Worldwide virtual goods market reaches $15 billion. Monetization still a four letter word.

The quickest way to lose respect in the games industry is to bring up monetization. Developers often see themselves as operating entirely free from any profit-motive, creating only beautiful experiences that transcend the banality of money. And publishers have become experts at dodging the army of payment solution providers that has started to crowd conferences in recent years. However, while often considered a dirty word, monetization is a key part of building a sustainable games company. Especially because that global, online market is now worth $14.8 billion.

It cannot have escaped experienced industry people that the gamer audience has expanded in both size and demographic make up. Where once the hardcore male gamer reigned supreme, today gaming is a form of mainstream entertainment. More importantly, the traditional console business is showing a decline. This means that publishers are actively looking for areas of growth. By publishing titles online (e.g. as browser-based or via client download),  publishers can reach a much larger audience worldwide. The games industry now caters to a wide variety of new players that have different preferences in terms of game play and how they prefer to pay.

One important trend in this context is the emergence of free-to-play or virtual goods revenue model. It allows the next generation of gamers to try a game before they commit any money, offering them a smooth introduction to games rather than asking for $50-$60 at the door. While the opinions on free-to-play still vary widely, even the major publishers have started experimenting with this revenue model. For both publishers and gamers to benefit from such a revenue model, it needs to be integrated in the development process from the beginning to ensure that games don”t overemphasize spending. The experience should be seamless. And so, understanding how people like to spend money, and what payment methods they prefer to use, is key to building a successful game.

What”s exciting about all of this, is the ability to develop games for a global audience. Online gaming has simultaneously opened up markets that were closed before and greatly enlarged the worldwide market. A market like the Middle East, for instance, has long been inaccessible. But today it accounts for $300MM in virtual good sales, indicating that there does, indeed, exist an audience.

Despite a cold response from many in the games industry, a solid understanding of payment preferences is an important component in building a global business. And so in our analyses, we look at the developed markets such as Europe and North America, and also cover Latin America, the Middle East and Asia Pacific. Key findings of our most recent payment report include:

  • Worldwide market for virtual goods to reach $14.8 billion in 2012E.
  • APAC is the biggest region with $8.7 billion in total virtual goods sales, with China”s $5.1 billion market leading the pack.
  • In India 1 in 5 virtual goods transactions are facilitated by prepaid cards.
  • The Middle East shows a preference for bank transfers, which accounts for 18% of all virtual goods transactions in Egypt and 15% in Saudi Arabia.

Facing a much less homogenous audience, the industry will need some time to fully integrate these various preferences into their business. But herein, too, lies the opportunity to accommodate a global audience and build a worldwide presence.

Want to know more about monetization?

Check out the most recent edition of our research on payment preferences among online gamers.

On September 5th at the NY Games Conference, Joost will be moderating a panel titled “Free, Pay-to-Play and Subscription: Monetizing Games in a Multi-Platform Universe.” Panelists include David Katz (Starz Media), Lex Bayer (Visa/PlaySpan), Bjorn Book-Larsson (GamersFirst), Chris Mahoney (PlayStation) and Jordan Metzner (Xsolla USA).