”
  • The Go Go’s – “We Got The Beat”

[images & track list via Touch Arcade]

Social Gaming, Beyond the Clones

n101539264719_7235[The following began as a comment left by gaming veteran Tadhg Kelly on a post we wrote last week about Zynga's Café World, a clever clone of Playfish's Restaurant City. Café World had 8.6 million monthly active users at that point, only a week after launching. Today, a week later, it has 15.9 million, according to our AppData service. In the article below, Kelly explores the history of cloning in the gaming world and the ramifications for social games in the future.]

While social games as a sector has exploded onto the scene as the new thing in recent times, there are some parts of how the sector operates which are very old-school. Chief among these is rampant cloning. Cloning has a very long and ignoble history in games for a couple of reasons:

It’s much easier to develop a game when you know what you’re aiming for.

Developing a new game is a complex undertaking because the target can be unclear. It’s not just how to develop it, it’s what are you trying to develop in the first place and how sure can you be that it’s any fun at all?

crate_tetrisHowever developing a version of an existing game removes half of that complexity and reduces it to an engineering problem. You already know it will be fun because you can use the previous version as a reference point. Developers and publishers generally like that sort of certainty.

Many developers like to copy other games as a way to learn how to code better.

Indeed it’s considered a part of learning how to develop games that you will at some point copy another game in order to learn how good games work. Tetris has been copied and recopied by every amateur developer you can think of for the last 20 years because the game mechanics are so instructive.

Many publishers like selling a recognisable concept to their audience.

Game publishers like a game that they can sell, and that means one of three things:

1.     An instantly recognisable concept

2.     A instantly recognisable brand

3.     A game concept so brilliant that it conveys itself

In an ideal world all games would be the third option but in actuality that is very rare. Wolfenstein and Doom are examples of games that managed that. For most other developers and publishers, however, they exist within the first or second option most of the time.

Invention is hard. What many developers do is opt for instant recognition through cloning either a specific game or following its genre. Game genres are simply a gathering of conventions from some source games that were cloned so much that they became standardised.

doomWhen Doom appeared there was no formal First Person Shooter genre. Now there is. Many games have cloned, adapted and expanded upon Doom’s roots. All game genres have similar roots.

Cloning is hard to defend against from a legal standpoint.

When Pong was released by Atari back in the 70s, it spawned many clones. Atari spent a great deal of effort trying to stop this sort of thing but discovered they couldn’t. Pong and Bejewelled and a bunch of other casual games have gone on to be cloned by just about everyone since because the games were very easy to clone.

Cloning is not generally considered to be copying.

Copying is lifting not just a game’s mechanics but also its look, feel and intellectual property. Legally speaking the reason why cloning has always been hard to prevent is that the law does not protect ideas. It protects the expression of ideas.

Cloning is a major source of innovation, through adaptation and improvement

Cloning has a sliding scale. Many of the cloned copies of Bejewelled are carbon copies that essentially swap artwork styles and brand name but are otherwise identical. On the other hand, Puzzle Quest certainly takes inspiration from Bejewelled but rolls a whole RPG out of it and so has become a unique and interesting game.

Cloning and Social Games

Zynga has managed to create a clever commercial engine for their games and a vast userbase as a result. But their tactics of the last year have relied heavily on cloning to get there. They tried original development but that did not go well (see their $2m fantasy title).

nintendoHowever they are not the only ones by a long shot. Playdom’s games are also largely clones, in many cases clones of clones. Playfish, often thought of as the more original social game studio, has based several of its games on Nintendo and other casual games and have also recently gotten into the virtual farming market with their own clone.

The RPG format in particular has been cloned far and wide into dozens of themes. Many of the other successful games are quite simply adaptations of existing concepts already in web games and transported into social networks. Farming games, rpgs, Poker, etc are some examples.

It is fair to say that the vast majority of social games are actually clones of other social games or casual games to a greater or lesser extent.

Is Cloning a Problem?

So cloning is everywhere. But is it actually a problem?

Zynga seems to be approaching 150m users. They may have a catalogue of games that have clear origins in other games. They may be making money hand over fist.

The Zynga difference is that Zynga have become experts at funnelling. They do this through spending an awful lot of money on advertising externally, and also use their own games as advertising platforms for their other games. Zynga is able to generate enormous user adoption of their games very quickly as a result (as seen by the recent explosion in Café World users). The same is true of Playfish, who cross-promote all of their games with a sidebar but don’t advertise as much.

farmvilleThis also means that the monthly active user (MAU) figure may be a false metric, as it only counts per game, not per developer. So Zynga may have 150m MAU on paper, but if those users are each across 3 or 4 Zynga games, the company’s MAU may actually be as low as 50-60m actual people. (This is also why it’s better to use DAU as a way of judging real activity in games on Facebook).

But so what? Does Zynga’s activity actually affect the original developers? It doesn’t seem to.

A recent example of this is Farm Town and Farm Ville. When Farm Town launched on Facebook it exploded up the charts with no advertising. It was a game concept so brilliant (for the platform) that it conveyed itself. Zynga (and later Playfish, with Country Story) jumped on this new market and applied their commercial model.

Everyone seems to have forgotten that Farm Town still has 19m users. While Café World may have a lot of similarities to Restaurant City, it hasn’t actually taken any Restaurant City users away. Playdom’s Poker title has its own audience, it hasn’t eaten Zynga’s Poker audience.

Unlike the console video game market where games are comparatively expensive and competition between titles is very much a win/lose scenario, social games are free. What we forget in comparing the MAUs obsessively is that players can be both Farm Ville and Farm Town players because it costs them nothing.

Social games are thus not a zero-sum market. The viral channel effect that brought 19m users into Farm Town is very much alive and well and raising new applications all the time.

Strategies to Deal With Cloning

However if you do think cloning is a problem then there are several approaches to tackling it.

Brand

Of all the casual games that have been commercially cloned over the years, one stands out as a highly significant exception: Tetris.

Tetris is not a difficult game to clone, mechanically speaking. It is a very simple game after all, and everybody knows how to play it. Tetris has certainly been copied by just about every college game development graduate at some point but it remains relatively untouched commercially.

This is because Tetris is a strong intellectual property. Tetris, unlike Bejewelled, is a game name which most casual players know very well and as a result they tend to favour the brand. Tetris launched the Game Boy, it is addictive, it had a song named after it and it is iconic and instantly recognisable. So clone developers tend to stay away from carbon copying it because there’s no point.

So a strong brand is good protection against cloning, but it is difficult to achieve.

Legal

The law may not protect game innovation but it does protect expressions of that innovation. That’s why Mattel was able to get Scrabulous taken down: It was so close to the Scrabble intellectual property that they were able to make the case that Scrabulous constituted an infringement.

The other form of legal protection that you could employ is patenting. Patenting requires that you have the means to file a patent, the means to protect it and that your game has a genuine innovation that other games do not yet have. Patents also take years to be recognised, although you can obtain some protection from using the phrase ‘Patent Pending’ clearly.

Patents have protected Slingo (a casual game mashup of slot machines and Bingo) from being commercially cloned for a decade. Nintendo has used patents to prevent anyone from using the insanity mechanic in Eternal Darkness.

Patents are something of an ethical minefield however as they can also stifle innovation. Many developers are not comfortable with that idea because software development is usually iterative and relies on being able to use innovations that went before to do something new.

Game Design

There is a correlation between the apparent complexity of a game’s design and how likely it is to be cloned. Bejewelled is easy to clone because the mechanics are on display. The Sims and Animal Crossing, on the other hand, are not. It takes time to learn how they work as much as how they work well, and this means the actual effort of cloning either of them is probably greater than is worthwhile.

peggle-deluxe-screenshot-2That doesn’t mean that you have to create a huge life-sim game just to avoid being cloned. Some casual games like Peggle have not yet been cloned to any great extent, partly because Popcap learned their lesson with Bejewelled and protect Peggle aggressively, but also because Peggle is very reliant on good physics. Good physics are hard to get right.

The real reason why many games on Facebook get cloned heavily is that they are easy targets. Restaurant City, Farm Town and Mobsters are simplistic games, and this is what makes them clone-able. Their game mechanics are very easy to understand and the kinds of reward that they offer are simple levels and item drops.

Social games to date are mostly just fancy interfaces with very little back end depth. It does not matter in Restaurant City what combination of items and menus you use in your restaurant. It doesn’t really matter what farm orientation you have in Farm Town. Most of the side quests in any RPG have no variation. Most of these games cast aside compound effects and deep design and so they are very easy for any developer to interpret into a rule set and then clone.

Social games are by and large extremely dumb software. So if you want to avoid being cloned, the answer is to not design dumb software that can be reverse-engineered in a week.

Does Cloning have a Future?

The current social game market, in particular the Zynga model, has a lot in common with television. Television is also a market in which cloning is also rampant. One channel creates a reality TV show and next season every other channel does one too. One channel creates a house-buyers guide and every other channel too. As with games, the easier the format of the show is to copy, the more likely it will be copied.

The Zynga model is basically applying funnel marketing to direct users from one game to another, like TV channels try to do from one show to the next.

However Facebook is not television. It does not have formalised channels, it is viral. Many web companies over the years have tried at one point or another to fence off users and keep them within their funnel (often with portals) but funnelling inevitably fails because it cannot keep up with changing user tastes fast enough. The internet audience is atomised and full of niches. It is not a constrained and channelled audience. Even Facebook itself seems to understand this with Facebook Connect.

super-mario-brosThe inherently viral nature of Facebook (and the internet generally) means that every social game developer is always vulnerable. We still exist in a phase of the social game market where the majority of users are still new to Facebook and social networking. Most users on Facebook are less than a year on the platform. Many of them don’t know that there are games on Facebook. Many don’t realise that it’s not Facebook hosting those games.

However, at some point soon the Facebook audience is going to start to mature. They are going to be less interested in dumb software and more interested in finding better quality ways to spend their time. This makes the cloning model very vulnerable.

Atari, the original cloned company, failed eventually because their model had become so reliant on dumb software that they could not contemplate another way of doing business. They eventually crashed, giving way to Nintendo’s much more depth-focused approach. Historically speaking the pattern of all game markets has been similar. The initial rush gives way to substance.

Game depth, original ideas and niche games command much greater loyalty over the long term, and loyal users tend to monetise much more readily and regularly than casual users. Viral channels ultimately reward this more because friends are always more likely to share what they consider to be remarkable and interesting things over average things. Advertising also tends to become less effective over time in all markets, so a brute force approach to marketing will not work so well without the virality to back it up.

Unexpected viral hits will continue to land, but so too will audience maturation, and that’s going to take us to more interesting places. All the top social game companies have built themselves a presence but a presence by itself is only a short term advantage. The real challenge for them is whether they can convert their advantage into a broader vision, or whether they can achieve an exit to a major publisher like EA, and whether any of the major developers and publishers will start bringing their much more mature games to Facebook. I expect we will see a number of such moves taking place in the next year.

Tadhg Kelly is the chief creative officer of Simple Lifeforms, a social games company dedicated to creating the best social games. He is a keen advocate of social games as a new evolution in games and game players, and a noted blogger and article writer to that effect.

[Doom image via Register Hardware; Tetris image via Popgadget; Peggle image via Sarcastic Gamer; Mario Bros. image via Paste Magazine]

Vector City Racers: Online Racing for Kids

Vector City RacersNot all MMOs have to involve orcs, swordsmen, angels, or demons. Vector City Racers, developed by Vector Entertainment, is a relatively simple browser-based Flash game tailored directly to kids ages 6 to 12. Riddled with simple, yet colorful visuals, creative user customization, and safe exploration, it certainly seems like a viable place for the young racing game player.

The game is a vectorized world of ramps, speed boosts, stores for upgrading parts, and item pick ups that players are able to drive around in and explore. As such, the avatar of this game is actually the player’s car: A simple, blocky looking thing — at first — that, thankfully, can be changed to the player’s own personal, aesthetic tastes.

ModShopThis customization is perhaps the most entertaining element to the MMO. Users are able to visit, what is called, the “ModShop” and in an almost Lego-like fashion are able to move blocks around to build and change their vehicle. However, rather than just connect blocks, players are able to intersect them and drag on each corner, on all three axis, in order to change their shape, allowing kids to create an avatar that is truly unique then showcase them to the world.

Despite the fact that there is a great deal of potential in ModShop feature alone, and the general exploration of 13 different cities is quite amusing (running into and knocking down buildings, for example), a racing MMO can hardly be called such without some actual racing. So, players can race one another in fairly simple circuit track races for rewards, increased leaderboards standings, and so on. Furthermore, for a quick time trial race (simply setting the best time), players can hop onto the Facebook rendition and challenge friends to beat their highest completion time.

Facebook Vector CityThe game has around 290,000 player registrations, including 15,000 daily unique visitors. This traction has apparently led to a handful of kid-friendly partnerships, including The National Childhood Obesity Foundation (N.C.O.F.), which promotes on healthy eating for kids.

Currently, the game is free to play, but offers extra “perks” for paid memberships that range from about $5 to $50 for a monthly and annual subscription respectively. The game also has deals for family memberships as well, so it certainly encourages parental involvement. As a matter of fact, kids can’t even play a full version of Vector City until the parents have approved their sign up.

Whenever a child does visit the game, in order to create a username and password, they must input a parents’ email — that needs to be confirmed — followed by the creation of a “Parent Login” before all of the game’s features are unlocked. Until such time, kids are limited to just racing about for only 30 days and are not granted access to any social features (i.e. chat). Granted, it is hardly a fool-proof plan to mediate where one’s children goes on the internet, but at least it is an attempt. And combined with the overall quality of the game, it seems a better place than most for kids to be spending their time online.

Reef Life: A Multiplayer Fish Game From Storybook Anytime

Rife Life HomeStorybook Anytime, a privately owned company focused around the education and literacy of children has a Facebook game of curious premise called Reef Life. One part virtual world, one part Monopoly, and one part exploration, this app takes a number of different game play mechanics and consolidates them all into one unique idea.

You are a small little fish that apparently fell overboard while on a Caribbean cruise. Finding yourself alone in a massive reef, you are taken in by the “Reef Whale,” Ronald Trout. From here on, he acts as your mentor, giving you various tasks to complete as you learn about the game itself and increase your overall net worth.

In its most basic form, the game is like any other virtual world. You explore areas, visit friends, and build up your own personal space. There are 27 different areas to visit, each with their own stores and residents. Unfortunately, until you get more friends to play with you, the number of people, or fish rather, available to visit is rather… limited. Nonetheless, as you explore the areas, you can pick up starfish to earn coins and various recyclable bottles (which can be traded in for more coins). The downside, though, is that this is a bit boring after a while because there is nothing really to see – beyond your various friends randomly placed as colorful fish – until people start moving in.

Board MapOnce you do have friends playing, however, the game improves dramatically. In fact, the improvement is two-fold. Not only will there be people to visit and interact with (i.e. doing things like cleaning a friend’s bowl) but the board game prospect of the game becomes more prominent. Players, travel around the reef using a sort of board game-like over world and clicking on various locations. However, every couple of minutes, players can “Spin” a wheel that will automatically move your fish around the board. When you land on a special location (i.e. “Trout Towers”) you might get something useful for free, but as for the other places, you can rent them for a specified amount of time and get a percentage of all purchases made from that location.

It is an interesting way to make coin in such a game, to be sure – the whole concept of investment, that is – and really adds a sense of economic strategy to the game, but it is a double-edged sword. Frankly, the biggest annoyance found within the game was the simple fact that one has to travel from spot to spot to buy the items desired. To get furniture, one has to go to Location A, to get clothing, Location B, to get accessories, Location C, and so on. Furthermore, you have to click a locator button to see what stores are where, but have to turn it off to actually visit them. Granted, that is minor, but the whole process comes off as irritating considering that virtually any social game incorporating personal spaces allows you to purchase items from within your home.

Nevertheless, Reef Life is an interesting game in the sense that it is very different from most of the titles currently circulating Facebook. Its potential as a virtual world is great, despite usability issues, and its investment concept is truly an interesting one. As it stands, the game seems to be growing gradually, but with some tweaks here and there, that rate could possibly increase.

The game has been slowing growing to nearly 24,000 users so far, according to AppData.

Inside Virtual Goods: Tracking the US Virtual Goods Market, 2009 – 2010, Is Now Available

virtual-goods-report-thumbnailWhile virtual goods have been driving revenues in Asia and Europe for years, 2009 will be remembered as the year virtual goods-based businesses began to scale in the United States. Virtual goods may be bringing the largest disruption entertainment, communication, and e-commerce infrastructure companies have seen for a long time.

That’s why I’m excited to announce today a new in-depth research report with partner/co-author Charles Hudson that is exclusively focused on the size and future of the virtual goods market in the United States, entitled Inside Virtual Goods: The US Virtual Goods Market, 2009 – 2010. It is being released for the first time this morning. The big picture? We estimate the total 2009 US virtual goods opportunity at just over $1 billion.

Purchase this report
Buy PDF: $995 USD
OR Buy PDF + 1 Year of Quarterly Updates: $1,995 USD

About the Report

Inside Virtual Goods is a new report designed specifically for entrepreneurs, investors, and analysts interested in the growth of this exciting new category of online commerce that is fueling the growth of games-as-a-service businesses. During our research over the last several months, Charles and I have spoken with dozens of executives and entrepreneurs from all parts of the ecosystem in order to form what we believe are the most detailed estimates, analyses, and predictions for 2009 and 2010.

We focused and organized the report around the following areas:

  1. Social Networks, Applications, and Games - The explosion of the virtual goods market on social networks is in our view one of the biggest stories of 2009. We delve deeply into the trends, stats, key players, opportunities, and challenges facing the space this year and next.
  2. Casual MMOs and Virtual Worlds - Virtual worlds and casual MMOs continue to grow as a meaningful share of the virtual goods opportunity in the United States. Our study breaks down the key drivers for success in this segment, trends in monetization and engagement, and the prospects for the future.
  3. Hardcore MMOs and Free-to-Play Online Games – Developers in the MMO / MMORPG space have been among the earliest adopters of the free-to-play model. We explore why free-to-play MMOs are succeeding, revenue and user trends, and the key issues facing this space as we head into 2010.
  4. Emerging Areas: Consoles, iPhone, and Subscription MMOs- As the virtual goods business model becomes more well understood, it is beginning to show up in new and interesting areas of the games and entertainment landscape. We highlight a few of the more promising areas where virtual goods are emerging as a promising opportunity.

Each section contains:

  1. A brief history on the evolution and growth of this space in the US, including a description of all key players.
  2. Estimates on the size of the US virtual goods market in 2009 in that area.
  3. A diagnosis of the key opportunities and issues facing the growth of that space, including our outlook and projections for 2010.

In addition, prior to delving more deeply into each market segment, we’ve provided an overview of the emerging payments ecosystem that is growing to serve these new businesses. Traditional e-commerce infrastructure providers only offer a partial solution, and the virtual goods payments layer is currently in a major state of flux. In the report, we describe the variety of solutions that have been brought to market to date, and the key challenges facing the industry from a payments perspective as a whole.

For more details, check out the full table of contents below.

The price of the report is US $995. In addition, we will be releasing quarterly research and updates on key developments in the space. A one-year subscription is now available for US $1,995.

Charles and I are looking forward to continuing to cover the evolution of the space over the coming year. We look forward to hearing from you!

Table of Contents





About the Authors

charles-hudson-headshotCharles Hudson

VP Business Development, Serious Business & Host, Virtual Goods Summit

Charles Hudson is VP of Business Development for Serious Business, a leading social games developer on the Facebook platform. In addition to his work at Serious Business, Charles Hudson organizes two of the leading conferences in the social gaming and free-to-play games industries, the Social Gaming Summit and Virtual Goods Summit.

Prior to Serious Business, he was formerly the Sr. Director for Business Development at Gaia Interactive, a leading online hangout for teens. Prior to Gaia, Charles worked in New Business Development at Google and focused on new partnership opportunities for early-stage products in the advertising, mobile, and e-commerce markets. Prior to joining Google, he was a Product Manager for IronPort Systems, a leading provider of anti-spam hardware appliances that was acquired by Cisco Systems for $830 million in 2007. Charles holds an MBA and BA from Stanford University.

justin-smith-headshotJustin Smith

Founder, Inside Network

Justin Smith is the founder of Inside Network, the first and only service dedicated to providing business information and market research to the Facebook platform and social gaming ecosystem. Justin serves as co-editor of Inside Facebook and Inside Social Games, and manages Inside Network’s AppData and PageData services as well.

Prior to Inside Network, he was formerly Head of Product at Watercooler, one of the leading application developers on the Facebook Platform. Prior to Watercooler, Justin was an early employee at Xfire, the largest social utility for gamers, which was sold to Viacom in 2006. Justin holds a degree in Computer Systems Engineering from Stanford University.

Buy Now

The price of the report is US $995. In addition, we will be releasing quarterly research and updates on key developments in the space. A one-year subscription is available for US $1,995.

Purchase this report
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Mochi Media Makes Flash Games More Social with Facebook Connect

Mochi Media, a company that distributes developers’ Flash games across the web, is now introducing a few ways to make its service more social. It has developed a standardized leaderboard that lets you log in using Facebook Connect and see how many points or awards you’ve earned in a game, versus how well your Facebook friends have done. You can also share your scores and other activity back from the game to Facebook, MySpace or Twitter.

SAS_ Zombie Assault 2 Mochi Media __ Fueling Creativity

In other words, these social features could help friends share more information about these games with each other, and bring Mochi and the third-party Flash developers it works with more users. Mochi founder Jameson Hsu tells us earlier versions of its leaderboards and awards have already increased plays per user by 20% to 30%. “It’s like Xbox Live but for Flash games,” as he explains the cross-game feature.

This social move pits Mochi more directly against social gaming companies on Facebook and MySpace. Right now, many of these games are spreading via Facebook’s news feed, for example, where a user sees an item about a friend’s activity in a game, clicks, and joins the game. Mochi intends to get these users trying out Flash games via the same mechanism — it is competing for users time.

Mochi has already been introducing some other significant cross-game features, including the Mochi Coins virtual currency earlier this summer. The company’s original business was an ad network that displays things like video pre-roll ads on the games. The new features may drive more revenue. More game-plays means more opportunities to show ads. But, also, the Connect integration lets a Facebook user immediately go in and buy coins without having to first set up a Mochi account.

Developers can customize the leaderboards, profiles and much more in order to fit the new features into their existing games (more here and here). On a somewhat related note, Mochi is also rolling out ways for developers to split revenue from games between multiple people — useful for the small, independent teams who create many of the games on the service.

The social release is another step towards Mochi’s goal of being the Flash-game platform on the web. More than 118 million people access the 17,000 games that Mochi distributes every month, according to comScore. More than 40 games have integrated Coins since the feature fully launched at the end of July. “Ads are still a large portion of revenue,” Hsu tells us, “but we’re seeing so much growth of virtual currency so quickly that it’s the primary focus right now.”

To dig deeper into the virtual goods market, check out our new report: Inside Virtual Goods: The US Virtual Goods Market 2009 – 2010.

Dungeon Fighter Opens Virtual Goods Shop

Dungeon FighterThe new American rendition of Dungeon Fighter Online, a two-dimensional massive multiplayer online role-playing action game already going strong in Asia, is getting another revenue stream in its open beta. The game’s publisher, Nexon, has recently opened the cash item shop which will allow players to spend the virtual currency known as Nexon Cash (also known as NX) on various virtual goods.

Originally developed by Neople, and already popular in the regions of Korea (Dungeon & Fighter), China, Taiwan, and Japan (Arad Senki), the game is a mix of arcade action/fighter type games and RPG-like fantasy.

Players are allowed to pick from five character classes (each with unique abilities) and are then able to customize them with various weapons, armor, skills, items, and clothing; hence the RPG label. These various customizations can be either functional (i.e. skills) or aesthetic (i.e. clothing).

Currently, many of these items are available in the beta version of the cash item shopfor as little as 500 to as much as 25,000 Nexon Cash ($1 equates to 1000 of the virtual currency) for a single item, and anything purchased during beta will carry over once the game finally goes live. This includes Avatar Tokens, Life Tokens (used to resurrect dead players), healing items, extra inventory (if only all MMOs had this), “respect” items, and trading licenses that allow players to set up their own personal shops.

Despite the number of different items, the most curious is the one dubbed “Avatar Tokens.” These tokens do not actually have an effect on the player, but rather can be used to turn into something more interesting. They let players a randomized effect that may change how their character looks or improve a random stat. They could turn out to be purely aesthetic or functional. Essentially, the idea is to create a bit of a gambling allure as players buy multiple tokens in the hopes that they get what they want or need.

Funji’s iPhone Game Gets More Social Features

funji roomLaunched back in May, iPhone developer Funji launched a comic book style, avatar-based app called Funji Home. At the time, it was the first avatar-based social networking app for the iPhone, but since then, the developers have been making improvements to the system and have just recently launched the new and improved Funji Home 2.0.

The focus of this major update was to improve social features. Among the most prominent is a point system that rewards players for social activity, as well as their popularity. In turn, this “currency,” as it were, can be used to make purchases within the game store for new decorations for a players’ virtual room. Furthermore, such currency can also be garnered through the completion of various offers, creating the basis for virtual goods transactions (the actual addition of directly purchasing room decorations in the future seems very likely).

In order to assist in the collection of friends to accomplish these social activities, Funji has also saw fit to add in a new forum to more easily mediate the introductions and discussions of both new and existing users.

Of course, a forum is rather superfluous (though it is nice to have), and since the game is centered around avatars, Funji decided to add a myriad of new outfits for the game’s virtual characters. With the capability of selecting different heads, bodies, and legs for an avatar, Funji Home now has well over 4,000 possible combinations for customization purposes. And if you are feeling indecisive, you could always make use of a the new “shake” feature that allows you to literally shake the iPhone and jumble up what your character will look like.

funji avatarUser interaction has also been improved. Back when we first took a look at the application, we mentioned some of the prototype features including bouncing a friend’s avatar around the room with a shake, or giving them a little affection by actually kissing the phone. Unfortunately, these appear don’t yet, but the first signs of their coming are now visible as players can now visit each other’s rooms and poke, tickle, or high-five whichever avatar resides there. According to the official press release, more interactions are slated for future versions.

By the looks of things, Funji is also working relatively closely with the community. This goes beyond just listening to feedback, but actually incorporates rewarding its most loyal users. At the moment, players that joined up and have been playing since earlier versions of the title are now being awarded a “Funji Elite badge” as well as extra points for item purchases. Also, if players are not veterans, the company also rewards the best user-created rooms, weekly, with promotional codes for Funji games and books.

Suffice to say, the improvements are indeed impressive, and as a free application, the value for the consumer is more than worthwhile. We will look forward to the next major update from Funji, and can only hope that its increased social trend continues.

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