Entertainment & tourism

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For years game publishers could rely on the sales of relative expansive game discs to gain their profits. But then together with internet the peer-to-peer networks came up which made it easier for consumers to find cheap alternative solutions to play their most favorite games. After years of fighting against this change in consumers behavior EA now tries to find a new business concept where they could actually make use of this new network possibilities. Buying a disc (or downloading the game) is only a one-time transaction. Once games are connected to the EA server network then extra recurrent micro-transactions are possible. Extra levels, game add-ons or even third party sales could take place inside the game in order to expand the game experience. Possibly this second transaction could become so large that in the end the first transaction would become insignificant. In that case pirated versions of game are just a part of a demo program of a game publisher.

Once you understand that revenue could come from these kind of transactions then you know why Apple for instance doesn’t force old iPhone user to buy new iPhones in order to make use their new software updates. Apple will earn the biggest amount of money with the sales inside the different apps. So when more users have access to the iTunes iPhone store, the more revenue can come in. Then you also know why Apple doesn’t focus on a broad range of iPhones. Nokia on the other hand does and by doing this they still are trying to make their money on the margins of actual cell phone sales like EA did with the actual sales of game discs.

Banking & professional services

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As previously described on In-Game Selling, companies are moving from advertisement based revenue models to in-app commerce or in-product selling. Timebridge.com is an excellent example of the same principle. Timebridge offers a scheduling service enabling people to collaboratively determine when to meet, also on mobile. Their actual revenue model is the resale of online and phone meeting services. This is not a freemium model, as Timebridge does not sell a premium of its own product. It is not an advertising business model either, since Timebridge is not earning on selling its users’ attention to advertisers. Timebridge’s business model consists of offering its users a free service that serves as broker platform to resell 3th party (meeting) services with commission.

A lot of free products and services go with a freemium or advertising strategy, but advertising is not sustainable for a number of reasons. In-app commerce, or broader, in-product selling is there to challenge advertising. Micro-payments will be a crucial facilitator in getting consumers to actually paying for content again, in times where people are used to free and ad-supported. Like Timebridge, in-game selling, blogs with jobs/widgets/affiliate programs… can your product or service offer a channel to sell and buy things? Sales people earn more than advertisers, don’t they?

Internet & media

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Apple is the only company that could get an applaus for the implementation of trivial product features like copy/paste. During the widely discussed iPhone 3.0 launch this evening they had of course more and better product features to announce: Peer-to-peer connectivity, improved accessory support, an in-app store,…

But Apple didn’t launch just product features, they rolled out new revenue concepts. Cut and paste took a while to implement simply because there is no money in it. But there is a lot of money in purchasing add-ons inside games and paid content subscriptions. Selling virtual weapons and levels is only one thing. This was just to illustrate the potential.

What Apple really did was launching a platform to sell any kind of good in any kind of application available to any user anywhere. This will transform iTunes into a wholesaler instead of the digital (music) store as we know it today. And once other parties develop the products and services on which Apple will take big margins thanks to the in-app purchases, they will be in the in-game selling model we’ve just illustrated.

I then I didn’t even mention the potential of the micro-payment integration offered by the new transactions app. But it must be clear that Apple has a clear view on making money.

Entertainment & tourism

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While In-Game Advertising is growing to $2 billion in 2012, In-Game Selling has all the ingredients to become the next big business model innovation in the gaming industry. Our analysis of the business model behind in-game advertising discussed how game publishers sell the ‘attention’ of their audience to advertisers. The next step now is to go from ‘attention’ to ‘buying’, or from in-game advertising to in-game selling:

• In-Game Advertising: gamers will see in-game references to a Pizza fast food chain, but still need to pick up the phone or surf to the website in order to order pizza delivery.
• In-Game Selling: there is a Pizza delivery icon, shortcut or location in the game environment, where you can order a pizza just by a click of the button. Example: While playing EverQuest II just type /pizza and a web browser will launch the online ordering section of pizzahut.com. Fill in your info and just kick back until fresh pizza is delivered straight to your door. Domino’s Pizza announced similar ambitions.

In-Game Selling business model

Where previously the game was just a standard product or experience, it is upgraded with a sales channel for other products and services (f.e. pizza delivery). The game actually offers a platform to bring together buyer and sellers, and brings benefits to both, which we know as a brokerage service. Similar to other brokers, game publishers can charge a listing fee to the seller, and/or a commission per transaction. The generic principle here is very valuable: could your existing product or service offer a channel to facilitate specific buy/sell transactions? Which goods or services are your users interested in? Which sellers are interested in your users?

In-Game Selling is a specific example. Any suggestions for a good generic name for this new business model? In-Product Selling, Free+Reseller = Freeseller, In-App Commerce…?