The Virtual Goods Market
A recent report by Juniper Research in the UK found that the virtual goods market will hit $3 billion this year and predicted it rising to $4.6 billion by 2016.
The main reason for this is no secret: the rapid rates of smartphone and tablet uptake and the corresponding spike in mobile gaming.
Much of the growth of virtual good sales has been in China and Japan and the report expects this to become more of a global trend, especially as more and more competing tablets are released, offering better gaming experiences than simply on an iPhone or Android phone.
The Numbers: A Zombie Example…
To use the above-mentioned example of Zombie Farm– the iPhone game – the app itself is free to download, but it raises “double-digit millions” of dollars through in-game virtual goods purchases, according to the GM of PlayForge. It has been downloaded over 11 million times and is number 7 in the App Store for highest grossing app.
You can play Zombie Farm without buying any virtual goods at all, but to speed up progress you can buy goods that range from $0.99c to $35. Only 1 in 10 users actually buy anything and only 3% of users spend over $100.
Virtual Goods for Developers
It’s become almost incumbent upon developers to find additional revenue streams for their games because selling games at $0.99c or offering for FREE on the App Stores may not even cover costs in many instances; it’s a very competitive market so pricing increases will be hard to introduce, so making games with in-game purchase options is seen as a way for developers to boost revenues.
There are a number of problems associated with the trend.
One problem is bad publicity – there have been a few press reports about large credit card bills being racked up by the children of iPhone or iPad owners, where the child has kept buying virtual goods again and again using their parents’ credit card details. This is mainly a problem of education and of creating extra controls within the game so this can’t happen.
Another problem with these revenue ideas for developers is that the Apple App store, Google Market and BlackBerry World still retain 30% of payments for in-game virtual goods. In social media gaming circles the story is usually worse for the developer.
This leads to many worries for game developers on just how to generate revenue for their work; hopefully it doesn’t signal the end of too many independent developers and the concentration of all the power into the hands of the major developers who are already cash-rich.
Other Monetising Options
There are perhaps other ways for game developers to create revenue for their business.
One idea is to incorporate more in-game advertising: gaming could become increasingly attractive for marketers, who are well aware that they can grab audience attention in this way and position their brand. As it becomes more attractive, prices can increase from the developers and the revenue-potential from popular games is high.
The problem might be with the 95% of games that don’t become very popular and will not be attractive to marketers, meaning those at the bottom of the food chain remain there.
Any bright ideas for monetising mobile gaming not covered here? Drop a comment below and let us know what you think.