Play No Evil offers up a good article breaking down why Free To Play is a superior engagement model to subscription or retail. Matt Mihaly from Iron Realms jumps in to offer a counterpoint on MapleStory's user base (i.e. 57M is a gross number, not representative of active users) and offer up Habbo Hotel as another North American virtual item sales success story.
In regard to Maple Story's user base, all 57M of them may not be active, but most of them are probably unique due to the fact that in China and South Korea, Maple Story requires users to enter their Social Security Number to sign up. So there likely aren't very many duplicates, world-wide.
Regarding Habbo's numbers, Paul Thind (Habbo's GM) reported their active uniques at 7.5M world-wide (1.7M uniques/month) at last month's Virtual Goods Summit. Habbo's annual revenues sit north of $65M.
From the article on Play No Evil, I especially like this passage:
The choice of prices are important. Buying blocks of currency or subscriptions for less than $10 means that it is an impulse buy. $50, or even $20, to buy a game is above the "whine factor" for parents. Nexon's ability to get payment cards into Target (see previous article) was critical - online game play becomes an impulse purchase at the checkout line. I think this is an area where many casual game companies "don't get it". Their prices are above the impulse purchase level.
In a related story, Fox News - that bastion of sound journalism - just did a piece on MapleStory and game addiction.
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:
- Rampant in Korea
- Not nearly as bad in the US
- 15% in Korea
- 2% in US
- 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