Presented by John Bates of Entropia Universe, Eyjólfur Guðmundsson Chief Economist of CCP, and Craig Sherman of GAIA.

Some Gaia statistics:

5 million visitors/month, 3 billion page views/month, 1,000 auctions closing daily, 1 million forum posts per day (second only to Yahoo!), $1 million/month in digital goods, and “many thousands of dollars” per day is being made off prepaid cards sold in Target stores.

Gaia is launching an MMO this summer that will be Flash-based. It has been in development for two years and they expect it to almost immediately become one of the top MMOs.

Panelist discussion:

Can a virtual world or MMO exist without an economy? Panelists agree it’s not likely because any time users perceive value in the world, a market will emerge regardless of terms of service.

Things without dollar value still have value. The acceptance of these MMO and virtual world economies will continue. They look just like traditional economics (inflation/deflation, economic utility) just a different currency.

Taxation on virtual world revenue is not really that exciting. When people pull money out of a virtual world, it is income and therefore should be reported as income to taxing authorities.

There will be a fundamental switch to micro-transaction economy in place of subscriptions. This change is well underway in Asia and is starting to happen here in the U.S.

Presented by Andrew Schneider of Live Gamer and Steve Goldstein of Ping0.

Why is there demand for black market goods? Many do not have time to play so they outsource, they have more disposable income to spend, etc.

Current analyst estimate that $1.8B+ is on the secondary market for virtual goods. IGE stated nearly $1B in gross transactions in 2005. ItemBay and ItemMania accounted for $974B in gross transaction volume in 2006. Economist projections are $5B in gross transactions by 2012.

Sony created the Station Exchange for EverQuest II as a sanctioned service to try to curb black market exchange. They found that majority of people paying real money for virtual items are not farmers looking to make a quick buck. Legitimate exchange promoted sense of ownership and reduced customer service issues by 40%. Interestingly, there was negligible impact on game balance.

A legitimate secondary market must only facilitate trading with publisher/developer consent, be safe and secure for players, and not support farmers. Panelists are discussing the Bragg vs. Linden Lab case and strongly recommending not giving ownership to players of their content.

Presented by Gabe Zichermann, CEO of rmbr

What is funware? It’s a type of application that uses social game design theories or mechanics in a non-game context.

Incidental funware application example:

eBay - Shopping microgames, status (feedback) meta-game, community expression

FaceBook - communication microgames, traditional microgames

Yahoo! Answers - research game, status (success), profiles, ratings, points, inherent quests

There is not a single application that could not benefit from being more fun. The millennia generation is drawn to things with more fun. Fun first, utility second. As a man in his mid-thirties, I have trouble seeing the world that way.

Why is FaceBook doing well?

Easy: Effortless, 2D, HTML

Real: Tangible benefit in RL (McSalad study - no one orders it, but it’s on the menu to draw people in.) People can justify using FaceBook because its “not really a game”.

Free: No, really - it’s free.

Fun: Socially-propagating story. The story that is being told in the game is literally being told by the players. As more players come into the story, it gets bigger, fatter, deeper.

Status: The ultimate fireplace mantle.

3D vs 2D

- Study in 2006 shows 70% of tween girls prefer 2D over 3D (reverse is true of boys).

- Anecdotal evidence suggest 2D is more palatable to everyone (movies, books, web games)

- Even 2.5D might be a challenge. Side-scrolling is under-utilized.

Rmbr

Rmbr is a photo-sharing game that came out of frustration with the way I interact with photos in real life. Rmbr is funware for photos - games like memory, photo psychic, etc. All designed to help people tag and interact.

Gabe’s advice to designers on opportunities:

“I want shopping, travel, financial services and product companies to be fun.”

Presented by Adrian Crook of FreeToPlay.biz and Relic Entertainment

Free models are emerging in real life including the European “free to poop” campaign with ad-supported public restrooms, Ryanair, and music.

What is free to play? It is not a genre or a platform. They are revenue models that monetize attention of its players.

91% of kids PC online games are free to play (Source: NPD). Examples include Kartrider (160 million users), Runescape ($60 million annual revenue), Webkinz (7 million unique users 340% growth in one year).

Current Free to Play Revenue Models:

1. Virtual Item Sales - unlimited ARPU because users decide the ceiling. The value drivers are rarity/price and visibility. Dual currency systems allows users to purchase stuff via in-game efforts (attention-based) and real money-based. 5-10% conversion rate ranging from functional, decorative, consumable/decay, etc.

2. Merchandise - Barbie Girls has 9.5 million users in 9 months. Their primary revenue model is the sale of Barbie dolls that plug into the users PC for redeeming access to game. Webkinz recognized $20 million retail in 24 months.

3. Information Sale - Food Fight on FaceBook requires users to provide information in order to make virtual cash to buy food to throw at their FaceBook friends. They hit 36,000 users daily, averaging two surveys per user, 25 cents per survey which is $18,000 per day in revenue or $6.6 million annual (projected).

Other models include … Advertising, Auctions, Player Trades, Subscription Tiers, Event Tournament Fees, Real Estate/Land Use Fees, Affiliate, Donations. More descriptions on Adrian’s website.

Design Tips:

1. Respect the free players. Don’t ignore the 90% that don’t give you money because they make the world viable.

2. Support integrated graphics. At the Virtual Goods Summit, someone from Nexon said “If we require a graphic card, we would lose 80% of our user base.”

3. Be browser-based or small download. Things are headed towards the browser. Even WoW is allowing people to play while download completes.

4. Regional payment systems. Not everyone likes to play for games the way we do in North America. GoPets has over 90 payment methods as an example.

5. Provide short compulsion loops. This is counter-intuitive from console game developer perspective. “How many hours of game play?” is the wrong mentality here. Games like Puzzle Pirates, 3-5 minute compulsion loops with average playtime of 2 hours a day, 30 days a month.

6. Defer user sign up. Users shy away from giant forms. Get users into the game play and creatively handle the sign up. Let them get a taste of your product first and foremost.

Growth Challenges:

1. Virtual Property Law. Linden v. Bragg as an example where this area needs to be decided by the courts.

2. Slow broadband. 6mbits in the US and 45mbits in Korea.

3. Rising dev costs. Developers are pushing the quality bar up on free to play.

4. Second Life slow down causing investment concerns.

5. Secondary Markets - IGE, unsanctioned item sales

6. Kids-only: After age 18, kids are graduating to consoles.

Trends and Opportunities:

1. New Free to Play platforms including social networks, iPhone $upercash, EA Blueprint

2. Breaking down the walled garden model. Metaplace, Wow Armory, Dr Char AP as examples

3. NPD top sellers as Free to play games

“We’re looking at the sort of game that five, six or seven years ago, they would have been putting in a box and selling on retail shelves. With the new technology we can delivery this through the browser.”

Erik Bethke, CEO of GoPets, Ltd. is tearing it up here at Worlds in Motion. Here’s my live blog entry from his session.

Great virtual worlds are MMORPGs. Great MMORPGs are virtual worlds.

Another title for this presentation could be “How to apply MMORPG Structures to anything and win big money.”

Most of the virtual world industry does not like World of Warcraft. Killing monsters and taking their shit is not their thing. I can’t even count how many UI elements on the screen. Yet ten million people are paying subscription fees to play it. Is it mass market?

I think these “mass market” questions (from MoU) are not correct. Virtual worlds are missing little guys with exclamation points above their head (a WoW reference for interacting with NPCs that have something for a player).

Even LinkedIn has quests. “I couldn’t solo LinkedIn,” because I had to go get recommendations from others, essentially a group quest.

I get frustrated with UI. We built our registration process as multiple pages. Professionals came to us and told us we should consolidate it to one page. We found after we did a test with both styles, the multiple page registration outperformed the single page registration.

“I don’t care what people think. Just measure it.”

We added a pay button. Our ARPU was over $20 a month in North America. No one likes to talk about registrations down to paying customers. And I’m not going to go there either. But lets just say we were happy with the results.

It’s so much easier fixing UI than fixing the core elements of your game. We launched with Microsoft Passport, we put in a ton of development on updating the UI, and the conversion rates did not improve.

We did tons of analysis. Over half of our revenue was coming from people that bought fruit trees from us for a few weeks in November 2006. It surprised us. If you waited for 16 minutes you could look at your tree and a piece of fruit would drop. We had no idea it would be interested.

It turned out that the fruit tree people were more 44 times more interesting to us. The same group was 65 times more likely to use custom creation tools.
Measure what the people are doing. Know your hardcore user base. For us, its people mining fruit trees and creating content. If you are missing hardcore users, you are missing deep fun. Your world isn’t fun if they are only there for two minutes, that’s bullshit time. Your hardcore users are your evangelists and they make extreme investments.

Game structure creates transactions and goals. Don’t change a known working structure unless you are certain you have something better. We took the apple tree people and allowed them to begin cooking with them. Our revenue TRIPLED when they could make apple pie, apple juice, etc.

Don’t sit around your conference room throwing things at each other. You can work a lot less if you work to understand your users.
I think of a leaf when I think of these things. Virtual worlds without structures suck. Worlds that don’t have structures force users to make their own.

We need a new word. Goal interface trumps user interface. Goals are measurable, comparable, accessible, meaningful, scale in challenge as user progresses. User interface should exist to support goal interface.

Why transactions? A transaction is a twittle in the BD. It’s picking up an item, dropping an item, creating an item, it’s selling/buying/trading. It’s concrete, its measurable… and its pleasurable.

Thesis:

- Good online games are engaging past-times

- Great online games have robust market economies with people spending a significant amount of time, capital and intellectual creative inside these spaces living lives.

- All great online games are virtual worlds

Powerpoint will be posted at erikbethke @ livejournal

Live-blogged from Worlds in Motion Summit. Presented by Reuben Steiger of Millions of Us.

We tell stories in weird environments. Those stories we learn are most successful when they employ methods of game play.

The Internet has failed at storytelling. The first time I had ever heard of the Internet was from someone in college. A fellow student had dropped out of school to be part of a “virtual society” called Geocities. When she described it, Steiger envisioned something that looked like Second Life and was underwhelmed when he saw it.

Up until recently, virtual worlds have been defined by a lack of rules and a different definition of fun. *I* get to define it, not the game designer. There is a new generation of virtual worlds, some on consoles, some simply on web browsers, that look much more like hybrids that look much more game-like and are mass market friendly.

Second Life has garnered to date about 95% of the media attention, comprises about 1-1 1/2% of the addressable market. This is really a point of inflection.

The forms of entertainment such as film, tv, and entertainment are beginning to blur. As TV came out, entertainment got a little lonely. You could consume packaged entertainment. This continued until broken by MMOs.

Movies lead to gaming. Arguably, Star Wars was the first to show people that not all the money was just in the movie. People are willing to pay for complimentary experiences. One of those additional experiences was gaming. We had arrived.

Club Penguin reverses this model. There’s a character franchise, yes, but there’s not really a story. They just got bought by Disney. Wouldn’t it be interesting if Disney creates a film based on Club Penguin?

Webkinz has extended the game play and the longevity of their product by pairing their product with a virtual world.

Reuben makes three predictions:

1. Social networks will become avatarized. Small virtual world plugins will be released into MySpace, FaceBook, etc.

2. Virtual worlds will become more like social networks. What we’re doing today are very small projects. In the future we will see major projects that drive entire shows.

3. Television tie-ins will increase for virtual worlds. In other worlds, virtual worlds are going to hit the console.