FreeToPlay.biz The Business and Design of Free-To-Play Games

26Jul/070

NHN: Lessons on Virtual Items Sales in the US and Korea

Last week I attended the Casual Games Conference in Seattle. One of the better talks was by Whon Namkoong, CEO of NHN USA. He discussed why he thinks the North American market is primed for virtual item sales games and the lessons his company has learned while trying to enter this market. I've summarized his points below.

In 2001, the US and Korean game markets were quite different:

Piracy

  • Rampant in Korea
  • Not nearly as bad in the US

Broadband Penetration

  • 15% in Korea
  • 2% in US

Broadband Speed

  • 6.8mps in Korea
  • .2 mbps in US

Number of Online Payment Methods

  • 5+ in Korea
  • Only PayPal in US

Today, things have changed in the US:

  • 47% broadband penetration
  • 4.8mbps broadband speed
  • Lots of online payment methods

He listed the well-known advantages to a virtual item sales model:

  • Low barrier to entry for user
  • Unlimited ARPU
  • Dynamic item updates, support for season items

But more interestingly, Whon covered the lessons NHN learned about virtual item sales in the US market:

Lack of efficient payment methods

  • 90% of virtual item sales in Korea are paid for via SMS
  • Korean SMS transaction fees are less than 10% (vs 40-50% in US)
  • US requires bank account linked to mobile phone; Korea does not

US network cost is 5x more than Korea

  • In the US, NHN changed their Gunz product from P2P to client/server.
  • Resulting network expense made the product inviable - the more users, the more money Gunz lost.

Serious hacking attempts

  • Asian hackers do it for the money - i.e. dupe and sell
  • US hackers do it to "break stuff"
  • Korean hackers don't reveal their methods, so they can continue to profit from them
  • But US hackers do it to share their knowledge, which causes a much larger problem
  • In 5 years of Korean hacking, NHN never experienced the US hacking techniques
  • Additionally, when ijji.com was launched in English, it essentially invited hackers from all over the world (rather than just those who could read Korean) - so hacking increased dramatically

Finally, Whon urged North American developers to work together to:

  • Support the use of prepaid cards and other payment methods
  • Make an alternative delivery system like P2P viable
  • Share info on hacking and hackers

add to del.icio.us :: Add to Blinkslist :: add to furl :: Digg it :: add to ma.gnolia :: Stumble It! :: add to simpy :: seed the vine :: :: :: TailRank