Entertainment & tourism

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Following our previous post on wantz.it and tweetag, two other social applications that presented during Pitch Arena were Taatu and Virtua Gym. For these two ventures we also briefly described their business model. We didn’t go in depth, but mapping out the four social applications gaves us the possibility to quickly compare them with each other. Taatu is already active for several years and relies on a more complex business model than Virtua Gym.

Taatu

Taatu relies on two big revenue loops in their business system. First of all they offer a 3D chat experience to their user base, an active crowd of youngsters. The attention of this group is sold to advertisers who can create branded content and events inside the 3D world of Taatu. Another stream of revenue comes from many small micro-payments inside their virtual world. Users can buy virtual items that will extend their community experience. Also, the users of taatu can create goods that others can buy, which leads to a virtual economy. Different to other virtual economies, the virtual currency can’t be exchanged to dollars. Money can therefore only be transferred from the users to Taatu company.

Virtua Gym

During their 8 minute pitch shown below, the two brothers behind Virtua Gym describe the different business models that they are using. Since they are still in a very early stage, it difficult to determine which part of their business concept will become their most important revenue stream. Once they have built up their service towards gym users, they will have an interesting user base to sell to niche advertisers.

This leads to a typical free advertising based business model where the basic service is offered for free in exchange for advertising. Many online services try to rely on this business concept but only a few of them manage to become sustainable. A large user base, even in a niche topic is vital to attract large advertisers. Therefor Virtua Gym is working to add an experience on top of their service where users can have an off-line but real-time sport competition against other people.

Entertainment & tourism

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Traditionally game publishers like Electronic Arts, Nintendo, and Ubisoft, sell their games for a fixed price including profit. This is known as the basic Product Sales business model or Experience Sales business model. From this basic transaction, a lot of companies look for new value propositions and revenue streams to add. In-Game Advertising is a very strong example of a revenue stream that has been (increasingly) added over the last years. Think of virtual billboards, branded drinks or stores, or a branded Soccer League name – all within the gaming environment.

How to apply the in-game advertising business model?

From the initial transaction on the top (experience for money), a new flow is added with attention going from the gamers to the advertiser, compensated by a cash flow from advertiser to game publisher. Attention is the new currency! This is a straightforward example of an advertising model in which you sell the attention of your audience to an advertiser. Important to note is that the advertising is integrated into the user’s gaming experience, which makes it less offensive and more effective compared to TV commercials for example.

For the game publishers, in-game advertising offers an important new revenue stream that covers for part of the game development cost (which is expected to grow to $20M per title for a 7th generation console game). Pricing can vary from up-front flat fees, conditioned to sales volumes, to cost per unit settings. Industry reports suggest that in-game advertisement can increase profits by an extra $1 to $2 per game unit sold, which is an important increase over the current $5 to $6 profit per unit. The total income from in-game advertising is expected to top $2 billion in 2012. In-game advertising can also completely replace the purchase price to an extent where the game becomes free for the user (more on that later).

Which audience do YOU reach at this moment? Who would be interested in their attention? Could you sell the audience’s attention to them (integrated in the current experience)?