Great article about WoW

A fascinating story I read on GigaOM, talking about the hidden secrets of WoW (from a DFC report). Now people will believe me when I say that WoW is a very good business but a very bad market.

I also often say that MMOG are niche market when it comes to online gaming. With 7 millions people playing WoW on a regular basis, hundreds of millions of dollars of revenues per year, it is easy to dismiss this claim. if it is a niche, then what is mass market online gaming ?
Let's do the math together:

• There is a whopping 1 billion internet users througout the world today
• WoW has 7 millions regular users
• WoW is about 50% of the total ww market for mmog, that means about 14 millions people play MMOG today
• Growth of this market according to the DFC report will reach its peak in 2008 then will slowly decline. Let's say it reaches 25 millions users in '08
• There will be maybe about 1.3 to 1.5 billion internet users at the time

To me, the "reach" of this market will be no more than 2-5%

So what will be mass market then ? Easy answer : casual gaming. My company has been selling casual games since 2001 and the one thing we learned is that everyone is a gamer. Indeed, the "reach" is closer to 90%.

THERE ARE 10X MORE people interested in playing casual games than online mmog ! I can guarantee that the online casual game market will be many many times bigger than the more traditional online game market targeting hard core gamers...

Comments

[mathieu]

You are absolutly right (you are a VC after all ;-). I believe subscription is not the answer for casual games as it requires too much involvement from end users. Only hard core fan can commit to such plans.

Some people solve the monetization issues with advertizing. One way to look at the issue is to think in terms of how many hours casual players are spending with their games. And then you insert ad into the casual game experience, either within the game (a bit complicated) or "around the game" (we have done it, check it out at the beta version of http://www.clickgames.com).

One other, much more promising imho, is to look for micro transactions with the games (the model is called "Items"). you actually buy cheap stuff to improve your gaming experience. In asia this model is VERY advanced and has literally killed the subscription model. High quality games are entirely free but you can buy add ons. For example, you have this korean company called Nexon. They have a game called Kart ridder (very casual). While it is a private company and they keep their number secret, my sources indicate they make as much as $400M, in korea alone ! (they will probably go public soon). Another successul company is QQ in china, I'll write a post later on this company, the numbers are absolutly amazing...

So I believe it is possible to monetize casual games, maybe with a slighter lower ARPU but with a *much* bigger reach. I am convinced the market will be many times bigger than the core game market...

[Fred D]

hey ! welcome back. you are talking about greater reach, but for a fuller analysis would be interesting to really compare the economic value of each segment given the strong subscription models and churn assumptions and so on...