This post is by Rip Empson
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It’s not exactly a secret that gaming has found new life on the web, social and mobile platforms. Of course, with it, especially the rise in free-to-play gaming, developers need to find ways to monetize their apps, or their browser-based games. Beyond mobile or banner advertising, there is the option of in-app or in-game purchases — the old in-game freemium model. Give your game away for free, sell new levels, armor, weapons, life for a buck or two. Lots of games have incorporated virtual marketplaces to hawk virtual goods of all kinds.
And good news for game developers: Virtual goods are hot and getting hotter. PlaySpan, the Visa-owned Monetization-as-a-service provider released a study today that reveals, among other things, that consumer spending on virtual goods has doubled since 2009. (Virtual goods, by the way, being a combination of both virtual currency and virtual items.) Not only that, but $2.3 billion worth of virtual goods were purchased in 2011 in the U.S., up nearly 30 percent from 2009. That means, on average, gamers spent $64 on virtual goods in 2011, roughly equivalent to the price of a console game.
Again, it’s all up-trending, as 35 percent of U.S. gamers have purchased a virtual good, a 50 percent increase from 2010. Of course, unsurprisingly, the gender breakdown shows that men are twice as likely as women to purchase virtual goods. To break that down further, nearly 50 percent of males under the age of 24 said they bought a virtual good in 2011, whereas only 15 percent of females in the same age group had done so.
Karl Mehta, founder of PlaySpan, said that he thinks we’re getting to a point where consumers are truly becoming comfortable with buying virtual goods on the web and on mobile devices. For example, the study found that, of those in the U.S. who had not purchased virtual goods, 70 percent expressed a willingness to do so. This comfort and openness to virtual transactions represents not only a huge opportunity for gaming, he said, but for the majority of digital content companies — those trafficking in music, movies, social gifting, rewards, etc.
This demographic data could be a big boost to producers and distributors of all digital content, allowing them to hone their strategies for reaching the right audience — across platforms. For instance, when it comes to why users purchase a certain game, 64 percent said that their choice was based on the price of the game, 51 percent was based on genre, while 48 percent said that their friends’ recommendations were a factor in their choice. This latter bit, in particular, is a huge validation for social gaming companies, or studios considering whether to integrate with the social graph, or enable users to friendsource recommendations, or share what they’re playing (or their achievements) with friends.
Again, when it comes to purchasing virtual goods, PlayData’s report shows that it’s important for game developers to find the right structure for incentivizing virtual good purchases. Hiding too much of the game under the promise of unlocking if they pull out their credit card is counterproductive, but creating some really terrific premium features that can be bought for a certain price is key — if they are integral to gameplay, and really improve the experience of the game, users will pay.
To that point, the study found that the top reason for gamers purchasing virtual goods, according to 55 percent of the population, is “to be able to do more in a game,” followed closely by the second reason: “To get a better experience playing the game.” Next was to advance a level or state, and developing one’s avatar or identity within the gameworld.
Lastly, when it comes to what platforms or media are fueling virtual goods purchasing, the leading source in 2011 was connected consoles, like Xbox Live or the PlayStation Store, for example. In all, 48 percent of gamers purchased their virtual goods on connected consoles, but that behavior is clearly changing, as users who purchased goods directly from within the game rose to 42 percent, followed by prepaid game cards and online virtual stores, at 40 percent and 13 percent, respectively.
In all, consumer habits really seem to be changing, as twice as many gamers are buying virtual goods today compared to two years ago. With the right strategy for in-game or in-app purchases, developers certainly have an increasing opportunity to monetize their free games, which, in the end, hopefully means a greater selection (and hopefully quality) of games for the end user.
Below, PlaySpan has given us permission to include the entire study, so check it out: