The Funeral of WoW Gold

At Engage! Expo last week, I had the chance to catch up with the team behind Webcarzz, the upcoming car-themed virtual world for boys. Production is ramping up now as the company gears up to launch to a public beta in May and is also currently working to close another round of funding. (It previously drew $4 million last summer.)  The concept of an active, sandbox virtual world–”bringing Tony Hawk into Club Penguin,” according to Andrew Leker, president of developer Mind Control Software–is apparently appealing to both advertisers and investors.

“You think of World of Warcraft as an action game, but that’s not action. It happens really slowly. We have action that happens as it is actually happening, jumping, twitch controls sticking to walls. It happens as you do it,” Leker said of Webcarzz.

That’s on the technological side. Over the past week at Engage and now in SXSW, I’ve been talking to various developers and publishers of virtual worlds and arguing that the importance of tech is subsiding to business development and content in virtual worlds. And it hasn’t been a hard argument. That’s in social worlds, though, where bringing in branded content and items of real-world interest (celebrities, musicians, movies, etc.) seems key to nailing down the teen and young adult demographic.

Webcarzz, though, is more game-based and aiming for young boys. There, as with traditional games, the technology can make or break the experience. Leker says that the Mind Control team  wants to support gaming that feels triple-A, but is accessible through older computers and slower connections with latencies in the 750ms range. 

In addition to constantly tweaking the code, Leker says the team also rebooted efforts and brought Webcarzz into Flash 10. That gives it a 3D feel in the browser that’s complemented by the vector graphics. According to Chris Bergstresser, CEO of Webcarzz, VC backers were hesitant at first, wanting graphics that were more attractive than retro. 

“We had to take risks with all the other virtual worlds that are out there,” said Bergstresser.  ”We have the vector graphics, and that got us positive feedback from our users. It also gives us a distinctive look. Kids like the vector graphics. They don’t know it’s retro. They’re just part of the game. And with the gameplay, we talked about why boys like the console games. It’s the kinetic feel.”

As Webcarzz looks towards its public beta and full launch set around kids return to school in the fall, it seems in a good place. In a February focus group of 114 kids, roughly 80% said they liked the game and the cars and 70% said they enjoyed the control system. The company said it’s already made improvements based on the feedback and continues to focus test with small groups each week. 

It’s important to get those reactions now as Webcarzz hopes to begin generating revenue in its public beta. The team told me that it will be integrating some monetization options from the get go. Subscriptions and microtransactions will eventually come into play, but at the beginning Webcarzz will rely on advertizing for revenue. 

Webcarzz will be one of the first virtual worlds to integrate Google’s In-Game Advertising system, which it announced last fall. Accordingly, Webcarzz will eschew banner ads and skyscrapers in favor of interstitial ads packaged with games. The company couldn’t share any names, but says it is also talking to other brands for future partnerships.

DFC Intelligence has recently released a report on the most commercially successful massive multi-player MMOs (MMO). World Of Warcraft, the most successful MMO has an estimated annual revenue of USD
500m. With the top ten MMOs in the world generating estimated combined revenues of USD 1,875m* there is no doubt they have matured into a highly successful commercial sector presenting considerable revenue and profits for their operators.

Here are some initial facts that you may find interesting:

Only one of the top-ten MMOs (Lineage) was launched in the 1990’s whereas all others have been launched in this decade.

MMOs are distributed fairly equitably around the most significant global market territories i.e. North America, Europe, Asia (Korea, Japan and China). Many of these games target global markets and are active in various territories.

MMOs have a wide diversity of styles and demographically targeted groups with children, teenage and young adult markets all well-represented.

The majority of the top-ten MMOS are in the fantasy genre. This is typical of emerging game markets. Fantasy is typically the first successful genre to be commercialised because it tends to attract early-adopter gamers first. Subsequent genres such as sports, children, family, adventure, action genres find their place in the market as new entrants carve out niches and segment the market for second and third tier adopters.

Successful MMOs clearly can realise significant profits for their operators and investors. How?

Retail

The early stages of the MMO market were dominated by a traditional and relatively unsophisticated commercial model. Retail was a dominant factor in the industry value chain and large game publishers (i.e. EA, Sony, Ubisoft) were the principle financing source for the majority of MMO products. Publishers sold a boxed version of their product in established retail channels, which was then played and updated online, with revenue coming from a combination of retail sales and subscription fees. This model is still quite popular with World of Warcraft the primary example.

This model was developed in the time between the cross-over from dial-up to broadband. It made sense to distribute on CD or DVD because there was no other way to distribute the required large amounts of data files to enough users. Early generation MMOs such as Everquest and Ultima Online had to be concerned over the download speeds that most users had and tailor their technology accordingly. Those restrictions still exist today (World of Warcraft updates come on multiple DVDs and most users still don’t have the means to download so many gigabytes of data in one sitting) but are for most practical concerns considered irrelevant in the modern market.

Now that operators have the ability to develop sophisticated and targeted MMOs and a means to distribute them, the business model is very different. Distribution may be cheaper, but MMOs are increasingly competing for user attention, and so user expectations of what they exchange for their attention have changed.

Within this context there are two new mechanisms by which MMOs in todays market typically monetise: Subscriptions and Virtual Goods.

A large proportion of western (i.e. USA, Europe) based MMOs are based on monthly subscriptions. Customers pay the operator a monthly fee typically ranging from about 5-15 GBP. The difference between this model and the older retail model is that the initial install version of the game is free. Users typically are given a gratis period in which to try out the game, or a limited sub-set of features, and they are encouraged to become subscribers.

Virtual Goods Sales

This mechanism was popularised in the East (i.e. China and Korea). In a virtual-goods based game, users are typically allowed to play the game as long as they want, but have the option of buying some form of property within the game. A virtual good might be something of tangible benefit to a player’s character or a visual customisation. Virtual good items are typical of small monetary (01p - 5.00) value but enhance the player’s experience, accessibility or individuality within the game significantly. This model is sometimes called micro-transactions.

Hybrid

Some MMOs use a hybrid approach of subscription and virtual goods, either offering different versions of a game for subscribers or virtual goods buyers, or combining the two. This trend toward sophistication throughout the methods available to monetise customers of MMOs is ongoing, but the hazard of a hybrid approach is that it can over-complicate the value proposition for the customer. 

Top Ten MMOs

1. World of Warcraft, launched 2004

Genre/Platform: Western MMORPG; client install with 3D graphics
Revenue sources: Monthly subscription, retails sales, prepaid cards (in Asia)
DFC estimated 2008 revenue: USD 500 million-plus

2. Fantasy Westward Journey, launched 2004

Genre/Platform: Asian MMORPG, client install with 2.5D graphics
Revenue sources: Prepaid cards
DFC estimated 2008 revenue: USD 150-USD 500 million

3. Maple Story, launched 2003

Genre/Platform: Asian MMORPG for kids, client install with 2D graphics
Revenue sources: Microtransactions, prepaid cards, international licensing
DFC estimated 2008 revenue: USD 150-USD 500 million

4. Shanda (company, includes Legend of Mir and World of Legend series), launched 2003

Genre/Platform: Asian MMORPG, client install with 2.5 graphics
Revenue sources: Prepaid cards, virtual item sales, Freemium, subscriptions
DFC estimated 2008 revenue: USD 150-USD 500 million

5. Lineage I and Lineage II , launched 1998 and 2003

Genre/Platform: Asian MMORPG, client install with 2.5 graphics (Lineage) and 3D graphics (Lineage II)
Revenue sources: Subscription, prepaid cards
DFC estimated 2008 revenue: USD 150-USD 500 million

6. Runescape

Genre/Platform: Western MMORPG for kids, web-based with 2.5D graphics
Revenue sources: Premium subscription, prepaid cards, real-world advertising
DFC estimated 2008 revenue: USD 50-USD 150 million

7. Club Penguin, launched 2006

Genre/Platform: Virtual world for kids, web-based 2.5D graphics
Revenue sources: Premium subscriptions, prepaid game cards
DFC estimated 2008 revenue: USD 50-USD 150 million

8. Lord of the Ring Online

Genre/Platform: Western MMORPG, client install with 3D graphics
Revenue sources: Subscription, retail sales
DFC estimated 2008 revenue: USD 50-USD 150 million

9. Warhammer Online

Genre/Platform: Western MMORPG, client install with 3D graphics
Revenue sources: Subscription, retail sales
DFC estimated 2008 revenue: USD 50-USD 150 million

10. Age of Conan

Genre/Platform: Western MMORPG, client install with 3D graphics
Revenue sources: Subscription, retail sales
DFC estimated 2008 revenue: USD 50-USD 150 million

Not only is it now possible for gamers to tell their World of Warcraft guildmates when they’ve passed beyond the veil as opposed to just passing beyond
Vermont for a few weeks’ vacation, there are actually multiple companies giving gamers a choice in how they want to reach out and swear vengeance from beyond the grave.

Last week we covered a company called Legacy Locker that stores passwords, site subscriptions and virtually every other kind of data a person may have in his online life and then passes that information on to a trusted friend or loved on in the event of the subscriber’s demise. Everything from a list of online bank accounts to “final farewell” messages could be included with the service, which costs $29.99 per year or $299.99 for a lifetime subscription.

It’s a good idea, albeit one a lot of people don’t like to think about; plenty of savvy gamers and net users have made their own provisions for getting word of their death out to online friends but a far greater majority has never even considered the idea, much less done anything about it. So it’s not too surprising that at least two other less-upliftingly-named companies are offering similar services for that sad moment when you finally run out of health.

Death Switch, set up by Baylor College of Medicine neuroscientist David Eagleman, lets people create emails that are automatically sent if they don’t check in with the site at specified intervals, from once a day to once a year. The service costs $20 per year and allows up to 30 emails with attachments. Eagleman estimates the number of subscribers at “probably close to a thousand,” and says he has no idea what’s in any of the emails because they’re encrypted and can only be viewed by their original authors until they’re actually mailed out.

“I work in the world’s largest medical center, and what you see here every day is people showing up in ambulances who didn’t expect that just five minutes earlier,” Eagleman said. “If you suddenly die or go into a coma, there can be a lot of things that are only in your head in terms of where things are stored, where your passwords are.”

If logging into a website to ensure you don’t accidentally shock friends and family with an exaggerated report of your demise seems slightly morbid, there’s also Slightly Morbid, a site which requires users to manually start the notification process. Like Legacy Locker, Slightly Morbid requires a person chosen by the subscriber to log into the system and get the ball rolling. Slightly Morbid charges a one-time fee rather than annual rates, starting at $9.95 for basic service.

Most of us have probably had an online friend who suddenly disappeared without an explanation and while it’s sometimes possible to determine the cause, more often there’s little to be done about it except hope for the best and wait for a reappearance. Services like these are novelties now but as online social connections become increasingly mainstream, there’s a good chance they’ll become as ubiquitous as a conventional will.

China’s refusal to authorize the release of Wrath of the Lich King could be a big problem for Chinese World of Warcraft operator The9, which says it will go bankrupt if the expansion isn’t released.

Authorities in China announced last week that Wrath of the Lich King, the latest expansion for Blizzard’s hugely popular MMOG World of Warcraft, would not be approved for release in the country due to concerns about objectionable content, most of which is centered around the presence of undead skeletons in the game. The Chinese release of the previous expansion, The Burning Crusade, faced similar issues and was delayed so modifications could be made, including the addition of flesh to skeletons.

The process appears more urgent for The9 this time around, however, as the company claims it will go bankrupt if the Chinese government refuses to approve the game. The9 actually paid, probably through the nose, for the Chinese rights to Wrath of the Lich King a year ago and has presumably sunk a good chunk of money into localizing it for the Chinese market as well, and needs to see a return on that investment. According to The Register, the company earns nearly all its profits from operating World of Warcraft.

It may be hard to imagine anyone going bankrupt while running a game as popular as WoW but that very popularity may be working against The9 in this case: Along with high day-to-day operational costs, WoW Insider says there are rumors that many Chinese players have abandoned The9 and set up Taiwanese accounts instead, where the expansion has been available since late last year. China’s General Administration of Press and Publication is still considering the matter.