Real-world value of virtual markets

Shortly before the recession kicked in computer gaming overtook movies in entertainment spending, and was on track to surpass music too. When the recession hit it wasn't immune, but the gaming growth curve lasted longer, and has kicked back in sooner, than many other industries. After a dismal September 2009 the industry has seen the first signs of turn-around as initial Q4 sales data is starting to come in.

The size of the global market remains significant, with values of key markets representing multiples in the billions of dollars.

Size of market in 2008:

• USA $11.7 Billion

• China $3.2 Billion

• Japan £4.55 Billion

• UK £4.03 Billion

In China alone, the gamer population is 217 million individuals and it is estimated that 64% of the online market plays computer games. In the USA the average age of people who play computer games is 35 year old: these are people with levels of disposable income that every consumer business wants to tap into.

All this information must lead to an understanding that the markets represented by, and opened up by computer games have high value, reflect desirable demographic spreads, and encompass massive numbers of people. So, how do we tap into this highly desirable market?

There are two basic options - target the player, or target the avatar [the animated character that represents the player in the game].

Player-based marketing

In these cases the marketer is tasked with connecting with the player and their real-world desires through in-game advertising. The technology allows various forms of connecting, but for the sake of this article picture a billboard that can show any one of 300 possible products, changing every 30 seconds.

Player-based marketing will consider the players internet usage history through things like cookies and other info in their browser and select the most appropriate products to show the player while they are in the vicinity of the billboard.

Avatar-based marketing

This style of gaming marketing targets the consumer alter-ego represented by the in-game character the player has chosen. Virtual worlds and associated computer games allow people to represent a part of themselves that they don't otherwise show. In a sense, in the computer game they become the other person they've created. While it may be the real world person making the purchasing decision. When it comes to in-game products the person for whom the product is being purchased is the avatar.

Paul Hemp wrote an article for the Harvard Business Review on Avatar-Based Marketing, in it he says: "Avatars offer a window into people's hidden preferences and a means for achieving sustained consumer engagement with a brand".

There are two revenue models that game developers and publishers use that influence the marketing decisions related to the game market. On one hand there is a subscription-based model where the player pays a monthly fee to have access to the game. In this model in-game products are generally earned, rather than purchased. The most successful online game "World of Warcraft" uses this revenue model with 12 million players each paying $15 a month to play.

The other model allows the player to access the game for free, but the products and tools needed in-game, to be successful and enjoy playing, need to be purchased in real-life hard-currency. This second model tends to be the one used in the big Asian markets like South Korea and China.

In all of this discussion we need to beware of the tendency to discount these transactions because they all happen in a virtual world, often with virtual products that have no physical presence beyond the brand that they are representing.

The will to carry on?

The global market in in-game goods (this is separated from game and hardware purchases and player subscriptions) is estimated at more than $1billion. Consequently, when a person dies the virtual property and assets that they leave behind have value. Companies like Yahoo, Linden Labs, and Blizzard who provide some of these online worlds and environments are considering revising the terms and condition a player signs.

These revisions will ask players to provide contact details for people who can take over and dispose of their in-game assets in the event of their real-world death. If they don't offer this option, and they merely shut down the user's account they increasingly run the risk of being sued for depriving the dead person's estate of real-world money.

This may all seem rather strange and a little unsettling. But, that doesn't make it any less real or any less important to come to terms with as we are all faced by the challenges and opportunities of marketing in a new and often virtual, world.

About Wisdom: Wisdom Games develops, implements, and supports gaming-based business simulation environments within the corporate world, operating from the premise that games have always been used by society to teach the values and skills needed to succeed in life, while being entertained.