Reuters note that Asia is also a playground for a range of virtual business models such as rentals.
Georgina Prodhan and Tarmo Virki report that, Cyworld rents background skins of popular South Korean baseball players for limited periods.

These rentals drive repeat sales and tap into trends.

Asian social networking sites allow users to chat, play games and share photos with some advertising thrown in.

But most of their revenues come from users, who are “represented by avatars and acquire virtual currency from the sites to buy digital goods, game packages or upgrades.”

How western SNS make money

• Habbo sells virtual clothes and furniture.
• Pet Society, which is available on Facebook, let you raise virtual pets and sell virtual pet accessories and e-food.
• With 7 million inhabitants, Second Life offers e-wares for sale for Linden dollars, the in-game virtual currency.

“They were all blown away even though some of them already knew about what was going on here,” said George Godula, founder of consultancy Web2Asia. “They (Asian social networking sites) are quite nimble at finding out business models or ways of how to make money,” he told Reuters.

Link: http://www.nytimes.com/reuters/2009/09/08/technology/tech-us-asia-socialnetworking.html

This week on the Virtual Currency Report we cover in-game Virtual Goods, Testing Platform for Online Game Developers, why 99c for micro-transactions is a problem, Google Checkout Glitchs, Gift Stores in Facebook, Voice Mashups for World of Warcraft, How Virtual Gifts Generate Revenue, BillMyParents New Payment Options, $5 million Funding for Virtual Currency Developers, Who made 1 Billion in Transactions, and why Virtual Worlds May Act Like Developing Economies. Let’s get started.

Turbine Selects PlaySpan as In-game Virtual Goods Provider

Turbine and PlaySpan, a monetization solutions specialist for virtual worlds, are to develop a virtual goods marketplace for Dungeons and Dragons Online, a free-to-play (FTP) massively multiplayer online roleplaying game

PlaySpan’s microtransaction platform powers the new DDO Store that was recently introduced into the game. PlaySpan’s microtransaction platform enables gamers to stay in the game while shopping for wearables, weapons, potions, hirelings, and other helpful items in the integrated marketplace.

www.turbine.com & http://corp.playspan.com

Multivariate Testing Platform for Online Game Developers

Offerpal Media, the leader in virtual currency monetization, launched its self-serve Multivariate Testing platform.

This is designed to help online game developers increase revenues from their virtual goods and services, the platform provides a way to test, measure and optimize critical monetization variables including exchange rates, price points, user interface options and more.

The platform is available for free as part of Offerpal Media’s virtual currency payment platform.

1. The first release allows developers to test their exchange rate, or rate at which real dollars convert to virtual currencies.

2. Given the number of variables that go into determining the optimum exchange rate, it is often difficult, if not impossible, to identify through simple trial and error.

3. Experience shows that an exchange rate that is too low, for instance, might not create enough perceived value, while an overly high exchange rate could lead to an inflated economy.

4. The testing platform should provide a framework for testing variations in a developer’s exchange rate and optimizing the results accordingly.

“Finding the right exchange rate is one of the most crucial factors in monetizing games,” said Markus Weichselbaum, CEO of TheBroth, developers behind Facebook games Barn Buddy, Kickmania and PuzzleBee.

He adds that the platform takes the guesswork out of exchange rate testing by allowing you to pinpoint the exact rate that generates the highest Revenue Per User without inflating the economy.

www.offerpalmedia.com

Why 99c for micro-transactions is a problem

Jon Jordan (PocketGamer.biz) reports that “When it comes to micro-transactions, no one knows more about the market than Korean mobile publishers. All Korean mobile games – whether free-to-play or paid purchase – use the system to enable gamers to buy virtual items.

Indeed, many games generate more revenue from their micro-transactions that the initial purchase.

In an interview with Gamevil USA’s CEO Kyu C. Lee, he notes that “Western consumers will adopt micro-transactions. It was easier to educate Korean and Asian mobile gamers since micro-transactions were already extremely popular in terms of PC games. But if you consider all the free-to-play and social games launched in the West these days, it’s just a matter of time. This is a global trend.”

http://www.pocketgamer.biz/r/PG.Biz/Gamevil+news/feature.asp?c=15602

BillMyParents New Payment Options

BillMyParents is going live with AdventureQuest Worlds and gPotato. This launch with two significant youth gaming partners marks the beginning of the company`s multi-phased plan to quickly build a user base across multiple markets and establish BillMyParentsas the leading youth payment system.

The BillMyParents payment system works as follows:

1 Once a player has made their selection, BillMyParents sends an email notification to their parent, requesting approval of the purchase and completion of the transaction.

2 The parent then has the option to deny their child`s request or to use a built-in chat function to ask for more information before making a final decision.

3 To complete the transaction, the parent enters their payment information.

The whole process can be completed within minutes without the teen ever gaining access to sensitive credit card details or other personal information.

Google Checkout Glitch Raises Doubts about Online Payments

DigitalTransactions report that Google Inc. has fixed a weeks-old problem with its Google Checkout online-payments system that prevented merchants from processing recurring transactions, such as subscription fees.

While Google says the glitch affected “only a small number of merchants, other observers say this and outages experienced by other alternative payment services—such as PayPal Inc.—raise questions about their reliability in comparison to traditional card processors.”

The problem affected what Google calls “Google-handled” recurring payments, or those that have been set up by the merchant to be processed automatically, for example, on a monthly basis.

Google Checkout’s rates for payment processing were lower than PayPal’s until this spring, when the service increased its pricing and removed free processing to users of Google’s Adwords service.

http://www.digitaltransactions.net/newsstory.cfm?newsid=2321

Gift Stores in Facebook newsfeeds

AdAge report that “as Facebook wades deeper into the e-commerce space with its payments system, a gift store that sells real items and retail stores on brand pages, it was only a matter of time before someone figured out a way to enable shopping in what is arguably the site’s most valuable real-estate: the newsfeed.

It gives an example of how it might works:

1 You create a gift registry on Target.com or Macys.com, and by hitting a button you can share your registry with all your friends on Facebook.

2 They’ll see the notification in their newsfeed — “Karen has shared her gift registry” — and, without leaving the newsfeed, Karen’s friends can purchase off the registry.

3 Users could also compile wish lists on retailer sites (or e-commerce-enabled brand pages) that they share with their Facebook newsfeed.

4 Their friends will then have the option to pool their money to purchase items from that wishlist together.

A recent study by Ripple6 and The E-tailing group suggests 43% make purchases as a result of their social-networking surfing.

http://adage.com/digital/article?article_id=138946

Voice Mashups for Facebook & World of Warcraft

Vivox have setup Vivox Labs, an initiative designed to capture and incubate new ideas around using Web Voice to create voice and web mashups.

The first two innovations to come out are Vivox Web Voice for Facebook, a way for friends and groups to talk on Facebook; and Puggable.com, a website for World of Warcraft players creating pick-up groups (PUGs) with voice chat, character data and boss tactics.

Vivox enables massive conversations to take place in online games, virtual worlds and communities. Now it’s bringing its voice capabilities to social web application developers and users with Web Voice.

Vivox Web Voice

1 Vivox Web Voice for Facebook combines the Vivox Network with the social environment of Facebook, making connecting with friends easier.

2 Users can have virtual reunions, play games or conduct meetings.

3. In addition to the core app, Vivox is working with developers to integrate custom voice capabilities into their applications.

Puggable

Puggable is a website that  supports pick up groups (PUGs) commonly formed in MMOs. Gamers often have to find similar geared players in certain roles to achieve game objectives.

Presently focused on the World of Warcraft community, Puggable assembles both character and instance data from the game so that players can easily build a complementary team.

Once the PUG is set, they can use Vivox voice right from their browser, making it easy and intuitive for players to communicate while playing together.

http://www.facebook.com/vivox

Virtual Gifts Generate Revenue for Social Networks

The mobile social network QEEP is now making virtual gifts available on mobile phones. It’s called “Mobile Virtual Gifting” and lets users buy and send small gifts as pictures to their friends.

The gifts can be paid for with q-points, the new QEEP currency, and cost anywhere from 2 US cents to 5 US dollars each. There are many different gifts to choose from; everything from a rose to a boquet of flowers, to a bottle of champagne.

In 2008 over 60 million gifts were bought and sent by Facebook users which can be considered a great success.

Qeep is produced and distributed by BLUE LION mobile GmbH, a privately held company founded in 2006 by former executives of T-Mobile International and Nintendo.

www.qeep.net

$5 million Funding for Virtual Currency Developers

Jambool Inc., a virtual currency provider, has raised $5 million in financing led by Madrona Venture Group.

Jambool has recently formed partnerships with RealGames, the games division of RealNetworks Inc. and distribution partners like Super Rewards.

“Virtual currency is critical to our go-forward strategy, so we considered every available option,” said Garrett Link, general manager of social games for RealGames

The platform enables developers to create and manage their own white-labeled virtual currency, to provide an in-game payments experience to users.

ILD Teleservices Reports Billion Transactions Mark

Alternative payment provider ILD Teleservices announced that this July it achieved 1,000,000,000 transactions.

ILD provides Bill to Phone payment alternative that lets you purchase products and services online or over the phone by directly charging your phone bill, without disclosing personal financial data to each business.

Virtual Worlds May Act Like Developing Economies

Suzanne Wu asks, “How would a massive multiplayer game respond to an economic collapse?”

While prior research has looked at economic behavior on the individual level in virtual worlds, a new study is the first to calculate big-picture economic markers such as Gross Domestic Product (GDP) and inflation in an online setting.

“Our concern was whether the economic behaviors within a virtual world function in the same way that they would in the real world — where, it should be noted, currency is also largely representational,” said Dmitri Williams, assistant professor at the USC Annenberg School for Communication.

Williams, co-author Edward Castronova (Indiana University) and a team including three other USC researchers were given unprecedented access to 314 million actual transactions from Sony Online Entertainment’s large-scale online role-playing game “EverQuest II.”

In the August issue of the journal New Media & Society, the researchers showed that while economic behavior in “EverQuest II” on the societal level follows what one would expect to see in the real world, the fluctuations are much more dramatic than normal.

http://uscnews.usc.edu/university/virtual_worlds_may_act_like_developing_economies.html

Reuters report that Asia’s social networking sites appear to have solved found lucrative ways to leverage profits from their online gamers. Asians spend an estimated $5 billion a year on virtual purchases via websites such as Qzone, Cyworld in South Korea and mobile-phone based network Gree in Japan, according to Plus Eight Star.

Georgina Prodhan and Tarmo Virki report that “Of the virtual sales in Asia, about 80 percent comes from the sale of such items as equipment for online games such as rods for GREE’s fishing game Tsuri Star 2. The rest comes from purchases for avatars on social networking sites.”

Such is the success of virtual sales on Asia’s social networking sites that the likes of Facebook are looking at the potential virtual money can generate.

Takeaways

To put this in perspective:

• Qzone’s Tencent Holdings made over $1 billion last year with just 13% coming from advertising revenue.
• In contrast, Facebook and Myspace depend on advertising to fund most of their revenue.
• Cultural issues. Gaming is popular among adults in Asia; in the West it mostly for kids.
• Status. Asian societies are very status conscious. No one wants to have an avatar with last year’s bling.
• Asia’s social networking sites are country specific but have very active user bases.

Stats

• Qzone had 228 million active user accounts for Q2 2009.
• Cyworld had 23 million unique visitors per month at the end of the Q1 2009.

Link

http://www.nytimes.com/reuters/2009/09/08/technology/tech-us-asia-socialnetworking.html

~~~

Doug Herman notes that while western social networking platforms like Facebook are considered distinct businesses from virtual worlds such as Second Life and There.com, in Asian, the two businesses are more integrated and provide leading social networking companies such as South Korea’s CyWorld, with very profitable revenue streams.
How does the Asian Virtual Goods Business Model work?

According Plus Eight Start, “Asians spend around US$5 billion a year on virtual goods purchases such as items to improve their capabilities in casual games and items to improve the look and status of their online avatars.”

The money represents around 80% of the total global market for virtual goods.

How does it differ from the west?

Two differences are 1)  that game players don’t have to spend much money or 2) pay a subscription fee upfront.

Doug highlights that instead, the Asian business model leverages “a large user base which views opportunities to improve their online “look”, experience or capabilities as worthy of a small investment especially when they view their online persona as a status proxy among their friends.”

“Social networking is just a way to get people together, but if you want revenue you have to sell them something. What [Asian social networking companies] found was that people were happy to pay for content related to emotion, status and entertainment. They  keep growing even though the economy’s bad because they keep making millions from [pennies] from millions and millions of people.”, Benjamin Joffe, Founder & CEO, Plus Eight Star.

Takeaways

1. Virtual goods sales in Asia is partly due to the lack of a sophisticated online ad market.

2. However, their alternative business model may be more instructive to Western social networking companies that struggle to develop a profitable revenue stream solely through advertising.

3. Recently Facebook has been developing their own virtual currency platform, dubbed ‘Facebook Credits‘.

4. Facebook already sells virtual goods and has implemented its own credits system to enable the purchases. Soon it may expand its system to push its virtual currency out to third party websites and application developers.

5. Asian teenagers also ‘rent’ virtual goods, such as skins, backgrounds and other items. This lets them bling up their web persona without paying the full amount. If they like the item, then they may but it.

Read more here: http://www.digitaleastasia.com/2009/09/14/will-the-asian-virtual-goods-business-model-gain-traction-in-the-west/

~~~

Mark Hefflinger reports that, as online gaming companies explore how virtual goods can leads to revenue generation, a new survey shows that, “free-to-play games attract the greatest number of virtual goods buyers, and that virtual currency is the most popular purchase.”
VGMarket performed the report on behalf of micropayments firm PlaySpan. It polled 2,425 users of PlaySpan’s Marketplace, Spare Change and Ultimate Game Card products.

Survey result s

• 58% of gamers
• 34% of massively multiplayer online game players and
• 23% of social network game players

have made virtual goods purchases in free-to-play games over the past year

Top selling virtual goods

The most popular virtual goods were

• 71% – In-game virtual currency was the most popular purchase followed by
• 37% – weapons
• 30% – subscription codes
• 26% – wearable items
• 25% – power-ups
• 19% – virtual gifts

Mark adds that “The median purchase in free-to-play games was $75; the figure was $60 for multiplayer titles, and $50 for social network games.”

Links:

http://corp.playspan.com
http://www.vgmarket.com
http://www.dmwmedia.com/free-play-web-games-see-most-virtual-purchases

This weeks Virtual Currency News roundup includes: Google Checkout to relaunch with micropayments, The Virtual Currency Revolution, Nonprofits test Facebook’s credits platform, Virtual currency takes off in Asian social networking sites, How Renting Virtual Goods works in Asia, txtNation bet on micro-payments, TrialPay and WeeWorld chose BOKU as online payments system, and Facebook Targets Paypal.

Google Checkout to relaunch with micropayments

Jessica E. Vascellaro reports that Google may be planning to help newspaper companies get paid for their work. Google is “planning to upgrade its existing Google Checkout payment service to handle billing and subscription services targeted at premium content creators like newspapers, according to a memo the company recently submitted to the Newspaper Association of America.”

Nieman Journalism Lab spotted this memo which responds to the NAA’s open request for new “paid content” solutions earlier this summer.

Google is working on new Checkout features that will allow publishers to charge prices from a penny (micro-transactions) to several dollars for digital content, such as news stories.

The Virtual Currency Revolution

Andy Jordan on the UK’s Guardian writes that “While local currencies have come and gone, many involved in social networks are hoping peer-to-peer (or P2P) virtual currencies will, given the momentum to retool the financial system, have more staying power.

He quotes the founder of Hub Culture. “You’re going to see inexorably, the movement towards peer to peer finance,” Stan Stalnaker says.

Hub Culture created a digital currency — Ven — which is pegged to the dollar, and allows members of the social network to trade goods and services as well as knowledge.

Why start a new currency?

1. Mostly to accommodate members who were juggling multiple currencies traveling all around the world.

2. He adds that “a social network is an ideal place to start a personalized currency, as it has trust built into the infrastructure already.”

Another virtual currency plugs into Microsoft Outlook. It uses a digital currency called “Serios,” which is attached to emails to signify urgency.

As you only gets a fixed number of Serios per week, it creates a marketplace for attention. You can “earn” Serios by performing tasks, such as completing an assignment ahead of deadline, for instance.

This reflect Chris Andersen’s thinking in this book, Free.

This makes sense given the “gift economy” as there is an abundance of information but as scarcity of attention, attention, trust, and reputation.

Not everyone is convinced.

Douglas Rushkoff, has tried to convince Craig Newmark to start a digital currency based for Craigslist.

“What people want is the ability to transact,” Rushkoff says. “They live in a world now where the money they want to use to transact is also being used by speculators to extract value from their communities. And it’s not a tool that can do both jobs well,” he says.

Nonprofits test Facebook’s credits platform

CNET reports that four nonprofit organizations will help test Facebook’s “credits” platform.

“We’re going to be reopening up charity gifts in the Gift Shop,” said Facebook. “We are exploring ways for developers to use the Gift Shop to offer…virtual, real, and charity gifts.”

The four test partners are Project Red, Kiva, Toms Shoes and the World Wildlife Fund.

Inside Facebook also reported that online gift and greeting companies–American Greetings Interactive, GreetBeatz, Someecards, and Real Gifts–would also be selling virtual gifts in the Facebook gift shop as part of a test of the new “Pay with Facebook” virtual currency.

Facebook uses “credits” to sell internal and branded virtual gifts, a change it made last November (gifts had originally been listed in U.S. dollars).

Virtual currency takes off in Asian social networking sites

Brenda Goh, from Reuters, reports that, Asia’s social networking sites appear to have solved the conundrum of how to leverage big profits from their extensive user bases.

Asians spend an estimated $5 billion a year on virtual purchases via websites such as Qzone, Cyworld in South Korea and mobile-phone based network Gree in Japan, according to Plus Eight Star.

That’s about 80 percent of the global market for virtual products.

80% comes from the sale of such items as equipment for online games such as rods for GREE’s fishing game Tsuri Star 2. The rest comes from purchases for avatars on social networking sites.

Brenda adds that “The evolution of virtual money on social networking sites in Asia is partly due to a less developed online advertising market which drove Asian web businesses to seek new ways to profit.”

How Virtual Rentals Work

Asian social networking sites earn most of their revenues from their users, not advertising.

Members are represented by avatars and acquire virtual currency from the sites to buy digital goods, game packages or upgrades.

1. Habbo, a social networking site for teenagers owned by Finland’s Sulake Corporation, sells virtual clothes and furniture.

2. Pet Society, which is available on Facebook, let you raise virtual pets, sells goods such as virtual pet accessories and e-food.

3. Second Life offers a range of e-wares for sale for Linden dollars. Some are mundane and others are controversial such as guns and virtual phalluses with price tags based on the size.

In Asia, Cyworld rents background skins of popular South Korean baseball players for limited periods. Such rentals drive repeat sales and tap into trends.

txtNation bet on micro-payments

If micro-payments are finding their own target market, it appears to be in the market for digital goods like games and social-network applications.
mENABLE announced that the mobile processing product it shares with its parent company, txtNation Ltd., has added several million unique transactions from the start of this year with the introduction of a new billing widget, adding further integration and payment options for websites.

Users could rely on credit or debit cards, but sending an SMS to a number is easier and less distracting, Whelan says. “It’s a lot easier to send a text message than reach for your wallet.”

Role-playing games, for example, see additional revenue from microbilling at rates as high as 90 per cent of their initial sales, while other games are generating as much as 60 per cent of their initial sales profits in micro-billing transactions.

Recently, the Financial Services Authority (FSA), responsible for implementing the European Union’s Electronic Money directive in the United Kingdom, relaxed the guidelines that determine what can be purchased via a mobile device. As a result, micro-payments are expected to steadily grow in popularity in major markets over the coming years.

TrialPay and WeeWorld chose BOKU as online payments system

“Mobile payments for digital goods is one of the fastest growing segments of mobility,” said J. Gerry Purdy, Ph.D., VP & Chief Analyst, Mobile & Wireless at Frost & Sullivan.

He adds that BOKU is clearly one of the early winners in this fast growing market with impressive customer wins and millions of transactions per month. We see billions of digital assets being purchase via mobile phone in the next few years.

In addition, BOKU announces it is going live in the next week with its payment service in Indonesia, New Zealand, Slovenia and Taiwan, bringing the company’s global reach to 55 countries.

Facebook Targets PayPal

Scott Morrison, Dow Jones Newswires, reports that Facebook might also be setting its sights on eBay Inc.’s (EBAY) PayPal online payments unit.

He adds that Facebook has accommodated more currencies, is testing new technologies and has recruited a handful of online payments specialists.

Facebook has started accepting payments in 14 new currencies, in addition to the U.S. dollar, a logical step given that more than 70% of users live outside the U.S.

This month, the company revealed it is testing a system for users to buy physical merchandise, like real roses, through Facebook’s payment platform. It also launched a test to let some users buy

Facebook Credits by billing their mobile phones.

Facebook has also hired expertise in this area, such as Prashant Fuloria, the former Google product management director who worked on Google Checkout and Ivan Kirigin, co-founder of shuttered micro-payments service TripJoy.

Analysts believe Facebook will try to establish its payment system as an on- site “wallet” and then leverage Facebook Connect — which lets people use their Facebook IDs to log into participating third-party sites – to deliver “one- click” purchasing capability across a broad range of Web sites.

If you have any other Virtual Currency News, please send it in.

Thanks

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