Inside Social Games

Not too long ago, FooMojo, creators of the popular Facebook app Pokey, announced the closing of a $9.9 million Series A round led by SoftBank Capital. The company is focused on the virtual pet space, but not just on Facebook. Rather, the company develops such applications all over the web and for the iPhone as well.

Combined with the seed round it raised last year, the company has now raised $10.7 million in total. After the Series A round closed back in September, CEO Ron Hornbaker noted that the company was especially fortunate to be ahead of the market crash, and was no longer looking for further investment.

Masayoshi Son, CEO of SoftBank Corp. added, “Japan was the birthplace of the virtual pets phenomenon and I witnessed first hand, the amazing success of the Tamagotchi driven from the basic fulfillment of virtual companionship.” Son went on to say, “FooMojo has taken the model to new heights of realism and technology by creating virtual pets that evoke a strong emotional bond with owners and are portable across social networks and devices. FooMojo is creating the next-generation of virtual pets and I expect the company to lead the category.”

[via Virtual World News]

Earlier this month, there was discussion regarding the taxation of virtual assets in China. Unexpectedly, however, similar discussions have recently been happening in the US.

Apparently, there is a “gap” in the New York state budget, and in response to this, Governor David Patterson proposed a number of solutions. Most interesting of them all was the one dubbed the “iPod tax” that would impose both state and local taxes on “digitally delivered entertainment services.”

Essentially, this means that any and all downloadable content could be affected. This includes all major video game platforms, and could also possibly encompass virtual goods and currencies. It’s not clear what exactly will happen, but GamePolitics.com says:

“If you live in the state of New York, you could find yourself paying sales tax on downloadable content (DLC) for video games, beginning in 2009.

That’s because, much like the private sector, state and local governments have been hit hard by the current recession. In New York, Gov. David Paterson (D) has responded by proposing a budget that calls for layoffs, service cutbacks and new taxes, including one that will likely add to the cost of your DLC on Xbox 360, PS3, Wii or PC.”

Of course, this is all just speculation at the moment. The budget will still have to be approved by the legislature, but regardless of whether it passes or not, it is interesting to see this sort of suggestion appear at all.

[via Virtual Goods News]

Earlier this month, PlaySpan announced the launch of its virtual goods marketplace. The site will be comprised of items from dozens of different online games, and bring them together all in one place instead of creating separate virtual marketplaces for each specific game.

This new “PlaySpan Virtual Goods Marketplace” will sell the items from games such as EVE Online, Saga, War Rock, Knight Online, and others. Players will be able to visit the new marketplace regardless of the game they play and purchase each game’s virtual currency or the items they desire directly.

PlaySpan also announced recently that it had raised a $16.8 million round of funding. According to PlaySpan chief executive, Karl Mehta, this new site will be simple, secure, and offer plenty of payment methods with a potential customer base of over 100 million users. Furthermore, since the site sells items and currency directly with the permission of the game developers it supports, they can avoid the much of fraud, scams, and theft that can come in ad-hoc secondary markets.

As it stands now, supporting publishers include Aeria, CCP, GamersFirst, InixSoft, NHN, Ntreev, and Saga. A number of these are based in Asia where the virtual goods movement is strongest and most mature, thus making up a large portion of an industry now worth approximately $1.5 billion (based on Strategy Analytics).

[via VentureBeat]

$2 billion US dollars: That is the virtual goods market on free-to-play games. In light of that hefty chunk of change, Live Gamer recently announced its partnership with Acclaim, GoPets, and IAC’s InstantAction.com to create player-to-player, virtual marketplaces. These markets will play host to the transaction of real currency for virtual goods.

Of the three partners, GoPets took the first step with the launch of its closed beta on November 20^th. Following suit will be InstantAction with its games coming soon in December, and Acclaim launching the beta of its title “9Dragons” sometime during the first quarter of 2009.

An article from Virtual World News quotes Symbiosis Games (developers of GoPets) CEO, Erik Bethke, “We’re excited to fully realize our partnership with Live Gamer and offer our users the safest way to exchange virtual goods for real money online.” He goes on to state, “The added consumer confidence provided by the first truly legitimate online goods exchange is a tremendous asset to our international GoPets economy.”

This statement couldn’t be more accurate. One of the biggest concerns a vast number of people have when purchasing anything online is security; especially when dealing with something that isn’t exactly tangible. Moreover, there are countless virtual currency sellers in places such as China that offer exchange for real money, and anything helps broker international work in addition to better security is a god-send.

The system should be reliable too; based on an upgraded version of Live Gamer Exchange. Features affecting both the publisher and the consumer have been given a facelift with improved search capabilities and listings as well as (and possibly most important) a new multi-factor fraud screening engine.

Considering that Live Gamer has faceted hundreds of thousands of dollars worth of transactions and has the experience of managing an always on virtual economy, these new features are well founded. Andrew Schneider, president and co-founder of Live Gamer, states, “We’ve been able to address opportunities in the live economy and incorporate those learnings… Continued innovation on behalf of our clients and their end-users will always be our focus.”

That said, Live Gamer could very well turn out to be a great service. It’s impossible to say for sure how it will do, but good or bad, it will be interesting to see it unfold.

[via Virtual World News]

We all know China has a lot of people - 1.25 billion approximately. Of that 1.25 billion citizens, about 40 million play online games, and 80% of those have purchased virtual goods. According to 5173.com, this market has grown to about 9.36 billion yuan annually, which is about $1.37 billion in US currency. And that was just last year - a pretty impressive number by anyone’s standards.

Virtual World News recently posted that the Chinese government had imposed a 20% tax on any income generated through the trading of virtual currencies earlier this month. Apparently, this latest came about after the failed attempt two years ago to simply ban people from profiting off of virtual transactions. Of course, details on how this type of levy will be enforced are unclear.

For those that may not know, this all refers to the concept of virtual goods which are generally inexpensive, non-tangible items sold on the web. They range from avatars, virtual game items, animated gifs, game currency (i.e. gold), music themes, etc. They are often used by people to add personality, or an edge to the games and social networks they are a part of, and have skyrocketed in popularity over the past few years.

However, this new tax is affecting an enormous number of users. For example, any seller of a virtual currency (a subset of virtual goods) transaction must report to the Chinese tax agency and pay income taxes within seven days of the sale. However, based on the most recent post on Virtual World News, “officials are still unsure of what exactly should be taxed or how….”

Regardless, the platform providers seem to be loving the idea, as it discourages the sale of goods within their virtual worlds by third parties (such as reselling virtual currency in an MMO). The players, on the other hand, are not as pleased with the result (increased costs).

One of the major titles in which virtual currency is sold is Blizzard Entertainment’s World of Warcraft. There are a number of gold selling companies that do nothing but acquire large sums of gold and sell it to players for profit. How are the WoW markets being affected? In a recent article in the Shaighai Daily, one WoW player states, “The price of gold has surged recently and its difficult to purchase enough gold even if you have the money sometimes.”

In many ways, the gaming industry and gaming culture are far more advanced in the east than the west. And in the same way that social gaming attracted gamers and non-gamers alike in the United States, it has also captivated the greater population of China as well. With an all ready fervent populace playing MMOs, it is not surprising that even more would be attracted by the simple and casual games found within social networks.

A recent article in Gamasutra notes Facebook and Xiaonei have been operating in China for a while now. However, it took quite a while to translate Facebook into Chinese, and Xiaonei hasn’t had the platform to properly support social gaming until recently. As such, the social gaming space was left a vacuum until it was filled by Kaixin001 in April of 2008.

Sure enough, Kaixin001 began to skyrocket in popularity as China’s billions of citizens gravitated to this new form of social, cheap, and entertaining media. The growth was so substantial that the majority of China’s game studios and networks began to implement social capabilities into their products.

The combination of games and social networks is further highlighted by the growth 51.com - which has also become a social network that supports gaming. Unfortunately, you might need to learn some Chinese in order to understand it.

The real question now is to whether or not the rise in social gaming will last in China. Based on the relatively low cost of doing business in this space and social gaming’s tremendous growth, things are looking good.