Saturday, May 23, 2009

Kids in Virtual Worlds: Run Down of What's New (So Far) in 2009

I've been pretty immersed in the thesis lately and haven't had much time to post. However, as I have a number of items pertaining to kids' virtual worlds that I've been meaning to blog about just collecting dust and of no use to anyone 'till they go live, I figured I should just compile them together in a quick, informal list of "potential resources" or "stories of interest". I'll get back to full dedicated posts (and analysis) asap, but in the's what's caught my eye of late:

Real Kids in Virtual Worlds
Via eMarketer, some great new figures and stats about kids' use of virtual worlds in the US. According to their data, 8 million US children and teens visited virtual worlds on a "regular basis" in 2008. They estimate that 37% of online children aged 3 to 11 years use virtual worlds "at least once a month" (a number they have also projected will grow, to 54% by 2013). The article comes with a handy-dandy table, reproduced below:

Interestingly, despite the highly commercial nature of so many of the virtual worlds designed and marketed to children, eMarketer seems to think the market is somehow lagging when it comes to advertising. As Debra Aho Williamson, senior analyst and author of the new report Kids and Teens: Growing Up Virtual, states:
“Unfortunately, as with social networks, advertising has not kept pace with usage. Not surprisingly, the hype and fizzling out of Second Life, combined with the tough economy, have made some marketers skittish for virtual worlds in general.”

She should take a look at Nicktropolis if she thinks that's the case. Although I'm sure that what she "means" is third-party advertising, not branded vw's advertising their own that doesn't qualify as advertising, however, I'll never figure out.

Are Media Companies Missing The Virtual World Mark?
Michael Pole wrote this article for MediaPost describing all the ways he thinks media companies are "missing the virtual world mark" by failing to take advantage of "huge opportunities to market and monetize their content libraries in Casual Massively Multiplayer Online (MMO) worlds." This includes failing to appreciate the power of "casual MMOs" to rally consumer communities around their favourite brands and products. As a counter example, i.e. "success stories" that have effectively applied this approach, he lists a number of kids' MMOs including Disney's Toontown, Pirates of the Caribbean and Club Penguin, Nickelodeon's Nicktropolis, and the Cartoon Network's Fusion Fall. Pole says: "This is just the beginning of a new trend in consumer entertainment, signaling an even greater opportunity for media companies to explore this burgeoning space."

He could have used the same or similar examples for his second point, that media companies are missing out on the new opportunities available within MMOs to "promote and monetize...content libraries and new franchises through micro-transactions, premium subscriptions, e-commerce, sponsorship and advertising." Webkinz and Club Penguin anyone??? The rest of the article goes over some of the economics of Casual MMOs (which can cost less than $3 million to contrast with "high-quality console-based videogames, which Pole says take between $10 and $50 million to develop), development schedules, and IP considerations. Overall, very informative article.

New Resource Alert: 360Kid Blog
Maintained by Scott Traylor, 360Kid Blog contains news and original research relating to kids and technology...esp. digital technologies, toys and games. So far, Traylor has posted this excellent analysis of Webkinz house designs, and an awesome article about virtual worlds play and web-enabled toys (reprinted from an article Traylor wrote for the May issue of Playthings Magazine). The site is a treasure trove for industry-pov analysis and discussion about many of the same issues and phenomena I discuss here at Gamine Expedition. A must see for anyone interested in kids and digital play. The blog is attached to a larger initiative, a company called 360KID, described on the blog "About Us" pages as:
"[A] kid-focused content and technology company dedicated to creating a love for learning by making quality products that educate as well as entertain. 360KID provides turnkey development services to the education, broadcasting, and toy industries. We are a multi-award winning and three time Emmy nominated company, creating educational products kids and teachers love."

Bookmark it!

Changes in Store for Kids' Virtual Worlds
Posted on AdWeek back in March (I told you I was behind!), this article by Mediaweek's Mike Shields describes how the kids' virtual worlds market should expect a "shake down" this year as advertisers pull back (or pull out) on their online advertising spending, as the current ad recession will likely dissuade advertisers from investing what little money is available in experimental forums (such as MMOs and other VWs). Shields overviews a presentation given by Strategy Analytics's Barry Gilbert at the Engage Expo! conference in New York, describing that while 2008 saw “an explosion of kids worlds...this year he predicts contraction and consolidation in the market as many of the dozens of kids/young-adult virtual worlds that launched in the past year may either merge or fold. “We don’t see it as a sustainable market,” he said. This appears to be particularly the case with "social worlds" - social networking based virtual worlds, as opposed to MMOGs, which were for the most part excluded from the figures and analysis given out during Gilbert's speech. Gilbert describes that although in 2008 "social" virtual worlds (not counting MMOGs) collectively pulled in $1.2 billion in revenue globally, only around 10 percent of that (approx. $125 million) came from advertising. As Sheilds writes, "He predicts that in '09 ad spending will decline to around $100 million and won’t bounce back until 2011."

So...does this mean that (casual) MMOGs for kids are all good, whereas social worlds are in trouble?

How Do MMOs Make Money?
Via, coverage of a recent report released by market analyst DFC Intelligence examining how commercially successful MMOs make their money. The article points to World Of Warcraft as the "most successful MMO" with an estimated annual revenue of USD 500m, and to the estimated combined revenues of USD 1,875 million currently generated by the top ten MMOs in the world. The article then goes on to provide an overview of very interesting patterns among the "top ten MMOs", including:
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.

The article then switches gears a bit to examine just how these MMOs generate revenue for their operators and investors, looking at retail, subscriptions, virtual good sales and hybrid models. But what is perhaps of most interest/use is the 5 pages dedicated to listing and describing the top ten most profitable MMOs, complete with launch date, genre/platform, revenue sources, and (DFC Intelligence estimated) revenue generated in 2008 (well, the range anyway...they sure don't give out specifics too freely when it comes to revenue). Awesome! Here's a very quick reproduction of the list, sans sure to check out the MMOSite original for the full effect:
1. World of Warcraft (2004-present) "Western MMORPG", client-install software. Revenue sources: Monthly subscription, retails sales, prepaid cards; DFC estimated 2008 revenue: USD $500 million+

2. Fantasy Westward Journey (2004-present), "Asian MMORPG", client-install software. Revenue sources: Prepaid cards; USD $150-$500 million

3. Maple Story (2003-present), MMORPG "for kids" (hmmm...but they say 13+, don't they?), client-install software. Revenue sources: Microtransactions, prepaid cards, international licensing; USD $150-$500 million

4. Legend of Mir and World of Legend series (by Shanda) (2003-present), "Asian MMORPG", client-install software. Revenue sources: Prepaid cards, virtual item sales, Freemium (??), subscriptions, USD $150-$500 million

5. Lineage I (1998-present) and Lineage II (2003-present), "Asian MMORPG", client-install software. Revenue sources: Subscription, prepaid cards; USD $150-$500 million

6. Runescape (2001-present), "Western MMORPG", web-based. Revenue sources: Premium subscription, prepaid cards, real-world advertising; USD $50-$150 million

7. Club Penguin (2006-present), "Virtual world for kids", web-based. Revenue sources: Premium subscriptions, prepaid game cards, [ADD: micro-transactions through trading cards, toys]; USD $50-$150 million

8. Lord of the Rings Online (2007-present), "Western MMORPG", client-install software. Revenue sources: Subscription, retail sales; USD $50-$150 million

9. Warhammer Online (launch?-present), "Western MMORPG", client-install software. Revenue sources: Subscription, retail sales; USD $50-$150 million

10. Age of Conan (2008-present) "Western MMORPG", client-install software. Revenue sources: Subscription, retail sales; USD $50-$150 million

Be sure to contrast these figures with the ones released by Screen Digest, which I posted about in March, dealing specifically with the North American + European markets. Some similarities, some doing so a more complete picture of the global MMOG market starts to come into focus. Also, be sure to check out this commentary by YPulse anastasia, which provides some analysis of the MMOSite article and its relevance to kids' marketers.

NPD - Six Million New Gamers In Last Year
Via Brandon Sheffield for Gamasutra, coverage of the 2009 DICE Summit talk by NPD Group senior analyst Anita Frazier, covering a bunch of trends analysis and projections relating to the digital games industry. Among her key findings, a number of interesting tidbits of info about gamer population sizes and demographics, including:
In total, 61% of the US population now increase of 6 million gamers from the previous year.

"About half of unit sales are for kids 17 and under. The retail market is very dominated by young people." The audience is 72 percent male, but women control "about half the spending in video games," says Frazier, reminding us that casual and more family-oriented games are spurring industry growth.

Love how all these stats just never add up, e.g. ESA's "Industry Facts", versus everyone else's.

Emerging Issues in In-Game Advertising
Another article from Gamasutra, this one written by Greg Boyd and Vejay Lalla, and providing a detailed overview of current issues, trends and challenges for in-game advertising. They provide some great stats, including confirmation that the global digital games industry generated approx. $40 billion in 2007, and that research firm Parks Associates estimated advertising in the game industry to be $370 million in 2006, growing to $2 billion by 2012. They review a number of issues to consider when thinking about integrating in-game advertising, from placement to measurement, to audience backlash. Compelling industry-pov read.

$594 Million Invested in Virtual Worlds in 2008
As reported in GameSpy, coverage of a report released earlier this year by Virtual Worlds Management that estimates roughly $594 Million was invested in virtual world companies in 2008. Impressive, given the state of the economy in 2008, but these numbers are still down from 2007's "spending binge" (as GameSpy calls it) of $1.4 billion. The article describes how only a fraction of the nearly $600 million went to funding large worlds aimed at "mature gamers"...instead, the bulk went into smaller, web-based games aimed at children and teens, as investors likely hope to reproduce the enduring success of Club Penguin andWebkinz.

The story was also covered by GigaOm's Wagner James Au, who writes:
[M]uch of last year’s investment also went into worlds aimed at kids and teens, which continue to enjoy enormous audience growth. (The largest, Habbo, is almost as popular as World of Warcraft, and profitable with far less development costs.) By VWM's tabulations, 19 kid-oriented companies saw '08 investment, compared with 11 virtual worlds for adults — though in my observation, the latter category actually includes several worlds such as YoVille and Metaplace that also strive for teen appeal.

In a related article, Au also talks about some of the VW revenue models that are attracting the most attention:
Most youth-oriented virtual worlds are free to play, depending on such methods as "freemium" upgrade subscription, microtransactions, and gift card purchases for revenue. Which explains why so much 2008 money went into companies that monetize virtual worlds in these ways and others — $64.7 million for five companies, according to VWM.

NPD: Kids choose digital content over physical format
Seeing as kids are exhibiting increasing comfort with and even preference for "digital only content", as described in this recent KidScreen article by Emily Claire Afan, the interest in monetizing kids' virtual worlds described in the previous article isn't all that surprising. Afan's article includes a bunch of useful info drawn from a the NPD Group's Kids and Digital Content III study report, which examined children's (aged 2 to 14 years) engagement with four different digital devices: computers, portable digital music/video players (PDMP), cell phones and video game systems. Items of note include:

- Convergence is on the rise: Although kids have traditionally used different devices (cell phone, laptop, handheld gaming console, etc.) for different types of content (e.g. ringtones on cell phones), NPD more cell phone users aged 2 to 14 years listened to music and sent/received images on their handsets than in previous years. Portable digital music/video player users also watched music videos on their portable players, and kids spent 12% of the time spent using video game systems watching movies.

- Overall usage for game consoles, PDMPs and computers has risen since 2007, mainly as a result of increased usage from kids between 9 and 14 years. However, use of these devices (including cell phones) among younger kids (under 9 years) was largely unchanged from previous years.

- Gaming is the most popular activity among child users: 85% of the child users play games, followed by music (60%). Roughly a third of kids surveyed watch videos and 22% download ringtones/tunes.

- Girls are using digital content more and more, and are "driving the increased growth in video game systems usage" from 50% usage in 2006 to 57% in 2008. Boys, on the other hand, are now watching more TV shows on digital devices than before.

- The largest increase in usage of digital devices occurs among 9-year-olds.

- Game-playing appears to be the first digital activity that younger children engage in: 82% of kids between 2 and 5 years play games on one or more of the devices surveyed.

And last but certainly not least:
5 Things You Should Know About Kids And Video Gaming
Written by MediaPost's Anne Marie Kelly, this article provides a wonderful amalgamation and analysis of some recent stats on kids and gaming drawn from the "2008 American Kids Study" conducted by Mediamark Research & Intelligence (MRI). According to MRI's study, 86.8% of kids aged 6 to 11 years played a video game in the last 30 days via one of four platforms (computer-based, hand-held, online, cell phone...29.1% played a video game on a cell phone!). Check out the original article for the full the meantime, here's brief overview of the points she covers:

"1. Frequency of Play Increases With Age":
- Of the kids who played a digital game in the previous month: 27.1% played every single day. 35.1% of boys play every single day, while only 18.0% of girls play every single day.
- Propensity for daily play is highest among 10-11 year-olds. "children in this age group are 16% more likely to be daily players than gaming children as a whole."
- "Only 15.0% of kids 6-11 played less than once a week."

"2. The Need for Speed Trumps Board Games"
- 61.4% of child gamers listed action/adventure genre as their top picks, followed by racing at 46.0%, sports (34.0%), fighting (31.0%), puzzle/strategy (29.5%), educational (28.8%), and card/board games (24.9%).

"3. Deciding What to Play Involves Collaboration"
- Nearly half (44.4%) of the respondents said that decided what to play was a "collaborative effort between themselves and their parents." This was true of both boys and girls, and stayed about the same across the age range examined.
- Only 21.1% of kids said they got to choose on their own, while 23.0% said their parents made the decision alone.

"4. Collaboration Helps Dictate Game Ratings"
- Only 9.5% of kids 6-11 reported playing games rated Mature 17+. Among the 10-11 age group, this stat increased to 16.7%....14.3% boys and 3.9% girls.

"5. Word-of-Mouth Referrals Are Key"
- 63.5% of respondents said they learn about new games through recommendations from friends,
- 45.8% learn about new games from family members.
- 18.0% discover new games via Internet sites.
- 73.1% say they in turn recommend games to friends, and 56.8% recommend games to family members.

Phew! That's a lot of info to digest! Happy Reading and Happy Weekend!


Jason Nolan said...

Thanks for this!

Club Penguin Cheats said...

Just keep in mind there is a big difference between Kids MMOs and Kids virtual worlds. Kids MMOs are more goal oriented, Kids virtual worlds are basically chat communities.