This last year saw a flurry of activity in the virtual goods space across social and casual games, virtual worlds, and social networks. The industry starts 2010 with promise and challenges. We spoke with Live Gamer's president and co-founder Andrew Schneider on how he sees 2010 playing out. Live Gamer is deeply involved in facilitating microtransactions within online games, social networks and virtual worlds and recently acquired Twofish and Korea's N-Cash.
Virtual Goods News: What do you see happening with free-to-play business models in the immediate future?
Andrew Schneider: Free-to-play models will become king online and on mobile, with revenue coming from microtransactions. We'll also start hearing hype around the first free-to-play console title.
VirtualGoodsNews: What company do you think will have the most impact on virtual goods in 2010?
Andrew Schneider: Apple will open the door for virtual currencies and virtual goods sales on the iPhone and iPod Touch via the App Store. Over $100 million in virtual goods will be sold within the App Store economy in 2010 alone, with overall virtual goods sales rivaling overall iPhone app sales.
VGN: What impact do you see microtransactions having on total mobile revenues?
AS: Mobile microtransactions will reach 20% of mobile revenues. The introduction of microtransactions through the iPhone App store will be a major influencer here.
VGN: Do you see any innovations coming in the ways publishers use virtual goods?
AS: Multi-purpose, cross platform item use will become commonplace. For example,
single items may have functional use in games or virtual worlds, but then also be used outside of that context — in user profiles or other social display outlets on multiple platforms.
VGN: Where do you see brands fitting in to 2010's virtual goods picture?
AS: Brand licensing will increase, both for free-to-play games and for virtual goods inside games, social networks, and virtual worlds.
VGN: Do you see publishers trying to monetize virtual goods differently in 2010?
AS: Publishers will focus on an integrated approach to revenue that expands beyond monetization of the "super-user," with a targeted combination of virtual goods, virtual currency and advertising.
VGN: Do you see traditional media companies adopting a microtransaction-oriented business model?
AS: Traditional media companies will increasingly mirror the virtual goods market in social gaming for monetization. The first major move to this will occur when Google starts charging for content.
VGN: Do you think the old issue of taxation of virtual goods will come up again in 2010?
AS: Now that such an enormous amount of money is being moved through virtual goods and currencies, yes. There will be a move by the IRS to ensure that taxes are paid on all micro-transactions for virtual goods and content. Watch for taxation regulation in virtual economies to resurface in 2010.
VGN: Do you see any innovations coming to the way virtual currency is used?
AS: We'll finally start seeing companies like Facebook and Paypal issue their own currencies, and Twitter implement its own microtransaction capabilities. The other trends we’ll see are game publishers attempting to capture and/or migrate users to their own sites, as Zynga is now doing with Farmville.com, where they can build direct relationships with their audiences and begin introducing universal virtual currencies to promote the transfer of users between different games. This will also enable more advanced merchandising techniques to increase ARPU among their audience
VGN: Do you have any thoughts about Zynga's success with virtual goods in social games? Will that continue into 2010?
AS: 2009 was a spectacular year for Zynga in terms of user and revenue growth, and for social game developers in general. With nearly 64m players, Farmville is a true mass market media property with significant incremental advertising potential, but can't live on forever as Zynga's money tree. 2010 will be about expanding revenue; introducing new games, enhancing revenue methods and driving broader distribution. Social gaming has been a gaming phenomenon that will be a critical component of every major publisher’s portfolio in 2010.
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