(August 3, 2009) - The microtransaction model is a proven and reliable business model for online gaming, virtual worlds, social networks and other virtual environments. Stemming from Asia, the use of microtransactions is beginning to flourish in Western markets; over half of all MMOGs launched in Western markets use a microtransaction model and these revenues are increasing at a faster rate than subscriptions, according to Nick Gibson at casualgaming.biz.

Shanda is a virtual environment provider who switched from a pay-for-time model in 2006 to free-to-play supported by microtransactions. Desmond Lu from Shanda said at the India Gaming Summit 2007 that the change in business model had escalated the traction to the site several times over.

The following are a list of some of the success stories that are testament to the strength the microtransaction model.

Zynga

• Estimated to be earning $200MM¹ annually in revenue, mostly from virtual goods like poker chips in its Facebook Texas  Hold’em poker application
• Zynga has 41.5MM monthly active Facebook users (one-fifth of Facebook's 200MM users)²
• Zynga has 11MM active daily players across all its games, 2.5MM players per day on Texas Hold’em, with Mafia Wars seeing 1.6MM players per day²
• Both games are estimated to be adding about 150,000 new Facebook fans every week³
• Majority of revenue comes from the 2% to 10% of users who pay $1 an hour to play premium games or buy virtual goods⁴

Sources: ¹TechCrunch 2009, ²Business Week 2009, ³Virtual Goods News 2009, ⁴Business Week 2009

Playdom

• Estimated to be earning $50MM¹ in sales per year from virtual goods
• Is the developer of the #1 game on MySpace (Mobsters), and 8 of the top 25 games on the MySpace application platform²
• MySpace portfolio: Mobsters (13.4MM users), Bumper Stickers (10MM), Own Your Friends (9.5MM), Kiss Me (2.8MM) Poker Palace (2.7MM), Heroes (2.1MM), Sorority Life (1.6MM), and Rockstars (1.5MM)³
• Poker Palace (in the Top 25 games list with 2.7MM monthly active players) and Sorority Life are on Facebook, with an iPhone Mobsters game to be released before year end
• Currently has 5.2MM daily active users and 21.8MM monthly active users, a 23% play rate, engages players for an average of 11 minutes a session with more than 5% of people who play the company's games spend money on virtual goods⁴

Sources: ^1,2,3,insidesocialgames.com 2009, ⁴Reuters 2009

Social Gaming Network

• Estimated revenue of $50MM¹ mainly through virtual good sales
• (fluff)Friends sees approximately $100K per month1 – since January 2008, (fluff)Friends has seen a 192% increase in revenue per spender, and a 143% increase in spend per transaction³
• In total, SGN-owned games have been installed a total of more than 51.5MM times, representing a total of nearly 40MM unique Facebook users²
• 13MM downloads of its suite of games on the iPhone and iPod Touch³
• iBowl, the company's most successful game, was also recently named #6 on Apple's Top 20 Apps of All Time list and awarded 24% of the iPhone and application market by ComScore³
• SGN's games also command more than 1MM game players per day across multiple social networking platforms including Facebook, MySpace and Bebo³
• On an average SGN games are on one in three of Apple devices, with a 25% user crossover with Facebook³

Sources: ^1,2VentureBeat 2009, ³SGN.com

Gaia

• Browser-based anime-themed ‘online hangout’ with over 15MM registered accounts¹
• Minimum age to play: 13
• Free to join
• Encourages and facilitates avatar customization
• Gaia claims that there are over 1B posts on the Gaia forums, 300,000 members log-in per day and on average a user spends two hours on the site
• ‘Gaians’ can earn ‘Gaia Gold’, the in-world currency, by participating in activities such as events based around holiday celebrations and mini-games – Gaia claims over 190MM Gaia Gold is exchanged daily
• ‘Gaians’ can also use real money to purchase ‘Monthly Collectables’
• Gaia Online allows third-party advertising
• Estimated 2008 revenue: $75MM²
• Sells more than $1MM a month of virtual goods³

Sources: ¹Kzero Consulting 2009, ²Gaiam, Inc. Q4 2008 Earnings Call Transcript, ³TechCrunch 2008

WeeWorld

• Browser-based virtual world with over 26MM users¹ (60% Female)
• Minimum age to play: 13
• Free to join
• Approximately 1MM users visit the WeeWorld site each month, and 80,000 login each day²
• Premium virtual goods and branded gear can be purchased
• ‘WeeMees’ can be customized for free: body, clothes and accessories, however users can also buy ‘Points’, which can be spent on specific items
• WeeWorld users can share their personalized avatars across a number of services (including Facebook) with the primary distribution channels being AIM and Skype
• Money can only be converted into WeeWorld ‘Points’, not back again
• WeeWorld allows third-party advertising
• Estimated 2008 revenue: $10MM+3 mainly through virtual good sales

Sources: ¹Kzero Consulting 2009, ²Tim Howgego - Virtual Goods, ³The Drum Online 2008

MapleStory

• Cartoon-style MMORPG for kids, using client install with 2D graphics – over 50MM players¹
• Minimum age to play: 13
• Free to join
• Revenue is generated via the “NEXON Cash Shop”, where users can use real money to buy virtual currency to be redeemed for special, exclusive items for users’ avatars
• Players can also join forces with others on a small scale by forming a party of adventurers, or on a large scale by joining a “guild”
• On average, players are immersed in MapleStory for 200 minutes at a time²
• MapleStory does not allow third-party advertising
• Estimated 2008 revenue: $150-500MM3 from virtual good sales

Sources: ¹MapleStory.com, ²Onscreenasia.com 2008, ³Virtual Goods News – DFC Intelligence 2009

Habbo

• Browser-based virtual Hotel with over 124MM avatars – 10MM active accounts¹
• Minimum age to play: 13
• Free to join
• Has an in-world currency, ‘Coins’, available for purchase with real money and awarded as prizes (through mini-games)
• ‘Coins’ can be used for activities such as furnishing hotel guest rooms, adopting a virtual pet, clothing and accessories for avatars etc.
• Has a mobile version: Mini Friday (approximately 1MM users²)
• Habbo allows third-party brand marketing
• Estimated 2008 revenue: $50MM3 from virtual good sales
• 10% monthly players pay, $10.30/mo per paying user⁴

Sources: ^1,2,3VentureBeat.com 2008,  ⁴Brinking – Nabeel Hyatt 2008

Club Penguin

• Browser-based virtual world with over 22MM registered accounts¹
• Targeted at ages six – 14

• Two types of membership
• Non-member (free): can go anywhere in the world except member parties and can use in-game currency to buy a limited number of virtual items
• Subscribers: added benefits such as additional game items and characters which can be purchased with real funds via the game’s virtual currency
• Club Penguin is ad-free
• Estimated 2008 revenue: $50-$150MM2 – mixture of subscription and virtual good sales
• 25% monthly unique visitors pay, $5/month per paying user³

Sources: ¹Virtual Goods News – DFC Intelligence 2009, 2VentureBeat.com 2008, 3Brinking – Nabeel Hyatt 2008

Whyville

• Educational, browser-based virtual learning world with over 5MM registered ‘citizens’¹
• Targeted at ages eight – 15
• Each month, more than 2MM visits are made to Whyville²
• Approximately 60,000 new players register every month³
• Players spend an average of 34 minutes per login in Whyville, and 3 hours in total per month⁴
• In 2008 Whyville changed from a subscription to a microtransactions business model⁵
• Revenue is generated through the purchase of virtual items using Whyville’s virtual currency, ‘Pearls’
• Previously, the subscription fee was $4.95, now players can purchase ‘Pearls’ in $5 and $10 denominations
• CEO Jim Bower has reported that with the subscription model there was 5-10% uptake for active users, but the ‘Pearls’ were doubling this number
• Revenue is generated as a combination of corporate and institutional sponsorship and virtual items sales

Sources: ^1,2,3,4Whyville.com, 5VirtualWorldsNews 2008

KartRider

• Korean 3-D casual racing game from Nexon, currently the most popular online game in Korea with over 17MM subscriber (1/3 of Korea’s population) and over 130MM subscribers in China¹
• Free-to-play MMO with revenue generated from virtual item sales
• Similar to MapleStory (also owned by Nexon), revenue is generated via the “NEXON Cash Shop” where real money can be exchanged for virtual currency
• Co-promotional partnerships with the likes of BMW, for example, have seen sales of 2MM virtual BMW Minis in-game²
• Estimated revenue: $250MM3 from virtual good sales

Sources: ¹Multiply.com 2008, ²Onscreenasia.com 2008, ³Intuitive.com

Tencent – QQ

• China’s largest internet services portal providing applications such as QQ instant messenger and QQ games
• QQ Instant Messenger has over 900MM registered users, nearly half of which are active¹
• The QQ Games portal has 5.8MM users simultaneously on-line²
• Has a virtual currency, QQ Coins, which are used to purchase virtual items across all QQ services – QQ coins can be earned or purchased
• Generated over $1BN in revenues in 2008, over $300MM in Q4 2008 alone³
• In Q4 2008, gaming revenue accounted for over $100MM from the purchase of virtual items⁴

Sources: 1,2Tencent Fact Sheet (as of May 2009), 3,4Tencent Annual and Fourth Quarter Results 2008

The microtransaction model which has been so successful in Asia  for nearly a decade is poised to become the defacto monetization standard worldwide for online games and virtual worlds; The removal of a subscription fee encourages a larger, more diversified user base, which in turn increases the overall number and willingness of players to trade in virtual goods.  In theory, there is no ceiling on the potential revenue that can be generated per user, unlike the subscription model, and the more the game developers enhance the game and community experience the less price sensitive players and the greater the reoccurrence of purchases will be.  Virtual goods contribute to a continuously changing game and virtual world experience and provide a continuous revenue stream to match. 

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