Hello, my name is Mike Gowen.

Virtual Goods Summit 2008 Notes

Here are my raw notes from the Virtual Goods Summit 2008. I’m presenting them to you as-is, so take it all with a grain of salt. As soon as the videos are posted, I’ll link them up. Here are the photos I took of the event.

Branded and User-Generated Virtual Goods

Margaret Wallace, Rebel Monkey
Brian Balfour, Viximo
Lee Clancy, IMVU
Amy Jo Kim, Shufflebrain
Sean Ryan, Meez

Quality and appropriateness are deciding factors between balancing branded and UGC.
Use a rating system or expose stats to bring good content to the surface.
No answer to which is better (branded or UGC), depends on world and audience.
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.
Avatars are two inches high, so clothing and items are exaggerated, giant gold flaming wings.
It’s all about status. Choosing branded or UGC is just an aspect of that.
Make sure to define guidelines upfront as to what is acceptable, then have the users police it.
Ad model for normal players, virtual goods for hardcore. The two together is a powerful formula.
If an item doesn’t promote status the price goes lower.
How do you price an item? What are they used to buying? Comparable to ringtone $.50 - $2.50 - Meez
Create a VIP program with status and privileges - Meez
Women want multiple body types, men just want buff (80%) - Meez
Do people want to express themselves for real, or fantasy. How does it affect goods? - Amy Jo
Let users control margin so they can adapt to the economy, real and virtual. - Lee
Virtual worlds skew female, games skew male (especially with combat) - Amy Jo
At There.com, females were leading charge of UGC. Top UGC users were exclusively female. Lee agrees 60/40 split. Some females buying 1000’s of goods.
We’re moving more towards activity. Goods should extend activity. Wave of the future. - Amy Jo
Don’t just think about goods for you…think about gifting. There’s only so much you can have/wear. - Sean
Extract more money from hardcore users who are willing to pay by having them buy for others. - Sean
Easier to monetize international audience with goods versus advertising. - Sean
Not clear if branded goods will able to generate enough, when charged for given licensing fees. Only for promotion. - Sean
Promotional credits to get people into the buying process.
Three tier system: Advertising for casual, then a la carte virtual goods, then VIP packages for the hardcore.
Fraud goes up when cash out is introduced or sheer size of economy hits a certain point.
Need to keep track of ins and outs of currency. Balance to avoid inflation. Be careful about activities that generate credits? Need great reporting tools.
Share information across companies about fraud. We can all help each other.

Making Virtual Economies Work

Susan Wu, Ohai
Dan Kolkowitz, Playspan
Susan Choe, Outspark
Lee Crawford, TwoFish
Christopher Donahue, Live Gamer

Volume plus geography origins of payments determines when fraud becomes an issue. Certain locations bring more fraud. - Susan Choe
Didn’t outsource as no one had the experience yet that bested theirs. - Susan Choe
Secondary markets have to be managed outside the games by a 3rd party. - Dan
You need ~$200,000 a month of primary sales before you can get into the secondary market. - Susan Choe
Look at what the users are doing and respond to it with your secondary market. - Susan Choe
Outsourcing helps others (the 3rd party) focus on metrics and reporting while you focus on technology and content. - Lee
Collect all data from each marketing channel with all their activity and determine their worth. - Susan Choe
Gameplay itself will keep some users but not all, half come because of social interaction. - Susan Choe
Sony Online Exchange was at $40-$60, has gone up since we took it over. - Christopher
They did it by reducing fraud and improving the user experience, but did not touch the gameplay. - Christopher
Was told she could triple primary market revenue with a secondary market by one of the panelists. - Susan Choe
Secondary markets allow the trade of time and money. - Lee Crawford
When people get used to free currency they won’t want to pay. Don’t give away currency for free. - Susan Choe
You need to train them slowly to transact. - Susan Wu
Once you set the culture for your community its very hard to change it. - Susan Choe

Virtual Goods and Social Networks

Mark Wallace, Wello Horld
David King, Lil Green Patch
Shervin Pishervar, SGN
John Hwang, RockYou
Andrews Trader, Zynga

$30MM in revenue in 2007 - Maplestory
Direct relation between engagement and the addition of new content. - Shervin
Growth of app is directly affected by growth of social network it resides in.
Social networks make dealing with fraud more difficult. - Andrew
Standalone sites, flufffriends.com - Shervin
Need a treadmill of new content coming in to keep people engaged, always something new. - David King
Create engagement between players by allowing trading. - Andrew
Average life of a user a little less than a year. - Mark Wallace
10% users pay for currency, of those another 10% complete the transaction. - John Hwang
$20-$30, per thousand daily actives with 200,000 daily actives- John Hwang
Trying out Fluff Pets, real world toys that unlock virtual goods in-game. - Shervin
Facebook can do a better job at helping users find games they like. - Shervin
Yoville was all about self-expression. That was the key. - Andrew
Keys are a great product, community, great experience, truly social. Landscape is still accessible to new developers. - David King
Not as easy to grow like you once could, but still possible. Not going to see day to day 20x growth. - John Hwang
Barriers are rising quickly, production quality, depth of content. - Andrew
If you want to make $5k, $10k, $15k a month, you can do that as an individual developer, do it. - Shervin
Passionate community, if only 10% are passionate, and 1% pay, you can build a viable business. - David
Secondary markets haven’t emerged in Facebook only because the platform is just too new. - David

Metrics for Virtual Goods

Daniel James, Three Rings
Andrew Chen

You can find the slides for this presentation, along with more photos here.
Lost 90% of users from the time they chose to play and clicked the link that spawned the download, to those who actually started playing. 0% loss if no install is needed.
Hire a company to handle payments, its too much to handle for a small shop.

Generating Real Revenue from Virtual Goods

Joel Brodie, Gamezebo
Anu Shukla, Offerpal Media
Adam Caplan, Super Rewards
Matt Mihaly, Sparkplay Media
David Perry, Acclaim

$1.5 - $2B market for virtual goods, but does not include secondary $500M - $1B additional. - Adam
No demand for virtual items, only demand for games, then demand within context of game. - Matt
Honest business model, you’re trusting your game. People pay when they love your game. - David
Gaming is anti-cyclical to economy…less spending, more on games, and now even better with micropayments. - Adam
Its not about the demographic for the goods, its about the demographic for the game. - Matt
30-35 monthly actives, 50% go to offers, 25% click on them, so 5% users converting to become a revenue generator. - Super Rewards
Charge a very low amount to bridge the penny gap. Time sensitive experience offers. Free gifting. - David
Let the user get engaged with the game, then spark competition. That gets them to pay. - Anu
Players have paid $1000 plus for an item in Iron Realms - Matt
Halo is a missed opportunity, they’re setting their limit at $50. There could be $25,000 Halo players if they let it. - David
Seen $500/day from a player on a slot machine with only a leaderboard, not prizes or payouts. - Adam
Some guy wanted to buy everyone in Saudi Arabia on a buy your friends game for $10,000. - Anu
Looking forward to Flash 11, with full 3D capabilities. - David
Thinking about letting cheaters out of jail for a fee.  - David
Dance game where if you do bad you have to wear panda suits…have to buy slimming potions or you get fat over time. - David
$800 to get to top of Friends for Sale - Adam
Sending virtual lap dances, very expensive. - Anu
Have to pay when you get reported for baby neglect. - Anu
If you have to guess about virtual good pricing, go high. You can always go down. - David
Test different price points and see which one works. - Anu
Iron Realms ran auctions to see where the price points are. Agrees with Dave, go high. - Matt

Billing and Payments

Paul Thind, Sulake (Habbo)
Christian DeBaun, PayByCash
Gene Hoffman, Vindicia
Lex Bayer, Spare Change Payments
Tim Pechmann, GMG Entertainment
David Marcus, Zong

You’re perceived on your own price point. Don’t be afraid to try a high price point and come down. - Gene
Best payment system is the one with the least friction. - David
Size of game doesn’t necessarily equate to monetization potential. - Lex
Competition drive purchases. - Lex
Open as many avenues to pay as possible and A/B test them. Everyone has different needs.
Fraudsters will test cards, just to see if they are valid so they can go buy bigger items at Amazon. - Gene
A/B test fraud countries in 15 day cycles. - Gene
Cards in store can induce trust in parents that the site is legit. - Tim

UPDATE: The videos of the conference have been posted here.