Virtual Worlds Forum Europe 2008: “Show Us the Money”

(Monetization options for Virtual Worlds)

VWFE 2008 (Virtual Worlds Forum Europe) got cancelled because the venue was taken away by the Police, so the organizers arranged an emergency Unconference for today instead. I decided – with only five minutes of prep (this is an Unconference…) – to do a session on “ways to monetize virtual worlds”.

I ran this session, so I took very few notes, sorry.

So … if you weren’t at the session, you probably missed most of the good bits :P.

Background

I’ve been in MMOs in some form or other for ten years, and I’ve seen VWs arise as a viable product, but the companies I meet seem to often have serious lack of understanding / plans of how they are going to make anything more than trivial revenues. Each year, the average technology of new companies (both presentation/graphics, and back-end/servers) seems to improve, but each year the monetization plans of new companies seem to get poorer, on average.

This is quite disappointing, so I wanted to do a session on ways to monetize VWs, and show that there’s no excuse to merely say “advertising”, or to stick to one or two plain derivative revenue models.

Reference points

How much revenue should we be talking about here?

2008 FaceBook – $300m
2007 FaceBook – $150m

2008 MySpace – $800m
2007 MySpace – $550m

So … if your monetization method tops out at a million dollars a year, forget it.

How can you monetize a VW or MMO?

Here I opened it up: in the few minutes before the presentation, I had thought up 9 different unique methods of monetization; how many could the audience come up with?

My ones (shared afterwards)

• virtual item sales
• dual-currency systems (currency-sales)
• physical merchandise
• lead-generation advertising / research
• sponsoring
• marketplace ownership
• subscription
• event fees
• consumable / rentable resource fees (LAND, also INGREDIENTS)

Audience ones:

• subcriptions
• virtual item sales
• ad-supported
• sponsorship
• merchandise
• event fees
• physical goods sales inside virtual worlds
• currency exchange fees
• be a deposits bank
• licensing in-world businesses
• tax

…I liked the “licensing” and “become a deposit bank” in particular :).

We then ran through them all and shared what our estimations of the total amount of money people across the industry were making using that particular monetization model. I can’t remember exactly what we said, and it was heavily influenced by me (because I’m quite up to date on figures for global public compnies for this – its something I’ve researched a lot and tracked for the past few years)

Something in the region of $5billion for subs, $3billion for virtual item sales, a guesstimated $1b or less for advertising (really really unsure of this one – I was guessing blind basing it mostly off CPM figures for ad-driven games – I hoped someone else present would know a real figure for this), a few billion for merchandise.

But … Villi shared a figure he had researched formally for a report last year: $2.1billion for the worldwide revenue from virtual-item sales. I reckoned that is looking like $3billion for 2008 (going off the projected revenues of the Chinese operators and how much they’ve gone up).

An interesting comment…

“Many VW’s don’t think about the problem of getting physical money into the world in the first place – the use of payment providers etc”

Think about that. Think about it until you understand what it means, what it implies for those “many VWs” – and how it relates to the current real-world financial crisis.

Summary

Companies are spoilt for choice when it comes to VW monetization, really.

And there are half a dozen forms of monetization that – straw poll – are already producing billions of dollars revenue across the industry.

And … forget “advertising”: there are better things out there, each of which is as good or better than advertising.