Trip Hawkins, CEO of social/mobile game company Digital Chocolate and the founder of gaming behemoth Electronic Arts, kicked off the Virtual Goods Summit this morning by discussing fantasy leagues, Facebook game monetization and the world market for these goods.
Trip started by discussing how he wishes for the day when “Social games are completely interoperable across all devices and networks.” Trip believes that free games with virtual goods is the way of the future, and likened it to how movies used to be like packaged goods, because you’d buy a ticket and then go see the movie. However, with television, a lot of it is free, and monetization comes out through advertising, or monthly subscription fees for cable and premium packages (pay-per-view).
Be sure to design your game so that there’s no limit to how much people can buy. Trip saw a game where people all maxed out on every single virtual item very soon. Trip explained that an infinite pool of virtual goods ensures that your goods scale to the budget of your consumers and players.
I agree with Trip in how he sees the idea of virtual goods in many other business areas, and that the model will be important in all kinds of areas.
Back when Digital Chocolate started their games business, employees there (and everywhere as I recall) used to laugh about how Korean players would pay $5000 in virtual goods. But Trip laughed at how a lot of the people he’d hear talking about this were buying $20,000 suits.
In China, virtual goods was a $7 Billion industry, and since the West has around 8 times the total purchasing power, if we just kept pace we could be at $60 billion by now.
So how far in that direction are we? Trip looked at devices to make a prediction about how big the audience is and will become.
It’s all about Facbook right now, because of the ease to gain customer acquisition and trials. That group is “certainly going to grow to 1 Billion”.
There are about 2 Billion mobile phones, but only 100 million are SmartPhones. However, we’re about to see that audience explode into a few billion from 100 million. If you can get products into Asia, that’s another Billion.
Another billion users that don’t use FB.
This will become the ultimate browsing experience, and there will be a lot of competitors. This will become a very powerful medium in the future. There could be 1 Billion tablets in 5 years.
So companies are going to need to be better prepared to be cross-platform. There will be a lot of benefit there, and being browser-based is going to be absolutely key as well. Trip explained that we’re moving out of a desktop era into a browser-based era, and we need to be able to develop there.
So how do you get a successful virtual goods game?
The key is “one and done”. There are a lot of players that play once, and they’re done. This is Facebook, where you get a ton of people to try, but a lot of those people quit immediately for various reasons. Lots of ADD in the Facebook user space. Trip pionted out that the return rate of many Facebook applications has decreased as notifications were removed.
MAU can hide a tremendous amount of churn, and people don’t know how to talk about this yet because it churns so fast. If you look at a company’s MAU and DAU, you need to see a skyrocketing DAU as the MAU increases, because a marketing campaign is bringing 20% of new users into the fold and those players need to stick.
Fantasy Sports Leagues are a perfect example of virtual goods, because the players are the virtual goods, and this is another area that will continue to explode.