Introduced to the mobile games market in 2006, microtransactions are the new trend in Korea that are predicted to become more popular as the business model has proven to be successful, generating increased revenue for game after game. Roughly one third of games launched by SK Telecom in 2007 have included microtransactions, and the number of games with the microtransaction feature is expected to grow in the near future. Currently, Gamevil, Nexon Mobile, and Com2us are leading the market trend with games that feature microtransactions. Out of these publishers, Gamevil has the highest percentage of games with microtransactions.
Before they became popular in the mobile gaming market in Korea, microtransactions were successful in other areas. The PC gaming industry is an example of this. In the U.S., most consumers are willing to buy PC games at retail. But in Asian countries like Korea, most consumers have chosen to download copies of PC games online, given the high-speed broadband networks. This posed a problem, especially when people could easily download pirate copies. Because of this, PC games did not sell well at retail in Korea and companies were not able to make as much money off of this. One of the solutions to this problem was creating online PC games that have a Client-Server Model, which would verify if the user was a subscriber. This became popular for hardcore gamers but didn't effectively target the casual gamers due to the high subscription fee that the people had to pay every month. Free online games became extremely popular too, but how do gaming companies make money then? This is where microtransactions come into play. Around the same time, companies like Neowiz had introduced microtransactions through selling clothes and accessories for the avatars used in PC chatting. This model was extremely successful and online game companies started giving out the games for free. As these free games became popular in Korea, microtransactions of special items and additional features in games became popular. The users were playing for free, but were also paying consumers.
Kartrider, one of the most played online games in Korea, is a great example of how microtransactions were used. In this multiplayer PC racing game, users can download the subscription free game and enjoy the basic features of Kartrider. However, users who want customizations and upgrades pay a small price. The free aspect of the game initially hooks the user into first downloading the game, and then the game play naturally induces the player to purchase additional inexpensive features. But it's not just microtransactions that make this game special. Kartrider took advantage of the high-speed broadband as well as the casual and community aspect of gaming. Players can race with or against other players online, and one doesn't have to be a hardcore gamer to enjoy this game. Technology combined with a casual gaming community served as the basis for the Kartrider microtransactions model and helped make the game successful. The fact that Kartrider has not only been successful in Korea, but also quite popular in and brought to other countries like the U.S., shows that this type of free, casual, microtransaction featured game will become even more prevalent in the U.S.
In fact, subscription free services like Facebook and MySpace are already common in the U.S as broadband connections improved and people began living online. On Facebook, users can enjoy the basics of the site for free and have the option to send gifts to friends for $1 each, an example of how microtransactions benefited a subscription free service with a casual community.
In terms of online games, however, the U.S. mainly uses the World of Warcraft model, where players purchase the game at a fixed price and pay on a subscription basis to play online. World of Warcraft is not a casual game, and not all players (like young kids) can or are willing to pay $15/month. Payment issues such as not having access to a credit card pose a problem. In fact, some casual gamers in general wouldn't even pay that much per month if they were only going to play a couple times. So what do young kids and casual gamers play nowadays? This group plays free casual games and only makes purchases for around a dollar each when they want additional items. The microtransaction feature generates revenues for these games. Users also have alternative ways of purchasing and paying for items. For the game Maple Story, another successful subscription free online game, prepaid cards were available for purchase at Target stores, and ended up being the second most sold content card next to iTunes. This makes sense, considering that a good majority of players were young and did not have access to credit cards. Other subscription free games operating on microtransactions, such as RuneScape with its over 10 million accounts, have also proven to be popular. The same example can be seen in Europe with Habbo Hotel. These trends show how free online casual gaming is clearly on the rise.
So how does this all apply to mobile games? Well, microtransactions have also proven to be successful for mobile phones in Korea. Just as free online games with the microtransaction feature attracted more users, the same could happen to mobile games.
Most of the games in Korea are sold at a fixed cost around $2.5 - $3.5. Development costs are going up but publishers have been having a hard time finding a new source of revenue. Thus, there needs to be other more effective ways of making money when it comes to mobile games. In Korea, publishers have used microtransactions in their games to generate that additional revenue. The users have the option to pay an additional price for extra features, items, or upgrades on their mobile phones for their games. This model has been shown to work well, as games like Nom 3, one of Gamevil's latest mobile games, generated an extra 40% of microtransaction revenue per download. Although this is still charging the end users the initial download cost and then adding microtransactions on top of it, the system has proven to be a success. These days, there are careful new attempts of releasing free games that rely only on microtransactions. This will broaden the mobile game audience in general, and might be a successful model for the future.
However, just as subscription-based online games became free games with microtransactions in the U.S., we believe that the same might happen in the mobile games industry in a couple of years. With subscription free community-focused services such as Facebook and MySpace and games such as Maple Story continuing to be popular in the U.S., subscription free mobile games may also become the new trend. Microtransactions could act as a vehicle in making games more enjoyable and exciting. There wouldn't be payment inconveniences for microtransactions as well, as purchases done through a mobile phone could be charged directly to the customer's phone bill. But it's not just subscription free mobile games that may become more common. Just as the Internet has seen a rise in online communities, whether it's in sites like Facebook or games like Maple Story, the community aspect of mobile gaming may become important as well. Because of the nature of mobile phones, customers could become more interested in games that allow them to connect and play with friends or a group of people. For these types of games, especially casual games, subscription free mobile games with microtransactions could help draw more users, just as free online PC games have done. As games like Maple Story appear more on mobile phones, publishers and carriers may look more into microtransactions to generate additional revenue.
Right now in the U.S., carriers are still focusing on converting more customers to their service. All of their promotions are still around voice. But as users settle more permanently on which phone service they want, U.S. carriers may eventually have to shift their focus to data revenue from content such as mobile games on their phones, and learn more from the online PC gaming experience to address the mass: microtransactions combined with a focus on the community will not only help make a game successful and generate additional revenue, but can also gain casual gamers who are a huge part of the consumer market. Microtransactions can be simply explained as another way to bill the users. But given the fact that we need a broader group of audience, the microtransaction feature is a critical factor in enabling the true experience of social network gaming in the market.
[Kyu C. Lee is President of Gamevil USA (www.gamevil.com), the North American arm of the South Korean developer and publisher of mobile games. Kyu has been with Gamevil since the year 2000, and has played a key role in the evolution of Korean mobile gaming. Kyu graduated Seoul National University with a B.S. in Physics.]