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Apple joins the Virtual Reality Face Race: http://t.co/AfXdaVhGUZ

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The Amerinet Virtual Facility: early stage visuals

When Amerinet (a leading US healthcare solutions organization) wanted to develop a 3D virtual medical facility, they called in KZero.

We’ve been working with them for several months developing the Amerinet Virtual Facility (AVF). A full 3D virtual environment containing a wide range of healthcare and medical products/services. The AVF is a sales and marketing tool, allowing customers to view and interact with products, obtain contract details and request further information.

The AVF is being developed in Unity and once launched, will be accessible via browser, iOS devices and Android tablets.

Here our some early stage visuals (and here’s the Slideshare presentation) showing the initial design approach and product models. As we move towards full launch we’ll be publishing visuals and fly-throughs of the full facility.

 

 

Digital Kids Conference presentation

Here’s the presentation Nic delivered at the Digital Kids Conference in New York yesterday.

 

TV Advertising Ups the Stakes in the UK Virtual Worlds Sector

With above average ARPPUs and paying user conversion rates, the UK market has long been a high-value territory for virtual world companies targeting kids and tweens.

And, whilst the likes of Moshi Monsters, Stardoll and Club Penguin lead the way in terms of user penetration, a group of newer virtual worlds are activating UK TV advertising in order to grow their userbases and take a piece of the market.

At present, Minomonos, Space Heroes Universe, Fight My Monster, Herotopia and Bin Weevils are all buying UK air-time across the major kids channels. Here’s a selection of TV ads shown in the UK.

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Lessons in Launching Virtual Worlds. Mistake #3: We’re Going With a Monthly Subscription

This is number three in our series explaining common mistakes made by companies launching virtual worlds.

In the first post we discussed the need for market (or rather user acquisition) budget and the target market range was explored in the second post.

Now the focus switches towards the monetization strategy – the pricing method that users will be encouraged to use.

Most virtual worlds targeting the KT&T marketplace opt for a monthly subscription pricing method – charge users a fixed monthly fee and provide them with enhanced/premium features. These premium items take the form of access to special areas, bundles of virtual goods, additional features and the like.

Worryingly, the pricing decision for a lot of virtual worlds and MMOs in the sector isn’t a decision at all. Instead, worlds just opt for a monthly subscription based on the following thinking:

  • If it works for Club Penguin then it will work for us
  • It provides parents with peace of mind – no unexpected charges
  • Having a recurring monthly subscription is less hassle

You get the picture.

And in principle the arguments above are sound. And indeed, virtual worlds such as Moshi Monsters, Jumpstart, Club Penguin and Wizard 101 all have monthly subscriptions. But, these worlds have become ‘brands’ in the space helped a great deal by spending sizable amounts on user acquisition (see mistake number 1).

However, there’s a much bigger picture that many virtual worlds completely miss.

Firstly, switching costs.

What many virtual worlds do not realize is that users who are most likely to be monetized are already being monetized somewhere else, i.e. a competitor virtual world. In this instance, the new virtual world has to shift the user’s attention away from their existing world and move them to their world. It’s important to bear in mind that the propensity for KT&T to have monthly subscriptions in more than one world is virtually zero, due to the issue of switching costs and an unwillingness for parents to be paying for two at the same time.

Another issue is brand awareness and reputation.

When a new virtual world launches, brand awareness and more importantly brand reputation is zero. Nobody knows and nobody cares. Yet worlds think parents will willingly pull out their credit cards and commit to a monthly subscription. If only it was that easy.

A far better pricing strategy is using microtransactions (MTX) at lower price points than a typically monthly subscription (which, surprise surprise is usually $5.95). Allowing users to purchase a virtual currency (which can be used to buy all the elements that a typical monthly subscription offers in smaller chunks) makes the payment decision much easier for parents.

Not only is the paying amount lower (read: cheaper) but also less riskier than a monthly subscription. This neatly side-steps the concern parents have that their child will get bored playing in world X and move onto to another one (whilst still paying for the first).

Implementing lower -priced MTX has an additional benefit of widening the paying user catchment. In other words, for a lot of users, paying $6ish a month is simply not an option. Whereas paying as low as $1 for a ‘taste of the good life’ is much easier to swallow. You just have to look at the app market for evidence of this. By lowering the paying entry threshold you can go after those users that haven’t been monetized by other worlds.

The bottom line is that pushing users over the monetization line is about showing KT&T whats on the other side of the fence. If you have a great VW then users will want to stay as paying users – give them a really low hurdle to jump over, then focus on raising it once they’re over it.

As a closing PS, another point missed by many virtual worlds is that by having a monthly subscription – a take it or leave it fixed price for premium content, you’re actually setting the upper limit of what users can pay. This means that the really engaged paying power users that reside within KT&T worlds can’t get anymore out of their world over and above the monthly subscription level and benefits. This is a poor longer-term strategy.

PPS: KT&T virtual worlds and MMOs with virtual currency based MTX convert three times as many users as subscription-only worlds and have a monthly ARRPU on average 20% higher.

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How Minecraft Gave Virtual Worlds a Second Life

A blog post from New World Notes today announced that Minecraft is now the popular game on XBOX Live. And in fact it’s more popular than Call of Duty. That’s kinda cool.

Minecraft has been an incredible success in a very short period of time by offering users the ability to create. Millions of users (we’ll call them that for now) are spending long periods of time crafting (creating) digital objects. Why? Just because they can. It’s Lego 2.0 with added zest.

The secret sauce is the interaction with these objects, other users and the environment. New digital worlds are being created and entire ecosystems of interaction are taking place.

What has really assisted in the growth of Minecraft is the passionate audience of fans behind it. And, in particular the videos of user creations and activities inside the world. This ‘Machinima’ enjoys multi-million views in really short periods of time. In turn, virality grows off the back of widespread exploitation of social graphs.

It’s interesting to see the different ways that users play / engage with Minecraft. Some re-create real world places – these are known as mirror worlds. Others create race tracks, space stations and even environments from other games such as World of Warcraft. Pop culture is also prevalent. Combining this and the viral element, here’s a video on YouTube that was released four day ago. It’s just about to hit 5m views. Not bad.

Minecraft is enjoying explosive growth and 2012 has seen them move from circa 28m registered accounts right up to 45m. This is the largest proportional increase in the entire sector, including the kids, tween and teen markets. The Universe chart extract below shows the Q1 2012 position (we’ll be releasing Q3 numbers soon).

 

Minecraft has become a global brand in around two years and the great thing is that due to the nature of the platform (user generated content), the community is in total control of its destiny – where it goes from here.

But hang on a minute.

Haven’t we been here before with Second Life?

Millions of users. Media awareness. Content creation. Communities.

All of these elements were (and still are) in Second Life. This has been the case for many years. The funny thing is that Second Life is still a great business. It’s just that the media got bored and moved on. People think that Second Life has closed, just because no-one really writes about it anymore. But the community didn’t get that memo and still enjoy being inside Second Life.

But is was never cool in a way that could be interpreted by a wide age range. Who, in turn could tell their friends. Maybe the avatars looked too real, and at the same time too weird. Maybe it was the brands that swept in and mainly left a bad-taste in users mouths. We were fortunate to create one of the best performing campaigns in Second Life, with our L’Oreal Paris campaign. Or perhaps it was the age limit of having to be at least 17 to register for Second Life. Sure, these was a ‘Teen Grid’ for slightly younger users but that’s not cool. You always wanted to go to your older brothers party.

Minecraft has a user base that spans a wide age range. We estimate the average user age to be 14 but that hides a spread from eight right through to 98. Minecraft is UGC (user generated content) for the masses. So, the users are kids, tweens, teens and adults.  The power-house of user base growth has come from the teenage market, with YouTube boosting K-Factors and brand awareness and other community-led channels such as Facebook have made virtual worlds cool again. In fact, the Minecraft Facebook fan page has just reached 5m fans.

Shown below is a google trends chart comparing Second Life and Minecraft.

Minecraft is the red line and totally over-shadows Second Life in blue, which is remarkable because the media  interest in Second Life was intense in 2007 – 2008. It’s just that Minecraft has become more popular by an order of magnitudes.

The bottom line here is that fundemantally. giving the people the power to create whilst socializing is one of the most compelling features of virtual worlds. It may even be the most important aspect. Second Life provided one of the first platforms for people to do this. But the growth of Second Life was ultimately hampered by some brick walls. The younger audience has propelled usage of UGC and Minecraft and  and in many cases it serves as the ‘graduation destination’ for the millions of kids and tweens that migrate from the highly successful younger virtual worlds such as Moshi Monsters, Club Penguin, Stardoll and others.

This sector is in good hands and promises much. As consumers and businesses, we will continue to use virtual content creation and engage with virtual social networks. Drawing from a previous point and closing this article, the ability to create and share will be the driving force in the future of the sector and virtual worlds like Minecraft give us glimpse into where we are heading. Albeit currently in large pixel format……but that’s cool.

Further information:

Lessons in Launching Virtual Worlds. Mistake #2: We’re targeting kids aged six to 13

This is the second in a series of posts examining common mistakes made by companies launching virtual worlds for the KT&T market. The first post, ‘We don’t need a Marketing Budget’, is here.

We get a stack of business cases every month at KZero for new virtual worlds. Obviously a critical element of any plan is the target market, so here’s some actual extracts from a number of these business cases:

‘Targeting boys aged 5 to 12′

‘Targeting boys aged 6 to 15′

Targeting girls aged 5 to 11′

‘Targeting girls aged 7 to 16′

And my personal favourite ‘targeting girls and boys aged 3 – 14′

Here lies the problem, and the topic we almost always raise first with clients…..

The activities that five year old boys like to do online (and in virtual worlds) differs massively from those aged 8, let alone 12 year olds. They have different play patterns and interests. Now compare boys with girls. Again, even though for early ages there’s a little overlap, once you get to tween and early teen ages, again, user profiles and interests differ greatly.

The point here is that having a wide age range as the target market in a business case may give you a larger addressable market but really, can a virtual world concept proposition engage both ends of the scale? Short answer, no. Only the early movers into the space (the likes of Habbo, Stardoll and Club Penguin) have enjoyed this type of wide penetration and this is mainly due to the massive brand awareness pulling users in in the first instance. Continue reading →

Lessons in Launching Virtual Worlds. Mistake #1: We don’t need a Marketing Budget

This is the first in a series of posts highlighting some very common mistakes made by (primarily) start-up companies launching virtual worlds and MMOs for KT&T (kids, tweens and teens).

The insight we’re going to share in this series is gleaned from over five years of consulting for and working with a wide range of companies in the sector.

When we speak with Venture Capitalists and Financiers looking into the KT&T virtual worlds and MMO space a comment we hear a lot is that the space is crowded. Indeed, looking at the Universe and Radar charts, its clear there’s a lot of companies in the market – ‘Chasing the Penguin’ as we used to call it.

However, a large majority of these companies have failed to scale and grow their userbases to critical mass levels. We define these levels on a registered account basis as being 1m, 3m, 5m and 10m. We measure these critical mass levels alongside the K-Factor (viral sign-ups as a % of paid-for) and see measurable uplifts in the K-Factor at each level. For example, once a virtual world reaches 5m registered accounts it sh0uld be seeing a ’1 for 1′ K-Factor, meaning the world gets a viral sign-up for every paid-for sign-up.

Virtual worlds and MMOs with insufficient marketing budgets are floating around in the market and failing to ramp up. This isn’t because their worlds are boring or don’t have great games or quests – worlds are not built to be boring. It’s primarily because when initial funding was raised for the development of the world, insuffiicent funds were allocated to user acquisition. Why did this happen? Here are some reasons:

 

  • Arrogance. ‘Our virtual world will be so great that we won’t need to spend much of marketing and acquisition. Sign-ups will be viral’.

 

  • Ignorance. Marketing was an after-thought, only brought up and considered once the world was open beta. This mistake was typically caused when the management team was mainly technical as opposed to commercial.

And, on the topic of marketing and user acquisition, this doesn’t mean banging out a few press releases or having a stand at a conference. Do you see many kids walking around virtual world or gaming expos? No, we don’t either. User acquisition means using measurable and scaleable online channels such as gaming portals, paid-search and the like. There are many worlds using these channels to great effect.

From a CPA perspective (cost per acquisiiton) we deem worlds to be performing well on a paid-for acqusition basis if their CPA is in the $0.50 – $0.80 range. In terms of an overall starting aquistition budget, we always advise at least $750k. Then and importantly, profits from monetization need to go back into the acquisition budget (at least 50%).

And what happens when the companies don’t have a sufficient launch budget? Not much unfortunately. And then they have to go back to the market or existing investors for another funding round. This is a painful process.

In the next of this series exploring Lessons in Launching Virtual Worlds, we’ll be covering off geographical targeting and target market age ranges.

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Golden Triangle Slideshare presentation

Our latest report, The Golden Triangle is now available on Slideshare.

This report explains and positions the opportunities available to IP owners in the toys/games and tv/movie sectors with respect to virtual world integration. The full high-res report can be ordered here

The Golden Triangle

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A Slideshare presentation about Slideshare presentations

Sharing is something we like to do at KZero. And, over the years we’ve shared a great deal of research and insight about the virtual worlds sector.

In fact, we only have one report that we don’t provide for free – everything else is shared, made available on request and viewable on Slideshare. To date, KZero reports and presentations have amassed over 320,000 views on Slideshare, so we’ve done a little presentation showing some data about the reports.

The headlines:

  • Total views: 324,410
  • Email shares: 592
  • Tweets: 158
  • Favourites: 356

Our most popular report on Slideshare is the old Kids, Tweens and Teens report (the newer, better version of this report is our only premium report), with 192k views to date. Second place goes to our Virtual Worlds 2011 report, approaching 20k views. Here’s our Slideshare presentation about Slideshare presentations.

 

 

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Dorothy of Oz branded social gaming suite launches on Facebook

Our suite of branded social games for the forthcoming Dorothy of Oz movie and virtual world has recently launched on Facebook.

If you’re feeling creative then the China Princess Dress Designer is for you. Social game wise, you can let off some steam with the Marshall Mallow Gumball Cannon or pit your wits against the Bricks of Oz. Enjoy!

You can learn about the overall online strategy for the movie here.

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