Tuesday, October 14, 2008

My Thoughts on the Virtual Goods Summit

Mea Culpa: I'll be perfectly honest, I only managed to sit through one full session(Daniel James and Andrew Chen's case study on Using Metrics). Not that they were bad sessions, in fact, most of them were very informative. Real data was offered. Unfortunately, as at most conferences, I spend most of my time in the lobby chatting with people. To be fair, I learn a lot of things I can't share on this blog that way, so it doesn't benefit any of you. Sorry about that.

Having said that, I did notice a few things:

  • A LOT of payment infrastructure companies were in attendance. You can always tell an industry is maturing when a tidal wave of infrastructure companies descend. It means money is being made, or at least people think money is being made. To be fair, payment is a huge problem. For some reason, I always find it amusing that we haven't mastered the point where money actually is being received from the consumer. You'd think it's be the most important thing to get right.
  • As an industry, games still rock. We have an amazing amount of brilliant, friendly, open people in this industry.
Best quote(remember this):
If you broaden past vanity items and talk about status, because really it’s about status and showing personalization, how you then do that through virtual goods or branded goods is a part of that, but always come back to status. -- Sean Ryan, Meez
Best Datapoints

Andrew Trader, Zynga: Yoville(virtual world on Facebook), earns in the neighborhood of $4,000-$5,000 a day in revenues across CPMs and micropayments. It's about 50/50 male/female and 2/3 international." NOTE: 2/3 international (question: does that apply to revenues or userbase?)

Daniel James, Three Rings: "Puzzle Pirates (casual MMO) earns $4 per registered user annually. Top 10% of users account for 50% of revenue".

John Hwang, Rockyou: "$20-30 revenue per thousand active daily user on Speed Racing (Facebook social game)." I assume that's per day.

David King, (lil) Green Patch(Facebook gifting game):"very limited percentage of users want to pay, so it avgs out to less than penny per user." Makes sense to me, since the design (lil) Green Patch is not optimized to encourage virtual currency sales.

Daniel James, Three Rings: "CPA leads are not worth it." Reason: unqualified leads don't convert.

Final Thought

Everybody is still quoting Susan Wu's estimated value of the virtual goods marketplace from last year as gospel. That value: $1.5 billion annually worldwide. Keep in mind that value includes secondary market sales of MMO items. Most people quoting that numbers have nothing to do with secondary MMO markets, but focus on decorative virtual goods for virtual worlds or Facebook apps.

I think it's about time somebody created a new estimate of the virtual goods market.