Category Archives: Virtual World / Metaverse

Virtual Goods Summit Notes

It’s been almost a year since I’ve posted about virtual goods, but read Mike Gowen’s recap of the Virtual Good Summit that occurred recently.  Here are some takeaways that are extremely important:

  • Teens expressing themselves may take more to branded items as they like to align with them.
  • People creating UGC are creating their OWN branded content. Others follow their brands as the would real world ones.
  • If an item doesn’t promote status the price goes lower.
  • We’re moving more towards activity. Goods should extend activity. Wave of the future
  • Don’t just think about goods for you…think about gifting. There’s only so much you can have/wear
  • You need ~$200,000 a month of primary sales before you can get into the secondary market.
  • Secondary markets allow the trade of time and money.
  • No demand for virtual items, only demand for games, then demand within context of game.

As you can see, this was a fascinating conference.  Check out more hereClick to see pics from the event.

Picture of Avatar Downloads

Total Speculation Post: Virtual Worlds

Sony has launched Sony Home, their virtual world enabling their community of users to interact with each other in a “game like” setting.  Apple is now toying with opening a store in Second Life (speculation).  Will this mean that ultimately, they will acquire Second Life and roll it out as their communications platform for their computers?  Will it be the next iteration of iChat?

One thing that we have learned is that people do not have have time to manage identities in multiple virtual worlds at the same time. If you are engaged in Habbo Hotel, then chances are, you don’t have time for Second Life.  If you’re playing World of Warcraft, then you may not have time to utilize IMVU.  Also, many of the previous brands who have released their wares into Second Life have all abandoned them after it being all the hype (front page of NY Times, etc).

I’m curious to see how this plays out.   What are your thoughts?

In Zurich: Recap of Speech and Pictures

Darren Herman SpeechI took an 8 hour flight from JFK to Zurich, Switzerland to participate in a conference at the GDI Institute on digital media and my portion:  the role of video games in culture and business.  While I have history in the in-game advertising industry, I didn’t focus the presentation on this.  I tried to talk about the macro-trends in the video game industry, some of which I posted in early October on this blog.

I spoke solely on in-game advertising at the GDI Institute in 2005 and the crowd really got into it.  Lots of great questions and insights that were shared amongst the few hundred in attendance.  As I noted above, maybe 10% of the presentation this time around talked about in-game advertising but the real time was spent with trends.  In-game advertising is part of a larger trend, which is finding ways to monetize games through the use of everpresent connectivity.  With broadband connectivity being harnessed by consoles, a new ecosystem of monetization opens up (skill based wagering, in-game advertising, virtual goods, subscriptions, RMT, etc).

One of the othe rmain topics I spoke about was about video game culture.  Look at what Guitar Hero and Rockstar are doing for fans.  The Nintendo Wii as well.  Toyota’s commercial utilizing World of Warcraft like content.  Games are finally being socially accepted which is opening up a whole creative market.

We had a fantastic discussion about this last night (as I was trying not to fall asleep due to timezone differences) and really enjoyed meeting a lot of new people.  Had lunch today with a gentleman I met last night and we discussed the presentation further.

For those of you who want to see some pictures of Zurich, I posted some in my Flickr gallery.

Ads Inspired by Video Games

If you’re one of the millions of Warcraft fans (video game) out there, then this Toyota commercial makes you smile. In the background, you hear “there are no trucks in World of Warcraft” which adds validity to the commercial and protects the game. I’m sure the Creative Director on the account is a fan of Leeroy Jenkins, where the inspiration of this video is derived.

 

This isn’t the first time that we’re seeing a brand using World of Warcraft as inspiration for a commercial. Check out the Coke commercial that appeared in Japan:

The commercials aren’t just viewed on television. According to YouTube, there have been over 1.5M views of these commercials. Totally opt-in. Impressive.

Disney Channel & The Possibilities

Disney gets it, at least for now.  They’ve incubated Hilary Duff and now Hannah Montana.  Lots of press and commotion around comparing Hannah Montana to other artists and the demand to see her in concert.  In NewsWeek recently, she was compared to Bruce Springsteen as a much tougher ticket to get.

Anyway, a few months back, Disney acquired Club Penguin.  To give you an idea of their traffic, I’ve pasted the attached graph below.   Disney is probably still figuring outClub Penguin Compete what they want to do with Club Penguin and in the midst of integration.  If you have children ages 5-12, I’m sure you’ve come across Club Penguin in one capacity or another.  Over the past year, Compete data shows that Club Penguin has goene from ~700k unique to ~2.7M unique inhabitants.  One year.  Substantial growth.

Not that there isn’t enough demand for Hannah Montana, but think about the cross promotion opportunities?  In-game radio.  In-world penguin shirts.  Club Penguin should have Hannah Montana music playing and allow the kids pick which music they want to hear.  Also, leverage this “virtual world” as a testing ground for new music and allow the kids to rate which songs they like and which they don’t.  With about 3M kids playing Club Penguin, there are tons of opportunities for these tie-ins.

There are obviously a lot of concerns around advertising to children and such; but if you handle this properly, I’m sure you can roll these types of programs out to much success.

Armano's post on blogging

Any marketing maven knows there are 4 Ps’ of marketing….product, price, place, and promotion.  I’ve even argued that they exist in the virtual world as well.

Dave Armano (VP, Experience Design @ Critical Mass and A-list blogger) laid out the 4 C’s of blogging in one of his latest postings.  I have linked to his picture below which shows a very clear graphic representation:

4C's of Blogging

Check out David’s post as it goes into detail about each.  Fantastic read.  I try to follow everything to a “C” :)

An Insiders Look at the Video Game Industry

The video game industry is going through some monumental changes and I thought I’d shed some light on them from the inside. With that said, I decided to whip up a presentation that looks at many of the different areas of the industry including many of the trends that are occuring.

The presentation is geared towards the following:

  • If you work at a media co. looking to acquire in this sector
  • If you work at an ad agency or brand trying to make sense of the video game space
  • If you’re a game publisher and looking to expand your product line and features
  • If you’re a game publisher trying to make sense of the macro industry trends
  • If you’re an investor, trying to figure out which are of the industry is hot

Please note that I purposely left out IGA Worldwide, a company that I co-founded a few years back. The reason why I left the company out of the presentation is that some readers would think that I made the presentation solely to hype the company. I tried to be as company-agnostic as possible, to give readers a non-biased view on the games industry.

I welcome all commentary and criticism. Please leave a comment on the blog or shoot me an email. I promise to respond to each comment individually.

I think we’re in an extremely exciting time with Halo 3 bringing in $170M on the first day, Areae launching Metaplace, and Habbo & Tencent proving out the virtual goods model. Who said games aren’t fun? :)

The presentation is below, and hosted on slideshare (if you’d like to view it there):

 

 

IAC Moves into Video Games (Analysis)

I read a fascinating analysis of IAC (InterActiveCorp) this evening and wanted to share my view.  First, please read the article written by Sramana Mitra entitled Web 3.0 & IAC.

IAC holds more than 60 online properties and someone could easily mistake it for a VC with a well-diversified portfolio of Internet properties. When some of these properties start “exiting” the portfolio, they seem to be able to get much better visibility and valuation. We have already seen how Expedia has performed over the past one year after being spun off from IAC. The question is, should IAC club together more of its synergistic properties and take them public separately, while maintaining a holding company status? As it stands, IAC seems to be losing focus as well as operational efficiency, and in trying to do so many things at once, it is not doing any of them very well.

The profitability of the company is remarkably low, and that is reflected in its relatively low market cap of $8 Billion, against a 2006 revenue of $6.2 Billion.

One area where IAC can innovate within is the video game arena.  I believe that IAC can grab a leadership position by working independently of any one particular video game publisher but doing business with all of them.  There are different ways to play within the games industry including both long tail and hit-driven models, subscription, virtual goods, and retail sales models.  IAC certainly has the resource to get behind such an initiative and they are currently on their way into venturing into the market.

InstantAction was setup by IAC and has been underway/underwraps for months.  They are buying their way into the games market by acquiring Torque (GarageGames) recently and looks like they are enabling game developers to use their engine to monetize their games (give out the tools and monetization assets to anyone and let IAC monetize their games…. and take a % of the action).  Should be interesting to see what IAC does here… and if the above is correct, InstantAction will probably be a solid standalone company.

Just remember:  subscriptions, virtual goods, in-game advertising, are all emerging ways of monetizing games.  Some do much better than others depending on the type of game/environment/gamer, but if used correctly, could do extremely well for the game publisher/developer.  I am assuming IAC understands this and is building for the future.

Disney & Club Penguin

For those of you who do not have kids or nieces/nephews to play with, you probably aren’t too aware of Club Penguin.  However, if you are aware of Club Penguin, you’re probably ultra-aware of the role it plays in your childrens lives.

This week, Disney announced that it completed the sale of Club Penguin for $700M, a price tag that wowed many folks, but when you dig deep into the financials, it only represented a 10x earnings and 5x revenues.  Umair over at Bubblegeneration Strategy Lab, a blogger that I read as often as he posts has a great writeup of the deal.

The argument he poses around this deal is not that of the terms and dealpoints, but around the strategy.  He believes that the acquisition of Club Penguin by Disney does nothing for the brand as it’s current IP (Mickey Mouse, etc) are dying a slow death.  I personally could see Disney opening up “Club Penguin” in the theme park by offering themed rides and areas, but to an extent, I also agree with Umair.  Certainly read his post to learn his rationale as I don’t do it justice.

Something else I really fancy from his posting is:

Secondly, this deal validates, to an extent, the virtual goods revenue model, and puts it squarely in the spotlight.

With the Virtual Goods Summit haven taken place about a month and a half ago and Sparter gaining some momentum, there is a spotlight on this industry and it’s only going to grow.  Disney surely sees this opportunity and has acquired hundreds of thousands of members who purchase virtual goods… recognizing that the lifetime value of a gamer is significant and they’ve only just begun cracking the surface.

Games Industry Blogger: Adrian Crook

If you’re in the video game industry or watching it closely, you probably want to have Adrian Crook on your radar screen as you probably already subscribe to Raph Koster and Nabeel Hyatt‘s RSS feeds.  Adrian is head of Relic Labs (THQ), trying to figure out new ways of developing and monetizing games through different digital ways.

I have had the chance to talk with Adrian offline and he’s extremely passionate about the space and has a lot of great thoughts about the future of gaming, as well, as, loves my favorite sport:  hockey.

Adrian has 2 posts that you should read it you’re following the MMO/Casual game development space:

Lots of great insight over on Adrian’s blog and look forward to linking to him more…