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Content Insider #171 -- The Game Is On

We're Starting to Take Virtual Sales to the Real Bank By Miles Weston

"The leader who stays in the rear, takes it in the rear. Besides, violence is one of the most fun things to watch."
- Mr. Hertz, Shoot 'Em Up (2007), New Line Cinema

A friend just had his PayPal account (hence his AmEx account) tapped for $50.

His son had bought a big bunch of virtual gold on a Zynga game he was playing.

$50 for something that doesn't exist? 

OMG, someone really can sell the Brooklyn Bridge!

The game industry has come a long way since our Atari days.  Now it's approaching a $1B  industry!

Sony, MS and Nintendo still fight it out for leadership in the number of devices, but the real profit makers are the social and mobile games.


Why would millions of people buy something as meaningless as Raging Birds?

How can Zygna have a market value of $10B when they deliver no tangible product?

As Mr. Smith said when looking at the screens, "It's just as good as cash."

Growing Numbers
It's a numbers game:
- Six plus billion people on the planet
- Nearly 4 billion feature/smartphone subscribers
- 40 million tablet users
- 60 million+ notebook system users

A friend pointed out that these people aren't "gamers"... they're looking for something to combine Facebook, forums and 3D gaming -- a better world.

And...they've got money!

Social gaming exploded last year.

Addictive apps like FarmVille and Mafia Wars really caught on with the social network crowd. 

There's an estimated 61.9 million internet social game players and they're spending real money.

Serious Bucks - Suddenly video games - consoles, PC, social and mobile devices - have become a real and serious business.  Between last year and 2014, worldwide sales will nearly double.  Source - Screen Digest

According to industry analysts, 27 percent of the U.S. iNet users are social gamers; and by 2012, more than 29 percent will be playing and buying virtual goods.

All of that in less than two years!

No wonder CES (Consumer Electronics Show), Macworld, MWC (Mobile World Congress) were overrun by developers, publishers, investors.

True, most of the social gamers match up with the overall social media community...they love free.  But a lot are buying virtual goods and purchase in-game content.

Buying Air - Game developers and publishers will achieve revenues from ad sales as well as marketing special offers.  But the real money will be racked up by selling virtual goods, products, places, tokens that enrich and help users play the games.  Source - eMarketer

Microtransactions pretty easily turn into big bucks.

Then too, marketers have found embedding ads in games is good business as long as they fit into the game and aren't too intrusive.

Game developers constantly work to improve their game design to reel in more freeriders and turn them into paying customers who buy more stuff!

More Eyeballs
With social media becoming an increasingly important part of "conventional business'" marketing mix, it's no wonder folks have started to compare the audience size with that of TV.

Heck, they're more involved with their games than folks were with the daytime TV soaps!

Take FarmVille, for example - 50 million users worldwide and most social gamers are women 18-50. 

Mr. Smith glared back at the other gamers and said, "I'm a British nanny, and I'm dangerous."

Media analysts at Flurry got advertisers attention when they dared to compare TV audiences with social gaming.

Show Time - Kids, men and women increasingly play video games in their down time rather than watch TV shows.  Daytime, primetime viewing and weekends all pull TV viewers away from their sets to the many game choices that are now at their disposal.  Source -- Flurry

O.K., it's far from "truly scientific," but the narrowly defined iOS gaming audience is between Sunday Night Football and Dancing with the Stars

True, the numbers are something of a leap of faith; but if folks aren't watching TV, they're doing something...

Flurry and most game analysts will tell you that social game play is higher on weekends than weekdays.  But weekday play peaks at 6:00 P.M. - 9:00 P.M., which is prime TV time.

By 2012, analysts project there will be nearly 70 million social gamers in the U.S. alone and the developers (and their investors) will be raking in about $1.5 billion.

As Mr. Smith said, "I hate to think what you'd do to get him into the right school."

iOS leads us into the other huge and rapidly growing mobile content market...phones!

It won't come as a giant surprise to you, but Pew Research recently reported that six in ten American adults (percentage is more with kids) are wirelessly online with either their phone or laptop - 20 percent phone only, 47 percent phone and laptop. 

Our daughter is like most folks "her age."

Smartphone Generation(s)
She had to have a new smartphone because she takes a ton of pictures, shoots video, likes to post them online and wants to share with friends.

The phone she had to have included muvee's automatic slide/movie production software she could use to painlessly make her movies and throw them up on her Facebook page, YouTube and Flickr.

It turns out, calling minutes for her and most of us are almost a waste of time.  Folks spend their time on the data side of the mobile device network.

Everything But the Call - Examine your own smartphone usage and you'll see that the device is used for more - a lot more - than simply making phone calls.  The non-voice usage is growing significantly as units and applications become more diverse and bandwidth becomes more readily available, more reliable.  Source - Pew Internet & Research

While texting,  photos and videos suck up most of the mobile bandwidth, 38 perecent of their data consumption is taken up by games like Raging Birds.

No wonder people were stumbling over games at MWC (Mobile World Congress) and the upcoming CTIA (the wireless association show)

Mobile Gaming
While folks 18-29 dominate the mobile apps/game use, owners 30-49 are increasingly mastering the depth and breadth of wireless capabilities. 

On the Road - While the game console at home still is most popular with the younger generation male; new applications for mobile devices, including smartphones and tablets, have made the gaming platforms more attractive to both sexes and people of all ages.  Source - eMarketer

This year, 64 million people will play mobile games at least monthly; and by 2014, more than 94.9 million mobile users will be burning up their phone's battery life playing social games.  

That doesn't include the preinstalled (bloatware) games, which don't make the developer/publisher much money.

Mr. Hertz looked at the phone's apps library he mumbled, "Do we really suck, or is this guy really that good?"

Nope, the bucks are made at the app stores and virtual sales!

By 2014, mobile game sales are estimated to top $1.5 billion.

Since smartphones sales are increasing at about 60 percent while feature phone sales remain relatively flat, the number of social and multi-player games - and the income for developers - is expected to be huge as the global population goes mobile. 

Traditions Change
That's probably why the folks at Nintendo and Sony are looking at ways to add smartphones to their product lines.

Apple, with a very visible/broad family of mobile devices - iPhone, iPod Touch, iPad - has more than 40.1 M people playing games on their thingies.

Sure, more people pay when they're using Nintendo devices (67%) and Sony (66%) compared to Apple's iPhone (45%) and iPad (32%); but the latter hasn't been in the market that long.

You and we also know that gamers play on multiple platforms.

If smartphone users spend more time with their phone, then guess where they'll spend more on virtual goods?


As Mr. Hertz said, "I can't talk right now, honey. I'm right in the middle of something."

Oh, and our friend who's son dipped into his PayPal/AmEx account?

Zynga cancelled the charge after numerous discussions about the value of virtual goods.

And his son promised "Never again Dad!"

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Undercover author Miles Weston has spent more than 30 years in the storage, software and video industry, indulging in, among other things, marketing activities in promoting PC, CE, communications, content technology and their applications . Contact Miles through his editor by clicking here.

Related Keywords:smartphones, games, game development, video game industry

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