On-Premise Gaming/Gambling: What Is It And Why Is It A Game Changer For Land Based Casino Operators?

Recently, I was talking to the CEO of the online mobile gambling business  CASHBET   about their business and where he thought the gaming industry was going. During the conversation the CEO frequently brought up the subject of "on-premise" gaming/gambling.

What Is On-Premise Gambling? - Essentially, on-premise gambling is online gambling restricted to the confines of a specific geographic area. In the case of the casino industry it is the restriction of gambling game content within the confines of the casino(premises). The primary delivery vehicle for on-premise gambling is a mobile device such as a phone or tablet either owned by the player of provided by the casino for use within casino premises.

 Apparently, many of the US based regional as well as Vegas and Atlantic City casinos have been given the regulatory green light to offer  this form of gambling within  their physical properties. On-premise game "delivery" is  a convenient way for land based operators  to engage players within their casinos without the requirement of having a physical  machine, table, etc. On-premise gambling allows players to use their own mobile devices to access branded gambling content within the casino property which also includes the hotel, recreation areas/pool, bar, etc.

There are a number of reasons why delivery of gaming content in this form is important for the longevity, survival, growth and player retention of land based casinos.

Generational Shift In Player Preferences - It is no secret that a generational shift in casino game play habits has occurred and is continuing to evolve.    The primary catalyst for this shift is Internet access to content of all kinds with gaming being only one of many domains that have been impacted. Potential land based casino visitors not only want to experience a game in an online context they also want to see shows, book rooms, communicate  with casino staff, friends and family, etc. online.

Social Context - The social context of online engagement is also an important byproduct of gamers playing casino games online in a casino setting. If properly executed all forms of social engagement including Twitter, Facebook, SnapChat, etc. can be included in the mix of communication during play allowing a much larger audience to participate vicariously in the game experience.

The End Of The Land Based Casino As We Know It And The Rise Of the New Co Casino - In many ways the on premise concept is a continuation  of the theme of the evolving casino experience and casino patron behavior and interests.

The recent  Vegas eSports event that was heavily covered by media is also a big part of the casino make over that is resulting in a younger demographic experiencing Vegas and casinos in general  in a way they understand and prefer.

The adoption, by land based casinos, of the  CASHBET online  mobile gaming  model is one of many new online and game content models that land based casinos will be  embracing in the future. The evolving  intersection of land based and remote gaming will be an interesting process that will likely result in new games all together that muddle the lines between terrestrial, remote, mobile  forms of game content delivery.

Kevin Flood is the CEO of Gameinlane, Inc. Kevin spent time at the Machine/Learning Lab at MIT as a technology transfer fellow engaged in model based reasoning, case based reasoning and rule based systems to enhance diagnostics systems.    Kevin has worked for and with US land based casino operators helping them evaluate social casino and iGaming platforms for the purpose of joint ventures and acquisitions in addition to launching online gambling operations in Europe. Gameinlane is also startup "friendly" understanding the unique value new gaming companies bring to the marketplace.  Kevin frequently speaks at gaming conferences around the world providing him with a unique perspective on this very interesting business sector. Kevin can be reached at kflood@gameinlane.com  and or twitter  at @kflow1776.

Cloud Computing And Online Gaming

Social game companies have been some of the early adopters of the cloud realizing that the cloud can offer them just in time server and DB storage to address spikes that online games normally experience. Also, a number of social games can go viral, or something like it, early on in the introduction of a game which makes the cloud a perfect answer for the social game world. In addition, social games can a have a very short half life growing quickly and then fading into the history books in only a few months. Why buy a bunch of servers if you are only going to use them for six months?

The realization that social games are driving the adoption of the cloud and in some cases challenging traditional cloud providers such as Amazon(AWS) and Rackspace has spawned a new crop of companies that are focused on the social gaming space either exclusively or as a special sales vertical.

RightScale, Fusion Storm, and Joyant are traditional hosting companies that have setup special game cloud operations with social gaming as the primary target market. For the most part their offerings are not necessarily unique even with the social game focus. However, an interesting service some of them are providing is the ability to deploy to a number of clouds in addition to their own distributing traffic and load across facilities. I suppose the reason for this is to avoid any one cloud provider from failing causing a complete shut down of an application and perhaps a cost control mechanism.

XingCloud    This company is is a bit different from the other game focused cloud provider. They are a Chinese company exclusively cloud gaming focused.   They are  leveraging the company's experience hosting Chinese games sites and integrating games into social networks. Their service is definitely exclusively focused on game developers providing cloud hosting services and quick integration of games into a number of social networks. They are actively looking to get into the US and European markets.

Clearly social game companies are taking the lead in the adoption of  the cloud and in some cases resulting in new cloud services for this space.

How about the other game providers such as casual games, console games  and online gambling?

These groups have largely ignored cloud computing. The console game and downloadable  providers are essentially offloading  game processing to the console or the PC resulting in a diminished server processing load. Therefore the cloud is not a big deal for them.

The casual game and online gambling companies that host web based games are server centric and in some cases taking on some serious volume so why are they lagging?

The primary reason they are not quickly adopting the cloud model is a legacy of traditional hosting. Many of these game companies have built large server farms and IT staffs around a self hosting environment. Despite the obvious cost benefit to switching there is usually a strong push back from the IT staff to maintain the status quo. Also, I doubt if management in these companies are cloud aware. They are using Vmware  to virtualize their hardware creating pseudo private clouds. However, this is likely an unsustainable position as their current hardware becomes obsolete and they have to upgrade or expand hardware  to handle traffic or to keep up with the increasing effciency of hardware.

Overall the gaming world is pushing the envelope of cloud computing because of the extreme volume and peaks and valleys of game usage. Cloud vendors are addressing this space with new and interesting offerings. The next interesting challenge is what do you do with all of this data that is being accumulated and how do you analyze it. This is ultimately more important then all of the hardware and network plumbing combined.

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes extensively about online games and their impact and integration into iGaming and E-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with online gambling, social gaming and e-commerce companies integrating social gaming with online gaming operations and integrate game mechanics into e-commerce applications.

 

Monetizing Social Games Conference Summary (London January 2011)

The conference  revealed some interesting surprises even for the more educated social gaming attendees. The conference attendees and speakers represented a good cross section of casual games, online gambling, social gaming, social media and advertising, legal and payment processing representatives. US and European entrepreneurs, business owners, legal experts and investors provided a good mix of opinions providing a global feel to the conference.  The following are some of the more provocative revelations that were uncovered during the conference.

Traditional Online Gambling Companies Are Investing In Social Gaming Companies - 888 and Bwin have decided that social gaming is the place to invest in  for the future. Both Mytopia and United Games have received funding from the big online gambling companies. The interesting thing about this investment is it is not designed to feed gambling leads to the major gambling brands. Instead these social and casual game publishers/developers are looked upon as a separate business unit with the objective of penetrating the social gaming market and growing that part of the online gaming market.

This says something about the emergence of social games as a legitimate "revenue" generating segment of the online gaming market. Not too long ago conventional wisdom considered social gaming as a small and insignificant revenue generator. Most attention was placed on spending big marketing and acquisition numbers on acquiring "real" gamblers. This has obviously changed with the realization that social gaming is a legitimate contender for the wallets of online gamers.

Do Virtual Currency/Goods Transactions Categorize Social Games As "Gambling" ? The speakers and panelists were pressed very hard on this question and would not concede that virtual currency/goods transactions with gambling style social games constituted "real" gambling. The legal experts indicated that virtual transactions were not even on the radar of European regulators. This indicates that it will be clear sailing for social gaming companies using this form of revenue generation to monetize their games.

Virtual Currency Inflation - There was some acknowledgment that the flooding of the  games economy with Facebook credits could be a future problem. However, most social games companies using Facebook credits were more concerned about the 30% of revenue that have to give up to Facebook to use their credits.

Facebook Threat As Payment Processor For All Facebook Transactions - The audience acknowledged that Facebook was moving into PayPal territory by becoming a payment processor for all forms of monetization within Facebook. The representative payment processors also conceded this with the caveat that the current processors would be processing all virtual currencies and not just Facebook credits giving them a competitive edge with publishers and merchants.

Getting Recognized In Facebook Is Getting Harder And Harder - With the Facebook pull back on notification based  virality it is harder to achieve massive player acquisition without resorting to Facebook advertising as a primary source of lead generation.  The days of  exclusively depending on virality are over. It is time to pay up and get the word out through conventional Facebook advertising.

More sophisticated development of Fan pages, cultivation of groups, co-marketing relationships with other Facebook application aggregaters all need to be used in tandem to achieve critical mass for a game promotion and continual player growth.

Does The Little Guy Have A Chance Anymore? - Yes and no. The budgets for game promotion are going stratospheric with big box companies like Zynga spending tens of million on game promotion and game development. Game development and advertising is now taking the same track as Hollywood movie development and promotion leaving the smaller developer and publisher in the shadows.

With this said the little guy can have a successful social/casual game business within social media platforms. A game does not have to be in the top tier to make money or to be popular. In many was this niche market  approach may be the best place to be. Under the radar and making money does not attract competitors and allows a company to sustain a realistic business model.

Portfolio's Of Games Helps To Increase Revenue Per Player - If you have a game that is reasonably successful monetize the players of that game over a wider array of games. Essentially, more game content matters. Having a bunch of games helps raise revenue per player and player retention.

Opportunistic Game Demographic Targeting - Currently the demographic of a frequent casual or social gaming player is female between 32 and 40 years of age.  They are spending the most money. Yes make sure you make games for them. However, this also leaves a big hole in the market. Facebook and big box game publishers ares clearly starting to lose the per-teen. teenage and early 20's segment of the marketplace because the majority of the game content is not geared to them. This may be the biggest opportunity for new game companies or new games.

Big Brands Want In - It is no secret that big consumer brands want in on the social and casual game party. They do not have the game development chops or advertising know how of seasoned game developers and publishers. Look to the big brands as a major source of revenue. This is tricky because you do have to build and promote a popular game no matter the brand. However, if this can be sorted there will certainly be good money in it.

Mobile Casual/Social Games - Mobile games have been a big disappointment primarily because it is difficult if not impossible to get the viral effect going. With this said everyone believes that there is gold to be found in mobile gaming if cost effective virality can be achieved. There were two companies presenting that had abandoned model game development all together and moved to conventional social game platforms because of their frustration with poor revenue generation from mobile gaming. However, they both indicated that they woulds dive back in if virality could be achieved in the mobile gaming environment.

Conclusion - Now that everyone realizes that games are the key to monetizing social network participants the competition amongst game publishers and developers is intensifying. Companies that considered social gaming as a fun yet insignificant segment of the online game space have now decided things have changed and they want part of the action. This means that the competition for social gamers is going to intensify. It also means that success breeds success. If a title goes viral and generates big numbers then revenue will be plowed into yet other big budget titles. There is room for new games developed and promoted with low budgets to succeed in generating enough players and revenue to support a sustainable business model. This may be the best place to fish for success in the casual/social gaming space.

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes extensively about online games and their impact and integration into iGaming and E-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with online gambling, social gaming and e-commerce companies integrating social gaming with online gaming operations and integrate game mechanics into e-commerce applications.

Gamification Drowning In A Sea Of Coupons, Virtual Currency And Awards

Is it just me or does anyone else feel bombarded by the number of companies and institutions issuing coupons, virtual currency and awards. I lost count of the number of programs I am a part of and I am beginning to lose interest in managing all of the "credit" systems I am enrolled in. I am on countless leaderboards and receive a flurry of notifications and account updates on the status of my points, how to get more and where to redeem them. I entered a  grocery store chain the other day and was accosted by a representative encouraging me to go to their web site and enroll in yet another program.  

From an egotistical point of view I feel partially responsible for this onslaught. Over the past two years my company Gameinlane.com has been advocating and working with e-commerce businesses to help them  understand the value of gamification. I have encouraged the incorporation of "game mechanics" into business applications to improve customer acquisitions, retention and revenue per customer. Of course, I am not the only individual or company that has recommended this approach. There are now special conferences on the subject and rock star pundits writing books and chairing conferences advocating the gamification of business applications.

With the blurring of the line between an online game and an online business  are we at risk of killing the goose that laid the golden egg or in this case the golden coupon and virtual point?

I am not sure I have the answer to this question. However, I do believe something is going to have to change  taking the gamification process to a new level to avoid a meltdown of consumer enthusiasm.

In my mind there are a number of potential outcomes.

Consolidation - Will a handful of virtual currency/coupon providers become providers of all virtual currency/coupons? We are already seeing this with Facebook. We could see a few more "big" players step in to consolidate the market. This will help in the management of coupon, award and virtual currency accounts.

Virtual Currency/Coupon Exchanges - Will exchanges emerge that allow consumers to easily exchange virtual currency and coupons issued by different institutions allowing consumers to leverage coupons and currency outside of the issuing environment. The airlines have done this for years will the other issuers join in. Having a point, coupon or award only valuable within a single environment is not very useful. If exchanges emerge the issuer can still maintain an identity with the virtual currency and give the consumer more options to leverage the currency elsewhere.

Merging Of Games And Commerce  - This alternative is the most interesting with the distinction between an online game and a shopping experience disappearing. I have already seen this with a virtual world shopping experience under development. The consumer and merchant actually engages in the shopping experience as a virtual person transacting and then receiving the goods through the mail. This moves the entire shopping experience online with no offline complement except for the delivery of the good or service. Although virtual currency is issued there is no physical store experience allowing the consumer to avoid the trek to the store. It also allows for instantaneous virtual currency exchange between merchants in the online marketplace.

Conclusion - I still remain an advocate of  the gamification of business applications. However, my enthusiasm for the issuing of points, virtual currency and coupons is beginning to wane. The added fun factor that game mechanics bring to a business applications has an undeniable value in the buying and selling experience, providing gamification does not distract from the transaction process. My enthusiasm for virtual currencies could be revived if trading and exchanging of virtual currency and coupons comes together in an easy to use and ubiquitous way. My suspicion is that entrepreneurs are already working hard on making these services available.

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes extensively about gamification, online games and the impact and integration into iGaming and E-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with online gambling, social gaming and e-commerce companies integrating social gaming with online gaming operations and integrate game mechanics into e-commerce applications.

Airlines Leverage Online Games To Improve Customer Loyalty

Recently I visited the United Airlines site only to find that they have made a significant investment adding online games to their web site. Historically, the airlines have been a bench mark for innovation in the virtual currency/rewards category. They have done a good job attracting consumers and retaining them by offering an option to participate in the "airline game". However, we rarely think of mainstream large corporations as innovators in the casual and virtual game world.

United's new initiative has taken the development and business integration of games to another level adding actual play for fun and virtual currency games to their site. The United online games can be found at http://www.optathlon.com/. I suggest you try the games out to experience the clever way they are using the games to improve customer loyalty.

United has done an excellent job of directly and subliminally creating a game environment that promotes what they want consumers to believe are United "values". They have games that insidiously imply that they are concerned about quick service, cleanliness and attention to detail.

They are not just offering games so people can find the United site to be an interesting place to hang out. They are definitely pitching why they are better then the competition. Comcast recently tried something similar with a simulated virtual world TV ad. The Comcast effort largely failed because of the lack of interaction and call to action.

The United experience is so much better at getting the job done because it is interactive and encourages stickiness with achievement ladders, virtual points and ultimately real goods and services for time spend and skill level achieved. The more time you spend with these games the more likely you are to identify United with attention to service levels, concern about consumer satisfaction and focus on operational efficiency.

I can not say that I have played a console or online game that has a sub plot to convey some form of customer loyalty and a goal that has nothing to do with the game itself. Most games exclusively focus on the game or virtual world they exist in. They get you to play more by encouraging interaction(viral component), ladders, rewards and skill levels. Extraneous goals such as culture, value systems and service level are not really a part of the mix.

The funny thing about the Untied virtual gaming experience is that it is easier to convey their values in this virtual world as opposed to the real flying experience. We all know what that is like. I wonder if repeated exposure to the virtual game world experience will be effective at convincing someone that United is a good company to fly with even if the real experience is something to be desired?

I did not see a big up sell push in the games to directly sell more tickets. However, I suspect if the games prove successful we will see this happening.

Other e-commerce sites might consider taking a look at the way United has implemented their integration of games with e-commerce. Many e-commerce companies are well on their way integrating game mechanics into their properties. Selling and competitive advantage is heavily dependent on consumers perception of customer care, responsiveness and recognition for loyalty. Having game mechanics emphasis these qualities is an interesting way of leveraging online games to increase sales and to encourage consumers to keep coming back for more.

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes extensively about online games and their impact and integration into e-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with e-commerce companies integrating game mechanics into their properties.

The Soul And Anatomy Of Games For Business Applications

Recently I started to ponder what makes an activity a game and what differentiates this activity from other fun and interesting activities. This speculation has been prompted by a number of recent assignments involving the incorporation of game mechanics into traditional business applications. The goal of adding game mechanics has been to increase traffic, customer loyalty, customer retention and to provide differentiation in the marketplace.

During my addition of gaming features into business applications I began to wonder why these features traditionally had value in a gaming environment and if they would be useful in a standard e-commerce application. What is it about games in general that naturally interest people and keep them playing over and over again?

The diversity of games and the way people play games came into the mix of my thinking. Why do some people play games in complete isolation with no contact with anyone and play these games for hours and hours and why are other people intent only playing peer to peer or multi-player game? Why do some people play a game of poker for no traditional compensation and why will others only play poker for high stakes?

Is there some thread tying all of these games and different behaviors together or are there really very different forces at work resulting in totally different behavior and motivation?

This question became very important to me as I began to decide or recommend what game features would be incorporated into my client's applications. Do all game features apply to an environment or do different audiences require different game features to keep them interested?

My thinking about this problem has brought me to a very interesting place. Given the diversity of games, the different preferences of gamers and the shear amount of time invested in playing games I came to the conclusion that some basic game mechanics have a wide appeal. Others do not have mass appeal causing the marketplace to be highly segmented. The styles of games people play appear to be influenced by culture, age, history, availability, technology access, legality, etc. The only common thread amongst all game types I could detect was that people play a certain game because it makes them feel "good".

The question is what is it about a game that makes people feel good. I am also a musician having explored a number of musical styles and have played different styles to different audiences. It is amazing to me how some people enjoy one style of music and not another. Even the same song played in a different style will get a different reaction form the same person. The music itself is based on the same system yet the a person will respond differently to a modified version of the song.

I suspect games and music are similar in this regard. There is something about a game that elicits an emotional and psychological state of satisfaction that is unique to that individual.

Finding a game style that makes everyone feel good is probably not possible. Some game sites and content providers address this by creating a large gaming content pool. Others focus on a specific market and only address that market. The challenge for e-commerce or other business models attempting to leverage the popularity of games in their applications is a bit more difficult. Certainly some of the basics that are found in most games and gaming environments are mandatory. Adding other gaming feature sets beyond the fundamentals requires more thinking. A study of the business clientele and audience is essential. The game a business is creating is a hybrid between a "true" game with a specific business objective to sell something other then the game while maintaining the feel good game experience. The feel good sensation has to lead to an actual purchase of a good or service.

Clearly businesses are on the move wanting to leverage the popularity of games into their business applications. This is a great idea as long as the approach to adopting games to a business is taken in the context of the business and its audience. One shoe will not fit all and some experimentation will be required to determine what the best game features are for each business. Certainly, if you can wrap the entire game and business transaction into a feel good gift wrap really good business things are going to happen.

The Emergence And Convergence Of Monetized Online Gaming (MG)

The world of online gaming is certainly changing at a rapid rate making it hard to figure out what category an online game falls into. Back in the day when times were simpler your could identify a game as a casual game, gambling game, MMOG, free to play, skill game, etc. With the advent of mass adoption of game platform virtual currency, Facebook universal virtual currency, virtual goods and the convergence of online games into an Online Gaming Ecosystem distinctions are hard to detect. To make things even more interesting traditional E-commerce businesses are now adding game mechanics(example:virtual currency) to their applications causing consumers to question if they are playing a game or buying something.

The underlying intentional or unintentional goal of the blurring of gaming categories is to drive more traffic and to increase the amount of money generated by players/consumers. Essentially, different games are using the same fundamental underlying monetization and mechanics to draw people in and to get them to spend money based on game elevation "levels".

This phenomena has homogenized many online games into a single category I call Monetized Games or MG's. This overriding classification makes more sense and easier for consumers, regulators, payment processors and businesses to identify the true purpose of an online game; which is to provide entertainment and to generate revenue from a player's participation in a game.

The quickly evolving nature of MG's is currently creating real challenges for regulators, payment processors, government policy makers, portals and advertisers. For example, how do you distinguish between a game site that let's a 12 year old buy virtual currency, to play in a game that awards more virtual currency for the purpose of buying virtual goods from the site from a poker site that let's you buy poker chips(virtual currency) to play in a game to win more virtual currency which in turn you cash out into dollars or pounds. In point of fact nothing is different about them.

Ohh and how about the airlines. you can earn virtual currency by playing the flying game and you can even buy more virtual currency to supplement your flying habit combining traditional virtual currency(dollars, pounds) transactions with online gaming business virtual currency. You can also trade this currency between other businesses to purchase goods and services form those businesses.

Essentially, the rapid rate of online gaming innovation is outpacing the ability of payment processors, search engines, regulators and lawmakers ability to adjust their polices to the brave new world of MG's. Taking a survey of some of these institutions indicates that these institutions have conflicting online gaming polices creating confusion within their organizations and frustration amongst online gaming businesses and players.

I suspect this institutional state of confusion is going to persist as the online gaming/e-commerce world continues to evolve and merge. From a consumer/player perspective it is an exciting time with new gaming entertainment models emerging. Online businesses are going to benefit with the ability of online gaming businesses to monetize players in ways unimagined several years ago. E-commerce will become a fun and engaging activity(finally!) encouraging players/consumers to spend more time and energy engaged in the buying experience.

Improving Online Business Applications With Online Game Features

The success of online gaming sites has caused traditional online businesses to begin to speculate about the reasons for this success. Online businesses also want to see their online customers increase exponentially, lower their acquisition costs and get the most revenue they can out of their online customers. Entrepreneurs are off and running filling the void creating conferences and writing books on the subject of helping businesses integrate game features into traditional online business applications.

My experience running and building both online gaming and e-commerce business applications brought me to the realization a long time ago that game mechanics could easily be incorporated into standard online business applications to improve customer acquisition and retention. Traditional businesses such as the travel industry were earlier adopters of virtual currency and reward gaming mechanics to improve retention. Many other traditional businesses followed their lead with great success. The movement of traditional businesses to the online space has seen an extension of these gaming features expressed in online businesses. However, the adoption of gaming features to online properties stopped with the adaptation of tradition offline game features to online business applications.

Encouraged by the recent success of online gaming customer retention and acquisition numbers traditional online businesses are now looking to the online gaming community to help them integrate more gaming features into traditional online business models.

What is it about online games that make them so unique resulting in lower cost of acquisition numbers, high player numbers and improved player retention? What are game mechanics and why are online gaming applications taking over the social network application world leaving traditional business wondering what about us?

There are some fundamental features(mechanics) of gaming applications that appeal to people and encourage them to play online games and to "invite(viral)" other people to play with them. Individual game features have to be collectively integrated into an application to create the gaming "effect". Specific implementation of gaming features into an application do have a positive impact on the effectiveness of an application. However, the real benefit of adding game mechanics into an application are only realized when they are integrated into a cohesive interactive system.

The following are the key components of a robust online gaming business that traditional online businesses should be pondering and working to integrate into their applications.

Virtual Identity - Most online games allow a player to assume a unique identity associated with the gaming community. The identity is tied directly to the game and may have no correlation to an individuals physical identity. This allows a player to freely express themselves(with caveats) within the gaming community. Essentially, they can become something entirely different in the virtual world.

Virtual Economy - To make a gaming system work it has to be based on an economy/currency. The economy could be a traditional currency such as the dollar, euro or pound. It can also be a currency unique to the game or to a community of games. Facebook is now creating its own virtual economy/currency recognizing the success of online gaming economies within the Facebook environment.

Competition - People like to compete for the purpose of interacting with other players, to be recognized for achieving success by others and to receive rewards for their efforts. In many ways airline and credit card companies have laid the ground work for this with their point and reward systems. The missing link is in the absence of participants being recognized for their effort and giving them the ability to publicly compete to obtain these rewards.

Winning(Prizes) - Online gamers all are seeking to win something to reward them for their efforts. The prize could be nothing more then a virtual label, virtual good or the allocation of points. It could also be a high net worth item such as a car or a trip. The ultimate prize value has to have to be a high "value" in the context of the virtual game economy. Establishing a "value" in a virtual game economy is one of the big challenges. Game currency inflation can occur just as it does in the real world requiring a business to manage its currency allocation.

Recognition For Achievement - Gamers want to be recognized by others for their participation in a game. This could be as simple as a leader board entry or a message blast to other gamers in the community indicating the player has achieved certain milestones. To use the airline example, this is where they have fallen short. There is no collective awareness of how someone ranks against someone else in terms of point allocation and there is certainly no identification of these people on web sites to provide the individuals with the exposure to the rest of the airline online community.

The More The Merrier( Viral) - Games are inherently social. People want to play with other people and or be measured against other people. This is why online games are so popular in social networks. If a game is not a multiplayer game it does have to allow for the comparison of game play results between players. Online communities thrive by encouraging communication between players. Text messaging, Facebook communication, e-mails, tweets, chat, etc. are all options that can to be part of the viral communication mix.

Interesting(For Ever Changing) - Games can never be boring or tedious. The most popular games have an ever changing characteristic to them. These changes can be manifest by the entrance and exit of different players, the addition of new reward levels, adding more games or changing the game in a way that requires the gamer to engage in a new strategy to win or adding complexity to a game.

Skill Levels - Gamers like different skill levels. A good game has a low bar entry level skill requirement that let's new players enter the game and become familiar with it. The more a player participates in a game the better they become requiring the game to provide increasing levels of sophistication to keep the player engaged and interested. They gamer is constantly challenged but never discouraged. There is always a fallback level and a higher level to attain.

Players want to be recognized, ranked and recognized for their achievements. This recognition attracts other players at their skill level to engage with them in head on competition. These levels organically create sub-communities within the gaming environment allowing a player to "identify" and associate and compare themselves. Smaller groups can become support groups supplying players with tips and references.

MultiPlayer Games - Mulitplayer games can come in many different forms. Certainly poker and MMOG games such as World Of WarCraft directly engage players to compete with each other. These games are especially popular. Players like multiplayer games because they are inherently social, competitive, provide visibility for their achievement and offer a constantly changing experience as new players enter the game and the skill levels of players change.

Player Referrals - Online gamers like to encourage people in their physical world to join them in their virtual game world. Players also like to grow their virtual identities and there virtual community by inviting their virtual friends ans associated to join in.

Fun Factor - Most people find games to be a fun and enjoyable experience. The fun factor is a baseline experience that underlies all online games. The key to a successful online game is to determine how to make the game fun. All of the features mentioned contribute to the fun factor. The hard part is to figure out how to integrate all of the game mechanics into an application that clicks with the audience making it "really" fun to play. An online game could be released and have an immediate high fun factor coefficient (online poker). However, most online game properties require a series of iterations to get it right.

So how does an average online business such as a travel, e-commerce, tax return, financial services, social networking site, etc. integrate such features into their online property?

Player/Customer Profiling(characteristics) - This may sound obvious. However, one may be surprised at how little online businesses actually knows about their online visitors. Google Analytics does not tell you very much about an online visitor. All online communities have characteristics that dictate how that community prefers to interact and what it considers to be a fun and a rewarding experience. This is where business owners and team members should start.

Create a list of these key consumer characteristics and associate them with game mechanics. See where you have overlap. Pick the overlapped game mechanics and start the process of building those features into your business applications.

Introduce these features gradually into your online community. Offering key customers to become "elite" evaluators of your "new" and improved game feature set is a great way to start building your community and get good feedback. Offer a rewards to these early participants.

When a business has decided what game feature set is most appropriate for their community begin to introduce the features gradually. The initial experience has to be robust enough to engage the community but light enough so the company can back off on the feature set if it is not working or change it to accommodate feedback.

In Conclusion - Online gaming has taught us that there is something about online games that creates a buzz that ultimately results in high online customer acquisition and retention. It can also lead to high revenue per online customer if executed properly. We all can learn from successful and not so successful online game properties and integrate the best of breed into our traditional online business application.

"A Little Self Promotion: My company Gameinlane.com works with online game companies and traditional online businesses to develop games and to help businesses figure out what game mechanics will work best for their business. For more information or advice on Gameinlane services please contact Kevin Flood at kflood@gameinlane.com."

Game Platform Preparation For Legalized United States Online Gambling

The impending legislation to legalize online gambling in the US has ignited debate and speculation on how to prepare for and successfully launch and operate online gambling operations in the US. One of the major challenges for operators and game platform developers will be their ability to provide robust and scalable game content to address the large and sophisticated preferences of the US population. Building and managing reliable and scalable game platforms is a non-trivial. The act of crafting an online game strategy and executing the production, delivery, operation, integration and maintenance of games, game platforms, payment processing, age/identity/location systems is worthy of some serious planning.

Licensing Versus Build - I crafted a blog several months ago called "Should An Online Game Operator License Or Build Games?" I suggest you also read this blog to determine if building your own games/platform or having a third party provide you with a solution is the best way to go for your company. This decision has long term strategic business implications that are difficult to reverse once a path is chosen. The decision does not have to be binary. There are hybrids. However, the decision has significant impact on cost, staffing, organizational flexibility and market differentiation.

Even if you do decide to license games and a game platform the following points should still be taken into consideration when evaluating a vendors product offering.

The Primary Challenge(s) For Online Game Development - Online gaming is fundamentally different then most web applications. Online gaming is transaction intensive. The amount of transactions that occur per second in a popular online gaming site far exceed anything witnessed on a standard e-commerce site. Game applications are "state machines" that must be aware of what has happened, at a detailed level, at any instant in time in order to proceed to the next state. Game applications are data intensive requiring the capture and storage of every detail of game play. This level of detail is required to support the "state machinery", to address the need to audit previous game activity and to support financial transaction processes. Underlying the game play operation is a banking operation that has to be 100% accurate. Gaming platforms have to be secure to avoid internal and external attempts to influence game play and or to extract funds from the game system. Multiplayer games are social networks that include interaction in social and financial terms. Gaming sites are subject to legal scrutiny by state and federal authorities. To sum it up online gambling systems are complex and held to a higher standard then other web applications.

So how does a company, operator, IT or development staff successfully build and operate an online gaming platform.

It Is All About The Database - In many ways this is also true for web applications that are not gaming related. I start here because in almost every online game system I have built, managed or operated the DB has been the primary challenge. In the early stage of development the DB selection, architecture, IT layout, query creation and table design need to be fully vetted. This requires projection of loads, data types and usage patterns. Each DB has its strengths and weaknesses. The way the DB is constructed has an impact on performance, security, reliability, cost and talent required to make it operate efficiently.

Why is the DB so critical in a gaming application? Gaming applications are "transaction" intensive resulting in the accumulation of data at a rapid rate. Games require quick response time to keep up with game play and require knowledge of the "state" of play to determine the next step in the game play sequence. If a system/DB fails to address these fundamental requirements resulting in an incorrect outcome, hesitation in game play, slow response time, or an incorrect result the game is over so to speak. The DB is largely responsible for making sure the game platform is in equilibrium for maintaining the stability and viability of the game platform.

DB selection is important. Developer's and business owners have their prejudices. Prejudice should not cloud your judgment for the DB selection. Databases used in high transaction banking operations come closest to the type's of DB's appropriate for gaming systems. However, these can be costly and prohibitive for startup operations. Certain open source DB's are good alternatives with the caveat that DB architecture and design are even more critical when selecting open source DB solutions.

Avoid monolithic DB's and plan for sharding and or clustering of the DB to segment the DB. The divide and conquer approach provides isolation and will help to avoid an overload of any one server. Design a DB to allow it to be spread over multiple machines. This provides you with an option to add hardware to address DB performance issues.

Who writes the queries and who is in charge of the health, welfare and design of the DB. The answer is simple; NOT THE PROGRAMMERS!! Programmers are not normally DB architects and have a habit of developing queries without taking into consideration the big picture and an overall architecture. Also, some "frameworks" auto generate queries. This is also not a good idea. Each query should be specifically crafted to optimize performance.

Game development organizations should have a DB architect on staff to implement a DB design, create tables, create queries and to interact with business owners, project managers and developers determining the philosophy, design, table structure, layout and setup of the DB. The responsibilities of a database architect are different from a database administrator and are often confused. This confusion is understandable because some database architects can and do administer databases. The distinction between the two functions is very clear. An architect established the DB design, creates tables and queries. An administrator loads the DB on the hardware, does the backups/restores an sets up the monitoring of the DB.

Application Layer - The games will need to run on their own hardware separate from web serving and database activity. This will optimize game performance and provide isolation in case there is a problem. Reacting to problems quickly is important because of the financial implications.

No single application server should act as a "controlling" or traffic router in the application server mix. This will defeat the purpose of distributing traffic to decrease the risk of impacting the entire system if one server has an issue. All application servers should be created equal.

Web Servers - Web server technology, load balancing, logging, etc. has become standardized allowing operations to handle large transaction volumes associated with typical web traffic. Keep game play responsibility away from web servers. Web servers will handle registration, log-in, traffic monitoring and content serving. The heavy lifting will be done by the application servers and the DB. One exception is graphic content. Place graphics on separate web servers.

Caching - Caching is a way of storing information/results on application or web server without having to go the the DB to fetch the information. Caching is most effective when certain data is consistently being used and retrieved. This will off load strain on the DB and distribute the load to the application and web servers.

Plan and Design For Multiple Delivery Platforms - Plan for Facebook, mobile and multiple language deployment. Do not design your game platform to deliver content in only one environment. Develop your application to be deployed in social networks, on mobile devices and with multi language support. Social networks and mobile are especially important given the trend for consumers to exclusively interact in these environments.

Small Foot Print Client - The age of heavy, large and complex game clients is gone or has been marginalized for use in console game environments or MMOG worlds. Keep you client development light weigh allowing players to quickly engage(download) your games.

Age/Location/Identity - For compliance reasons your game system will have to know where a player is accessing your system from, where they reside and how old they are. This can be a fully automated implementation or a combined automated manual process. The implications of allowing a player to play on a gaming site this is underage or from a jurisdiction that does not allow online gambling will be severe. Creating these systems requires expertise in risk managment(AI) and access to multiple data source that provide the operator with comprehensive coverage of the target population.

Prepare For System Audits - A game system will be subject to audit to assure that the system is secure and the outcomes are fair and random. The game systems will be audited by third party organizations. They will determine go and no go. They could shut you down if your system is deemed vulnerable to internal or external attack. Prepare your code and system layout to make this process as painless as possible. Obtain the auditors guidelines beforehand to make sure you are not over or under designing you system for audit and compliance.

Payment Processing And PCI Compliance - The credit card companies have formed an alliance that dictates the level of security your platform will have to have to take credit card transactions. These guidelines are detailed and require a PCI knowledgeable individual or company to help you implement a PCI compliant platform. If you are caught not complying your credit card transaction processing could be terminate. Run through your own PCI audit before launching.

Tracking And Analytics - Google Analytics will not cut it. A system should be created that ties web traffic together with game play and payment processing activity. This is the only way you will get a complete picture of player behavior, marketing results, traffic and revenue per player.

Hosting and IT - Unfortunately "Cloud Computing" may not be an option because it is difficult to enforce PCI compliance in a Cloud environment. This will require the operator to locate a hosting facility in a jurisdiction that allows online gambling operations and has the infrastructure, bandwidth and expertise to support a sophisticated gaming operation. This may be one of the biggest challenges for game operators.

Denial Of Service And Intrusion Attacks - In Europe it is common for a gambling site to be subject to a denial of service attach and then a ransom to stop the attachk Get you hosting, network provider and development team together to craft a strategy to deal will the attacks.

Intrusion attacks conducted by robot scans of your URLS will also be common. The goal is to figure out a way to reverse engineer the URL to get access to your data. So, be careful how you construct your URL's. Do not forget about the URL's you put into e-mails and other promotions. The attackers scan these as well.

Engage a security service company to regularly scan you URL's for vulnerability. This we be required for PCI compliance as well.

Web Services - Your architecture and applications should be designed as web services with the appropriate standard communication protocols (SOAP/XML/Hybrids). Your applications will be accessing data from external systems and supply data to external systems. Do not back your platform into a proprietary setup.

Monitoring And Support - Support for game platforms go well beyond the needs of standard web applications. 7/24 of course. However, the financial implications to players, your company and to payment processors can be severe if the game system has downtime or unexpected failures. Do not skimp on monitoring software or you IT support staff.

In Conclusion - The eventual legalization of online gambling in the US will open up new and lucrative opportunities for businesses. It will also provide challenges for these businesses and their technical staff/partners to deliver and support operations that meet the requirements of their players, regulators and payment processors. Be prepared and design game systems with this in mind.

Are Silicon Valley Investors and Businesses Taking Virtual Currency Seriously?

The Silicon Valley legal firm Orrick held a Virtual Currency Summit this week featuring representatives from a number of local companies servicing the virtual currency industry. Their presentations were followed by a lively question and answer period engaging the audience in a dialogue about the state of virtual currency transaction processing and monetization in the US. The summit was informative with the presenters providing information on the percentage of online gamers transacting (1-3%) with virtual currency, total volumes of online game players, the challenges associated with monetizing online games with ads, the future impact of Facebook credits, the emergence of mobile payments as a way of paying for online currency/goods and the tight margins for virtual currency businesses.

All of these subjects were interesting and revealed a significant commitment on the part of consumers, gamers, businesses and investors in the virtual currency value proposition.

The most interesting part of the summit was the subject matter not discussed. The noticeable absence of dialogue surrounding some of the more challenging and provocative aspects of the virtual currency business was no doubt intentional on the part of the speakers. However, if the industry does want to flourish it should take into account the entire picture.

Look To Asia For Direction - Virtual currency/goods transactions have been in play for years with Chinese and other Asian businesses and communities leading the way. Most of what is starting to happen in the US has already happened, matured and has become institutionalized in Asia. Essentially, we are in import mode from Asia. The US is actually in catch-up mode following the lead of China, Korea and Japan. Just glancing across the Pacific will give US game developers and virtual currency platform providers good information and direction regarding integration of virtual currency monetization into online games, legal challenges, consumer habits and the lead Asian business have in terms of market penetration throughout Asia.

US Payment Processors/Payment Gateways - Many online game companies are having trouble getting payment gateway providers and payment processors to handle their virtual currency transactions. I do not have specific reasons for this hesitation. Is it a charge back issue, an online gaming issue or age issue? Indirectly this could cause a defacto monopolization of the business by companies that have good payment processing arrangements. It is also a bit perplexing because the underlying systems that handle transactions do not appear to be anxious to sign-on to the optimism we are all generating about virtual currency transactions.

Age Verification - I was really surprised that the audience or the speakers did not raise the age issue in regard to virtual currency and goods purchases. In fact, there was one individual heading up an organization representing a pre-teen and teen audience acknowledging the fact that this segment of the population is using cell phones to buy virtual currency and virtual goods. He wanted to know what payment methods they will migrate too once they move into the adult category. Neither he or the speakers addressed the danger of pre-adult age individuals actively buying virtual currency and goods online without parental supervision. This is an area that should be given a bit more respect. Given the amount of money that can be exchanged in online games, as well as the game and advertising content involved. Online game operators might want to consider how they are going to police this space before external organizations start asking questions.

Is It Gambling? - I hate to bring this up and rain on the virtual currency parade. However, we have already heard rumors of Zynga being under investigation by state attorney generals and The justice department because of their use of virtual currency to monetize game play. The businesses building a monetization model around virtual currency and goods sales need to be careful. They should face this issue head-on and make sure they position their virtual currency transaction model in a way that is legal and consistent with state and federal law or get clearance from the authorities that virtual currency transactions are OK providing they adhere to a certain criteria.

We do not want to see a reenactment of October 2006 when the federal government passed the UIGEA. It essentially wiped out millions of dollars in investments and killed off a number of legitimate businesses. The same thing could happen with virtual currency based businesses. Eventually, these transactions need be recognized as legitimate transactions under SEC, state of federal law.

Virtual Currency/Good Trading - The practice of trading virtual currency and virtual goods is occurring. It happens on Ebay, in Zynga poker chat rooms and on Chinese auction sites. The Chinese government went to the extreme of drafting legislation that specifically prohibited the exchange of virtual items and currency for traditional currencies. In China virtual currency transaction volume rivals traditional currency transaction volume. How do we handle this in the US? The industry should draft its own policy on this before government bodies get involved.

Conclusion - The conference was great! It demonstrated that the virtual world is eclipsing the physical world creating great opportunity for businesses and investors. It highlighted the popularity and willingness of business to jump in to address the emerging US virtual currency/goods demand.

Enthusiasm and adoption is great. However, it comes with a responsibility. Showing tacky abusive ads in games is a minor annoyance compared to what could happen if virtual currency transactions are not recognized as "real" transactions. The US has the ability to legitimize virtual currency and become a transaction hub and exchange center for virtual currency. The US could make a mess of it if it does not deal with the obvious issues that have already been seen in Asia and are now growing in the US. The US is currently a follower and not a leader in this space. If it wants to take the lead and offer virtual currency on a worldwide basis the industry needs to grow-up quickly and show the way for the rest of the world.

2010 iGaming Asia Congress Summary

I had the opportunity to attend, speak (Online Game Ecosystem) and chair a session at the iGaming conference in Macau this year. I attended the Asian conference to get a better understanding of how Asian iGaming compared with online gaming activity in North America and Europe. The attendance at the Asian conference was a great follow-on to my attendance and review of the ICE conference in London in January.

Anyone that has followed my blog over the past year knows that I believe the Asian gaming community is the primary innovation engine for new game development and virtual currency/goods transactions. Much of what is being implemented in the US today has already been done in Asia and yet to be implemented in Europe. With this bias in mind I dove into the Asian conference looking for confirmation of this trend. I came away with a much deeper understanding of Asia's gaming market and the underlying reasons for its character and direction.

Asian Game Market Diversity - The Asian gaming community is not homogeneous. Asia requires a number of marketing plans and strategies depending on country, region and target audience. The cultural, geographical, historical, legal, political, linguistic, network backbone and economic diversity of the region require developers and marketing managers to take each country/region individually and craft an appropriate strategy. China. Korea, Japan, Philippines, Malaysia, etc. all require special attention.

Online Game Popularity - The numbers and growth of online gamers in Asia dwarfs anything that is happening elsewhere in the world. It is the place to launch and monetize games if a company understands what a particular market likes and can support. For example, the proliferation of high bandwidth land and mobile networks in Korea and Japan is yielding high numbers of mobile gamers playing graphically sophisticated social networking games. In China mobile and land based broadband networks are just starting to emerge making it difficult to offer bandwidth hungry gaming applications. Consequently, China's growth is being fueled by light weight games that are primarily focused on the desktop or laptop platforms. even with this lack of high bandwidth access the Chinese online gaming market is resulting in very high player volumes.

Gaming Law And Regulation- In many Asian countries online gambling is outlawed. However, that does not mean that the laws are enforced. For instance, in Malaysia online gambling is illegal. However, if an operator pays the authorities the proper stipend then the operator is allowed to do business. This may seem questionable from a westerner's perspective but it is the way business is conducted in many parts Asia. A business is expected to engage in this kind of activity and it is not considered shady.

In China it is illegal to gamble online. However, many Chinese regularly gamble online. It is all about the matter of degree relative to other issues the Chinese government is dealing with.

Virtual currency trading is big business in China. China specifically prohibits the exchange of virtual currency for conventional currency. Despite this law virtual currency trading persists as long as it does not reach a certain level attracting the attention of the Chinese government. The danger for an online gaming operator is that at anytime the Chinese government may crack down on these practices. Chinese business owners are very familiar with this cycle. When the crackdown occurs they cease operation for awhile and then reappear with a slightly modified business model.

In the Philippines online gambling is legal. However, due to the low Internet adoption rates in the Philippines the online gamer numbers are relatively small. So the Philippine gaming operators have decided to target Chinese gamblers. They are doing very well with this focus.

The Games - Online Asian game developers produce a wide diversity of games. They range from sophisticated 3D virtual worlds on mobile phones in Korea and Japan to very basics casual games in China. The games in Korea and Japan are particularity interesting because of their simplicity and technical sophistication. These markets are using the latest Flash mobile front ends allowing developers to create really good looking games.

The primary gambling games that Asians play are different relative to what is played in the US or Europe. Asians are table game focused and not slot or machine game oriented. Within the table game category the Chinese are partial to just a couple of games. Baccarat and Sic Bo rule in the Chinese community.

Online Poker In China - I overheard an interesting comment by someone at the conference. The individual indicated that Texas Holdem is perfectly suited for the Chinese audience. He indicated that the types of games played by the Chinese contain dynamics also found in Poker. The social aspect in particular was mentioned as well as the simplicity of the game. This obviously means that there is a great opportunity for launching a successful online poker operation in China if the game includes subtle changes that address the language(localization) and particular Chinese interaction preferences.

Social Networks - Asian game developers and operators are integrating with social networks and in some cases creating their own social gaming networks. Asians are not using the popular and common social networking names found in Europe or North America. Facebook, Bebo, Hi5, etc. do have a big following in Asia. Remember Friendster that so called first and failed social network. They are alive and well in the Philippines and Malaysian. Asian have many of their own social networks (QQ) that are unknown outside of Asia. The close integration of gaming and social networks is creating the large concurrent player numbers we are witnessing in Asia.

Social Media - Using social networks as business promotion and communication mediums is still not fully developed in Asia. This is in stark contrast to the US were businesses understand how important it is to use a coordinated social media approach to attract and retain consumers and customers. I am not exactly sure why this is the case. However, I suspect eventually Asia will catch on.

Demographics - Online game players are young in Asia. This is due to the fact that access to the Internet is relatively recent skewing Internet traffic to the younger side. This has a big impact on the type of games, amount of time spent playing games and the growth potential for gamers in Asia.

Advertising - Generating revenue from online advertising is underdeveloped in Asia. It is not a significant source of revenue for online game properties. This is the result of the domination of online advertising by big brands. Consequently the inventory of advertisements is low compared to North America and Europe. It is also a reason for the emphasis on monetizing games with virtual currency and virtual goods.

Virtual Currency/Goods - Micro-transaction monetization of games from virtual currency sales and good purchases is the primary revenue driver for online games in Asia. Asia leads the world in this regard requiring traditional gambling sites to evaluate their methods of monetization in Asia. In Asia a combination of micro and macro transactions combined with gambling or macro-transactions may be imperative to lure players up the ladder from the predominant monetization environment.

Macau's Land Based Casinos - Although the conference was an iGaming conference I could not help from taking part in the Macau gambling scene. I have spent plenty of time in Vegas playing games and working with casino operators. I had to see what Macau had to offer.

First of all, Macau is magnificent from a building and development perspective. It exceeds Vegas in terms of money being spent gambling. The casinos are big, even bigger than Vegas in some cases. They are also well run. The gaming floor composition is noticeably different than Vegas. There are very few slot machines and many Baccarat and Sic Bo (dice game) tables. There were a few roulette and crapes tables but I did not see a single blackjack table.

The attendance at the casinos was interesting. Some of the casinos were sparsely populated and others were very crowded. The Venetian was particularly jammed. This is saying something because the gaming floor is the size of several football fields. I asked the locals why the difference in attendance? Was it the odds, the accommodations, the service, etc.? The simple answer everyone gave me was marketing. The Venetian was doing a better job at contracting junket operators and giving out handouts on the ferries running from Hong Kong and other places to Macau. Macau is a big day gambler venue due to the close proximity of Macau to big population centers such as Hong Kong (7 million people). Hong Kong is an hour ferry ride away from Macau.

Conclusion - Asia is a diverse region with a growing population of gamers being driven to online games as the Internet becomes more accessible. Asians have a culture of gaming and gambling naturally leading them to participate in this activity online. Virtual currency and virtual goods gaming related revenue is a major driver for high cash flow generation in casual social games. The appetite for online games is growing creating a demand for new online games and the conversion of traditional games to the online environment. This trend is an opportunity for existing and new game operators to grow their Asian businesses potentially rivaling gaming operations in North America and Europe.

For more details on the Asian gaming market or help in setting up gaming operations in Asia please contact me at kflood@gameinlane.com.

Virtual Currency Blog "Censored" By Chinese Government

A colleague of mine residing in China recently informed me that he could not access the Kevin's Corner blog. Further investigation revealed that no one in China could access it and the blog had been censored. Apparently, my last blog item suggesting that there could be a link between the purchase and sale of virtual currency and gambling raised some eyebrows in China.

It is no secret that I have posted a number of items on Kevin's Corner relating to the phenomenal growth of the use of virtual currency, the purchase of virtual goods, the sale of virtual goods and the trading of these items in China. A host of Chinese companies have gone public on the back of revenue generated from virtual currency and goods sale. The purchase, sale and auctioning of virtual currency and virtual goods is big business in China despite the efforts of PayPal to stop the trade on their property.

The recent Chinese government legislation banning the B to B trade of virtual currency certainly got my attention which in turn lead to a couple of blog items and a lively debate amongst my blog readers about the true purpose of the legislation. The debate still leaves me a bit uncertain on the legislation's true purpose. Was it designed to stop virtual currency trade from undermining the yuan as the base commercial and trading currency in China or was it designed to stop gambling related to gaming virtual currency's ability to be traded for yuan?

Either way open discussions about virtual currency trade in China are obviously not welcome by the Chinese government. In a centrally controlled economy the government wants to set currency valuation and to control commerce in a way that can be tracked by the government. Somehow virtual currency trade is threatening their control.

Clearly, virtual currency has proven to be a bit of a challenge for China. On one hand their stock market is filled with companies making million on game play, virtual currency trading and virtual goods purchase and sale. I image it is hard for them to sort out how to keep their new age economy growing and at the same time control the very engine that is driving the growth. I am flattered that someone or some bot decided to block my blog. However, I doubt that blocking my blog is going to stop the proliferation of virtual currency trading in China or the desire for Chinese residents to use virtual currency as a proxy for real gambling.

Gameinlane Virtual Currency Exchange

For all of the followers of my blog you know I have been interested in the rapid evolution of virtual currency. This weeks announcement that the Chinese government will begin the full regulation of virtual monetary exchange underscores the importance of virtual currency for the world economy. They have instituted this move because virtual currency trade is disrupting the trade and value of traditional currencies. This further confirms my prediction that the intersection of virtual currency and traditional currency is on the horizon. In fact, it is already here. I am of the opinion that this is the single most important development we may see in our life times. It will create all kinds of opportunities and challenges. It will rock Wall Street and redefine Main Street. The line between virtual goods and physical goods went from blurred to non existent.

So how do you get on board and not buried in the onslaught of virtual goods merchants and virtual currency issuers. You leverage virtual currency to get big fast!!!

We have marveled at Blizzards early success and Zynga's recent success in this space. Their big problem is that they act as insulated silos not encouraging the open exchange of their currency. Guess what! This is a big mistake and a great opportunity for other virtual currency issuers to create larger and more sophisticated trading environments. How about inter trade of virtual currency between issuers? Yes, this is the next step and a way to grow a much larger community of virtual currency users and virtual currency.

At the risk of self promotion I have started a business, www.gaminlane.com to do just that. I have begun to engage game companies and virtual currency issuers to join the virtual currency marketplace.

If you are issuing currency now leverage it by allowing it to be exchanged with other currency issuers. Start establishing a real value for your currency by allowing people to use it outside of your environment!!

Let's create the next big wave in virtual currency. For more information on how to sign-up please contact me at kflood@gaminlane.com.

Is my prediction of a Universal Virtual Currency on the Horizon??

What Everyone Should Know About Subscription Gaming

World of Warcraft and EA's Club Pogo are two of the well known game sites that use subscription as a means of generating revenue from online game play. Over the past several weeks I have received a number of inquires concerning online subscription gaming. My discussions with the interested parties reveal some preconceptions and misconceptions about subscription gaming. Subscription gaming is not for everyone and has some unique characteristics that should be taken into consideration before committing to using subscriptions to monetize game play.

I spent 5 years operating online subscription gaming sites on two continents with very different regulatory regimes targeting different gaming audiences. That experience taught me that subscription gaming has fundamental characteristics that transcend geography and game type.

Legal Status - Many of the questions I receive on subscription gaming involve its legal status. This is the one area that business owners are the most confused about. First and foremost the subscription model in and of itself does not make a gaming site legal or illegal!! Taking a fee of any kind for game play is consideration. In most regulatory regimes the combination of consideration, chance and prize are all taken into account to determine the classification of the business, game and transaction.

Laws addressing online gaming are complex, confusing, ever changing and in some cases poorly defined. My suggestion to anyone contemplating monetizing game play through subscription or any other monetary consideration should consult an attorney that specializes in this field. My recommended attorney's for US operators are Tony Cabot and I. Nelson Rose. For the UK and for Eurozone operators I recommend Harris and Hagan in London. They will have good advice on UK operations and will refer you to qualified attorneys for the rest of Europe. Asia is a different challenge with legal advice hard to come by. My suggestion for operators considering Asia as a target is to isolate the country(s) of interest and then research businesses that are engaged in monetizing gamers. Reach out to them to determine how they decided to move forward with their transaction model.

Life Time Value of a Player (LTVP) - The LTVP is a number used by many gaming sites to develop business models, measure progress and to project future revenues. In a subscription model this is not as easy to do as you might think.

In my last company I took random samples of subscribers to determine their subscription durations, drop off and resubscribe rates. My sampling consistently indicated that subscribers were subscribing and resubscribing on a regular basis. I can not reveal the actual rate for this company but it was a surprise to me to see so many players treating the subscription model as a "micro transaction" model.

This behavior makes it hard to determine what the lifetime value of a player. It requires some sophisticated math involving statics and probability to sort out what is happening at any moment in time. A better and more simpler way to determine the health of the business is to calculate the total subscription revenue for each month and determine the percentage increase or decrease from the previous month. Going forward you should see a trend that will help you predict future revenue.

Subscription or Micro Transaction? -In analyzing gamer behavior watch out for high percentages of churn and then re-subscriptions. If players are coming and going at relatively high rates this means your property may be a better candidate for a micro transactions and or a lower subscription fee. This phenomena is what I call a a micro transaction in disguise. The content or characteristics of your property are not attracting a long term commitment by players. This does not mean that you do not have a business but it does mean that you should reconsider your content to attract longer term players or change the model to take advantage of the short visitation of your clientele.

Churn - Churn is the fall off of subscribers on a month to month basis. In both of my subscription gaming experiences churn stayed constant. This may not be the case in your proposed operation but for this example let's presume yours is constant. The challenge for subscription sites is the back filling of the lost subscribers as the overall pool of players increases. For instance, when you first start out with your business you may have 1000 players subscribing. If you have a 20% churn rate you will need to replace 200 players to keep you revenue numbers the same as the prior month. When you have 10000 subscribers you will have to replace 2000 player before you can grow your revenue.

This phenomena creates interesting marketing and operational challenges. In the early days of a subscription business you may see excellent growth because your churn pool is relatively small. When your overall pool increases it becomes more difficult to maintain the status quo and to grow. This may require a constant addition of new content to keep pace with churn or ever increasing marketing expenditure to keep the business growing.

Source of Payment - Subscription monetization requires a relatively reliable single transaction source to bill on a regular basis. Credit cards are the most popular source of obtaining funds for recurring transaction. If you are in an environment such as China where credit cards are not commonly used you may have to reconsider using a subscription model.

Churn And Credit Card Transactions - Involuntary subscription cancellations related to credit card expiration and insufficient funds are significant contributors to churn. Special programs, reporting and notifications are required to address these issues. Build these programs into your operation early.

Recapture Programs - There are a number of clever methods to recapture subscribers that have involuntarily and voluntarily stopped subscribing. These programs impact your decision on CRM and payment processing selections. Be sensitive to these issues early and modify your procedures and systems to quickly recapture lost subscribers.

Recurring Payment Providers - Some of the credit card payment services offer a recurring billing option. In most cases these will not be sufficient to run your business. Players will have to be rebilled when they fall out of their normal subscription run. Special for free subscription periods may be required to keep a player as part of your service. Special promotional discounts that have initial periods and revert to another payment amount will be required. Do not think of subscription gaming as an effortless way to generate revenue. Flexibility in payment processing is essential for success. You may have to build your own recurring billing system.

Community/Social Networking Features - I mentioned in a previous blog (The Power Of Your Existing Players) about the importance of existing players in an online gaming business. Do not start your subscription gaming business without community or social networking features. The best way for you to decrease your churn rate and to cost effectively increase your subscribers is through voluntary player invitations and the camaraderie of the community itself.

Free Play Is Essential - I also addressed this in a previous blog (The Importance Of Free Play). Never under any circumstance force a new player to transact without having experienced game play for free. The fall off for this mistake could be terminal for your business. Those first players are so important for building community and volume. Transition (Optimizing Pay For Play Transitions) them into the subscription transaction model and let them fall back into free play if they can not transact. They may return and become subscribers at a later date.

Players That Pay But Do Not Play - There is a cadre of players that will play for a bit but stop playing and still pay for the service. This is great but your ability to maintain this revenue source is heavily dependent on how you deal with credit card expiration. Do not take these people for granted. If they do fall off reach out to them again.

Gaming Platform Requirements - If your subscription model is working you are going to experience high volumes of players playing at the same time over long periods of time. This translates into technical game platform challenges. In my previous position we flattened two game platforms that had been designed for a game transaction model. Your average off the shelf systems are not going to make it. Build a business plans that includes the development and maintenance of your own gaming platform. This is expensive but you will need the expertise and flexibility to react to volume spikes and the addition of more games and content.

In conclusion, the subscription model is a creative way to offer a comfortable initial price range for players and still get a higher overall transaction amount if you can successfully retain players. However, operating a subscription gaming business is not a trivial undertaken and requires special operational planning and procedures to make it work effectively.

For more details on operating a subscription based gaming model please contact me at kflood6@gmail.com.