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Making virtual economies work by Mind Map: Making virtual economies work
5.0 stars - 1 reviews range from 0 to 5

Making virtual economies work

Panelists

Susan Choe, Outspark

CEO & Founder

online game publisher

"virtual fairground", each game = 1 ride, main street coming soon, linking games together

5 games, 1 flash Items-based game

>3 M registered users, >2 M monthly uniques,75% from USA, 16-25 year olds

Lee Crawford, Twofish

Founder & CEO

ERP for Virtual Worlds & online entertainment, banking, reporting, inventory management, horizontal white label platform

Christopher Donahue, LiveGamer

publisher-sanctioned primary and secondary market vgoods transactions, B2C and C2C

Christian DeBaun, PlaySpan

VP of Operations

publisher-sanctioned primary and secondary market vgoods transactions

recently bought PayByCash

revenue-share model with game publisher

Susan Wu, Ohau

former VC at Charles River Ventures

primary vs. secondary

Susan Choe

nothing outsourced in primary market (B2C), built this themselves because nothing was available when they were starting 2 years ago

signed PlaySpan for secondary market (?)

probably need couple of hundred thousand $ of volume in primary market before secondary market takes of, also look at the game: once players start setting up stores themselves, time to open up the secondary market officially

Christian DeBaun

secondary market needs to exist to promote primary market, makes market liquid for players, Susan Choe supported this view, bumps up the sales of primary market, separating primary & secondary is artificial, it's a interconnected economy, and you need to consider the whole

think secondary market should take place outside of the game

Christopher Donahue

time & cost of implementation of secondary market?, regulatory costs (e.g. different state taxes, international laws), try not to be a "money holder" so you won't become regulated, these platform providers take care of this (?)

Lee Crawford

secondary market allows users to trade money to time and vica versa

metrics, tools

Lee Crawford

what are the key performance indicators, first optimize your user experience, get the free to play part working, understand the friction between selling items & gameplay, what can you sell etc, then you can optimize your catalog, need real-time access to data

Susan Choe

needs tools to spot fraud, e.g. limits on dollar amounts per user/demographics, had challenges with in getting this done with PayPal, fraud becomes noticeable with increased volume and non-USA geography

have a PhD just doing analytics

track data, marketing source, funnels, new users, what they buy, how they buy, engagement etc, lifetime value, in-game stats & web stats

qualititative data, surveys, focus groups

merchandising

Susan Choe

essentially a retail business + entertainment

events, social interaction drives retention!

need to do number crunching, sales, traffic, demographics, buy what, how, when, identify what sells -> try to bring this up in the game at the right for the right players

C2C market, needs escrow -> leads to money holding & banking regulations, scary stuff, better to outsource it

Christopher Donahue

acquired Sony's Station Exchange, increased their revenues a lot, now at 50-60 $ / transaction, also volume of transactions has grown

if you don't have a secondary market, somebody will build it if there's money to be made

if you have a secondary market when you go out, there is less hesistancy from the users as they accept it from the get go

secondary market is a profit center, if it is publisher-sanctioned, black market just creates support costs, bad image for the publisher etc

Inventory control, metrics & control on what's going on the economy, data from secondary market helps in managing primary market

fees

Christian Debaun

10% fee for secondary market, profit share with publisher

primary more expensive

light integration, e.g. verifying from the item DB what the seller owns

Christopher Donahue

10% fee for secondary market, profit share with publisher

Lee Crawford

10% fee

operating margins

you could perhaps apply standard retail rules of thumbs for this

Q&A

pricing strategy

test price points, collect data, tweak it (5%, 10%, even 20-30%), see what happens

do market research, what other games sell, when, how, then test these hypotheses, look at black & grey markets to see what's the going rates / elasticity

test with sample of users, try to measure price elasticity

"socioeconomic stats", sample = 100 users -> if you get a trend, then it is typically right

don't forget ROI, see what ARPU you need, and how you get to that, cost of development of content, marketing costs

spray & pray doesn't work

seeding economy

who gets free credits etc

Susan Choe, if users get used to free stuff, it is really hard to get them to pay, don't start that way, you can do real world sweepstakes, e.g. 40" HDTV

Susan Wu, give it out for behaviour you want to encourage

Lee Crawford, give out soft currency, not the hard currency, does somewhat cannibalize hard currency sales, but you can always tweak soft currency "give out" rates

Christian Debaun, if you give out free currency, people will game it, blows up your economy