Gamer Creates Business To Tap $13 Billion Virtual Goods Market
Live Gamer will launch Live Gamer Media to complement its ecommerce unit to support advertising for brands and publishers. The new business unit combines two companies that LiveGamer recently acquired: video game ad network GamerDNA and engagement advertising platform BrandPort.
Brandport, rebranded Ad Elements, creates a 15-second video spot, engaging the gamer in questions about the advertisement before rewarding him with an in-game virtual item, explains Andrew Schneider, Live Gamer president and co-founder.
"We see about 30% of non-paying users participate in this program," Schneider said. "For each of these users, we serve up 10 ads per day. More than 90% of these participants view all the ads."
Through the Ad Elements video ad unit, Live Gamer -- which supports about "90 million users making transactions" -- can generate up to $1 per month on average for "viewing users" by combining commerce and advertising, Schneider said. The combination of Ad Elements' video ads from and GamerDNA's custom rich media and IAB-standard banner ads creates the business unit Live Gamer Media.
The market for virtual goods should reach $13 billion this year, up to $16 billion in 2012 and $20 billion in 2014, according to ThinkEquity, a research and investment banking firm.
Schneider calls the combination of ecommerce and advertising for the ad industry "unique," but describes offerings that include pieces from PlaySpan for ecommerce and WildTangent for social gaming ads.
Live Gamer's technology aggregates payment gateways for companies worldwide. It supports game publishers like Sony Online and Electronic Arts, along with more than 100 methods and virtual currency systems used in games similar to "Farmville." "Zynga's two top titles garner about 160 million active players," Schneider said. "They filed for an IPO and enjoy about 60% profit margins. Most companies who adopt these gaming services see similar results."
In social, you see a conversion rate of about 1% to 5% of monthly active paying users who pull out a credit card, use PayPal or another means of payment to purchase virtual items. These social gamers spend about $5 to $7 monthly. Core-gaming conversion rates reach between 10% and 15%. In the LiveGamer network, with more than 150 game titles, users spend about $30 monthly, and a small percentage spend hundreds, even thousands.
While Live Gamer focuses on gaming, Schneider sees applicability in other markets, such as daily deal coupons: watch an ad and get a coupon. For now, the company will stick with virtual goods, he said, as more advertisers and publishers continue to look for new audiences and engage at higher rates.