We are living in a digital economy. Commerce as we know it, based on digital technologies, has become dependent on the internet, even when it comes to traditional brick-and-mortar retail. But this phenomenon is not limited to commerce – it’s taking place in all industries, including video games. This is visible in the now-widespread and growing popularity of Massively Multiplayer Online Games or “MMOGs”.
The video game industry is in very good shape at the moment. Thanks to online gaming, developers and publishers have been able to reach a much wider audience than ever before, and MMOGs are the tool they are using to attract and retain these customers.
MMOGs include the traditional “online role-playing” MMORPGs, often considered the domain of hardcore gamers, as well as casual free-to-play games, browser-based games and “social gaming”, which blurs the line between games and social media. All of these can be classified as virtual environments (VEs).
As the popularity of virtual environments balloons, not just among gamers but all across the demographic spectrum, we’re witnessing what economist Edward Castronova has called “a mass exodus to virtual worlds and on-line game environments.” This has led to VEs recreating many real-world activities, including the development of local economies using in-game monetary systems, also known as virtual currencies.
What is a Virtual Currency?
Virtual currency refers to a type of digital money issued by its developers and used and accepted within a specific virtual community, such as the in-game currencies in Second Life, World of Warcraft or EVE Online. This in-game money is used to purchase virtual goods or services within the game world.
These currencies are so important to the experience of VEs that some MMOG developers have employed economists to define and manage the in-game money. For example, EVE Online has an incredibly deep economic infrastructure within which players are free to operate, from trading goods to building their own corporations. However it is explicitly prohibited to exchange the in-game currency for real-world currency. This type of virtual currency is centralised – i.e. control of the money supply is in the hands of the MMOG’s developers.
The virtual currency of Second Life, Linden Dollars, on the other hand, is freely exchangeable with real-world currency, making it possible for players to openly make a living based on a successful in-game enterprise.
A Meeting of Worlds
As fascinating as the development of isolated local economies within these virtual worlds is, what we’re interested in is the way virtual currencies interact with real-world currencies and the places where virtual commerce and e-commerce overlap.
Game developers and publishers are enjoying the fruits of a very healthy marketplace. Online gaming has never been such a promising industry for both long-established MMOG developers as well as new market entrants. There are a variety of different payment models foronline games, such as:
Typical of AAA games and popularised by MMORPGs such as World of Warcraft, traditionally players would purchase online games from a store the same way they would purchase offline, single-player games. However, for the majority of these games players would have to pay a monthly subscription fee to allow them access to the persistent online world. As MMOGs began to attract a wider population, developers began to create new revenue streams in the form of:
- In-game purchases: While players can earn money within the economy of most VEs, developers often also give them the option of using real-world money to purchase items or in-game currency; and
- Downloadable content (DLCs): DLCs are optional expansion packs players can purchase to add content to their game, such as new items, areas, characters, quests, customisation tools, etc.
The success of these additional revenue streams allowed for the development of a new pricing model for MMOGs:
A portmanteau of the words free and premium, freemium games get their name from the fact that they are free-to-playbut players must pay to unlock optional “premium” content and features.
This has proven a successful model for many developers, as 50% of all MMOG players only play free-to-play games and because of the habit-forming nature of online gaming, it’s easier to sell premium features to existing players than to sell the complete game to someone who hasn’t played it yet. However, this model has received criticism for encouraging predatory tactics in game design.
This model is the alternative to freemium. Whether it’s players who are uncomfortable with having locked content in their games or it’s parents who are sick of unexpected charges for premier content on their credit cards, there is a market for games that come with all content included at initial purchase. Apple has recognised this market by implementing a pay-once-and-play section in iTunes.
Needless to say, all of these pricing models require a robust e-commerce platform in place to allow developers to reliably accept payments with as little impact on the player’s gaming experience as possible. In order to provide the best customer experience and in turn maximise your profits, we recommend providing players with:
- Flexible payment methods: Offering more payment options is proven to increase conversion. DalPay provides support for several payment methods.
- A localised buying experience: Supporting local languages and locally-preferred payment methods inspires confidence in international customers. DalPay supports 24 languages and over 150 currencies.
- A seamless buying experience: In-game purchases should be just that – in the game. If players have to leave their game or visit a website to complete a purchase, they will likely abandon the purchase and possibly even the game entirely since their immersion has been broken. Well-integrated in-game purchases encourage players to keep playing and keep buying.
Online game distribution is a healthy, growing market and as it continues to mature more and more players are expecting the seamless gaming experience spearheaded by AAA developers (and willing to pay for it). But even if you’re a new indie developer it’s possible to offer the same experience to your customers, with the right e-commerce service provider.
Read our second installment in this series: Virtual Commerce Part 2: How MMOGs are Pushing E-Commerce Forward.