Liveblogging the Virtual Goods Summit: Virtual Goods Meet Entertainment

For the last panel of the day, the conversation turned to how the world of entertainment intersects the trade of virtual goods. With companies like Kongregate providing a gameplay environment and achievement-based awards and others like Meez simply offering a branded, aspirational expression, it seems like virtual goods are an easy way to reach out to users' online worlds

Virtual Goods Meet Entertainment
    Virtual goods have a long established place in the world of quest-based and campaign-oriented online gaming. As important as this genre has been, the casual games and entertainment markets continue to attract a different demographic with different motivation. How will virtual goods impact the casual games and entertainment markets? Will the same tactics and techniques that worked in other instances drive success here as well? Our closing panel will share their thoughts on this topic and talk about what the future holds for virtual goods and entertainment.
» Jim Greer, Kongregate
» Erik Bethke, Go Pets
» Sean Ryan, Meez
» Charles Hudson, Virtual Goods Summit (moderator)

Ryan: We’re all about identity. We think that’s the core of the Internet. And we’re entirely US focused and entirely ad-based. We’ve booked about 1/4 million dollars in the last six weeks, and we’re continuing to make it easier for users to take their avatars with them throughout the Internet. I was not creative or a big thinker. I looked at Korea and thought avatars look good. Virtual goods look good. Let’s do that/ That’s the strategic thought that went in to it.

Greer :The concept behind Kongregate is take the techniques that worked well for the gaming environment and use them to integrate with the social aspects of other functions. We launched our public beta in March, and we grow with 50-60 games per week and have 600k unique visitors per month. We’re currently just ad based, but we plan to look into other revenue streams in the future. Our users are predominantly young and male.

Bethke: We’re a virtual world all about pets and games. It’s a hybrid experience between raising a virtual pet and playing games. We’re completely ground up from our item-based model. Our demographic is actually over 80 percent female, and one-third of that is in North America. The age range, though, is  extremely broad. I’m extremely passionate about treating virtual goods as real property. When we sell something to people, it’s theirs. I completely agree with everything Dan Kelly just said. We’re just beginning to experiment with brands. In our experiment, users are actually paying money to add experiences that our tied in.

Hudson: I was thinking about the focus that in the real world, people spend a lot of time to pursue money and fame, things like that. How do you feel people pursue that?

Ryan: When our users, who are primarily female, spend 5-6 hours a night online, self-expression should show itself in their blogs, Ims, games. Our most loyal users are women. They make their friends, themselves, their boyfriends. Men, as usual, are a little more self-absorbed. Our brands are accepted through common choices. And our users associate with them. And we try to make them fun. Pride was this weekend, so we had a whole Pride theme. Next week might be music. And we have an incredible strength in moms, so we rolled out a whole set of mom-related things. What it comes down to is that I am online, and I want to express something about my identity through that.

Bethke: Self-expression is huge, but it’s a lot bigger than that. I’d like to ask you a favor. If you have  a party, put 4 or 5 different colored marbles into one bowl with some other empty bowls around there. I think people have no choice but to then sort those out. I think we’re programmed to do stuff. There’s no distinction between play and work. There’s just crappy work and great play. But people want to do lots of things beyond just expression. What is cool about the Internet and specifically social networking services is that we’re not stuck, for the first time in human history, with the asshole that lives next to us. We can reprogram our neighborhood, but unfortunately we’re still born into this particular world and plane of existence. But people are now living  very significant parts of their lives in these other worlds. We can arrange worlds, not just friend circles, to our liking.

Greer: I come from a purely game industry background. You’re motivated in games by getting to do things. Every 20 seconds you get to kill a new enemy. Every 15 minutes you get to see a new area. Eventually you acquire all the rare armor that you want. What our site is about is that with all these games, they reward you at about 15 minutes. When you achieve something, your friends are there to see it. It’s a mix of wanting pride in your accomplishments and a fun process of achieving them. We don’t sell any virtual goods directly, we let people earn them.

Hudson: That’s a good segue into my next question. Do you think for folks in the so-called casual space, there’s a difference between items earned or bought?

Bethke: I think so. Some rewards can be gained by spending time and some by spending money. There are four player types, socializers, player killers, organizers, and explorers, and it’s different. Some people are time rich and others are money rich. You need to build a virtual world with different types of achievements.

Greer: As a gaming community, we’re more about achievement through time and skill, or at least grinding, and what people have said here is that if you balance those aspects of achievements, you can do it. We haven’t tried trading, but for an audience of gamers, they take more pride in what they’ve done than what they’ve bought.

Ryan: Whether it’s one method or two, you want to keep people who are enthusiastic because they contribute and add value. When you get to the level of heavy users who can contribute 50-100 dollars without warping the playing field, that’s great. But in the US, I think there’s going to be a mix of subscription and virtual goods and advertising. We have a vibrant advertising market here. We have users spending 5-6 hours per night that used to be spent in traditional gaming, so the question is how you get advertising to contribute to that.

Greer: We try to work with brands so that if you hit level ten you are rewarded with a prize awarded by Best Buy or something like that, and you might get a real-world benefit as well. That’s integrated with display ads, but the core reason we think people in a competitive environment will accept ads is because they’re associated with what people are already doing.

Bethke: I disagree with Sean. I think if you have a single currency, you lose people. I disagree with the cultural differences people keep outlining between the East and West. When you design your game experience to work the car companies, that distorts it for the user. If you design something that’s great for the user, the car  company will still be there. When you talk about virtual worlds and currencies and items, you’re talking about the things that are still there in the real world.

Hudson: Do you worry about how to manage fraud and trade and things like that?

Ryan: We were assaulted this week by the Patriotic Negroes, a group that started in Second Life and takes pleasure in destroying communities. And in worlds designed for 20-somethings versus tweens, you have to allow for a little more leeway. Until you get some sort of user engagement with ratings, on free sites, people will get tossed and then just come back.

Greer: People do invest in their reputation on our site, so getting banned is kind of a big deal for people. We will get a rush of trolls sometimes, but we empower users who we trust to deal with them. Ultimately we may have to go farther than that and say, “You can’t talk until you’re level 3” or something like that.

Bethke: I think it’s a huge question, that maybe next year there will be whole conference about this. How will we get the right policies to deal with our users or the staff to deal with that. There’s no college out there that trains people to act as community managers. If I want to hire coders, I just get in line behind Google and hire whoever they don’t. But it’s a responsibility. We’re just private companies trying to make money, but these people here believe they’re some sort of resident believing they have rights. If you ban some group that’s inappropriate, that raises lots of tricky questions.

Audience: There’s a lot of game-like elements in sites that we use on a regular basis, like Amazon or eBay, do you see that becoming a market?

Greer: I agree that a lot of sites have game-like qualities. To the earlier question about whether you purchase your items or earn them, there aren’t many sites where you pay money to the provider and get status. That’s what appeals to me personally. I’m more motivated by wanting to play games and show off what I’ve done than shopping in a virtual environment and express myself.

Audience: Because it’s really no different than me getting a star for completing an auction or getting a prize for completing a quest.

Audience: I see a solution for problematic users. Kick them out and sell their land.

Bethke: I had a question that I asked my users about what happens when you buy a lot of land then don’t use it. Do we just give it away to other users? The debate went on for a long time. But we decided that after 90 days we take it back and give back their money.

Greer: So what happens if someone wants out of the site and just does that?

Bethke: It’s a confiscation system, but we just give back the cash inside the system.

Audience: As social economy sites look to develop this, how much intrinsic value comes from developing the virtual economy yourself versus buying it from someone else or partnering?

Ryan: I think it comes down to how important the feature is for you. If it’s an important feature that needs to be integrated deeply, it’s hard to farm out. When it’s a driving factor behind your social network and the reward mechanisms get sophisticated, I haven’t yet seen an outside vendor that can do that. Some are getting better and one is doing a good job, but it’s hard to do. If it’s not that important, it’s much easier, though.

Bethke: I think you have to ask what your company is doing. What’s the core purpose and mission? With Go Pets, there are a lot of things that I didn’t build myself. I think it’s going to be like the traditional Web. I don’t want to build a blogging or email site. I’d rather work with someone.

Ryan: When you think about how many touchpoints you have, is that really possible?

Bethke: Well with the payment system, I have to go down and work with those guys, but I don’t want to do it all myself.

Audience: As time moves forward, people have a lot of interest in virtual goods. As you create a new game and move from old ones, is there an exit strategy for people that want to keep coming back?

Ryan: End of lifing it is tough. When you accumulate a set of items, and I shut down your game, do you deserve compensation?

Bethke: Historically, when people care about a game, but the company can no longer run it profitably, often the game is just handed over to the fans.

Greer: EA has killed off some, but the successful ones just kind of live forever. I think that for companies that want to stay in the business, they have to build a good reputation.

Bethke: I think it’s a strange case, because if you have people that care about the world, you’re probably not going to shut it down.

Joey Seiler
www.VirtualWorldsNews.com
joey (at) showinitiative.com
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skype: joey.seiler.vwnews