The Risky Legal Waters of RMT in Social Media Games: A Zynga Case Study

Pixels and Policy previously reported on the potential risks of building an online gaming platform around the concept of real money transactions, or RMT's. Customers have proven willing to shell out large sums of money for virtual goods in the form of microtransactions, the $1 – $5 purchases common to games on Facebook and MySpace. So what's the problem?

There's an emerging legal question regarding RMT, and it centers on the growing partnership between online game developers and marketing agencies. What happens when a developer offers "free credits" for filling out "trial" offers? As social gaming titan Zynga found out, offering another venue for RMT is proving far more complicated than planned.

Continue reading The Risky Legal Waters of RMT in Social Media Games: A Zynga Case Study

Examining the Economics of Augmented Reality

Arthur2 A reader submitted an interesting article from the tech blog Vision Mobile. In the article, Andreas Constantinou discusses the unique economies created by augmented reality and virtual worlds with an eye towards the future.

But is Constantinou overly optimistic about the transformative power of augmented reality?

Pixels and Policy takes a look at how augmented reality and virtual economics can grow alongside the real-world economy.

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Zynga’s Virtual Currency System Comes Under Heavy Fire

Farmville Thanks to some extensive reporting by a few gaming-industry websites, prominent social media game companies like Zynga have a battle on their hands.

The big issue is whether Zynga – which recently announced a huge profit – is basing most of its impressive financial growth on scams.

Investigative blog Techdirt and Mike Arrington of TechCrunch took Zynga to task for drawing a huge revenue stream from what they argued are questionable contracts, intensive marketing to children, and developer-created scarcity.

Pixels and Policy takes a look at the allegations and finds out there's quite a bit to be said for the quality of games-industry journalism.

Continue reading Zynga’s Virtual Currency System Comes Under Heavy Fire

All In The Family: Zynga Sues Playdom for ‘Mafia Wars’ Rip-Off

Just a day after our coverage of how social networking games like Zynga's Mafia Wars are raking in tens of millions of dollars in revenue every year, news broke that Zynga was headed to court. The unlucky defendant? Playdom, author of the eerily familiar-looking Mobsters. Looks like there's some *ahem* bad blood between the families.

From VentureBeat

Zynga filed another suit claiming
that Playdom had hired away four Zynga employees who had helped the
company steal Zynga’s secrets, including a crucial document called the
Zynga Playbook

The Zynga Playbook is literally the recipe book that contains Zynga’s
“secret sauce,” and its contents would be invaluable to a competitor
like Playdom.

The Zynga Playbook constitutes a collection in one
document of many of the most material non-public commercially valuable
concepts, techniques, know-how and best practices for developing
successful and distinctive social games.

So Zynga argues Playdom allegedly pilfered their "secret sauce" by hiring away employees and pumping them for info. As we mentioned yesterday, Zynga has a lot to fight for – its playbook brought in $50 million in revenue at last count, and a recent expansion of their Texas Hold'em app to the iPhone costs anywhere from nothing (for the lite version) to $34.99.

That said, 'Mobsters' does play like 'Mafia Wars,' but I struggle to find a social networking game that doesn't play similarly to every other social networking game. The real trouble here is the litigation. If big developers like Zynga can sue for a game that resembles its own in theme or mechanics, despite the fact that small producers have only limited mechanics to work with, this could create a chilling effect on small game production.

We've repeatedly seen through iPhone Apps and do-it-yourself Facebook coding that small developers can create products that resonate. The appetite for both graphics and non-graphical virtual worlds is growing, especially for worlds like Mafia Wars that can be played without demanding graphics capabilities. These are the virtual worlds for casual gamers, and casual gaming is a lucrative market, willing to drop hundreds through microtransactions and customization features.

It would be a disservice to the emerging social networking game genre if litigious power players scared small developers away from the platform. There's definitely growth potential there.

The Guardian: Virtual Commerce Will Change the World

If today’s
tech article
by England’s The
Guardian is any indication, a veritable virtual world earthquake is
rumbling across the pond. Correspondent Victor Keegan gets the impression all
of this virtual commerce may be more permanent than the Furby:

Unlike the industrial revolution, the virtual one is led by
the East, not the West. Market researcher Plus Eight Star puts the virtual
goods market in Asia at more than $5bn, or 25 times higher than recent estimates for the US, though
they may be a serious underestimate.

Keegan pulls from data harvested by virtual researcher par excellence Edward Castronova of
Indiana University, who took on the heart-pounding feat of reading hundreds
of pages of Everquest 2 player transactions
in an effort to map virtual economic
trends.

It’s refreshing to see the growing virtual-to-real currency
conversion market taken seriously. What’s great about Keegan’s Guardian article is that it brings in an
area of virtual commerce that is exploding while remaining under the radar of
the graphical worlds scholars: Facebook and social networking games.

For those unfamiliar, Facebook is rife with free-to-play
games like Mafia Wars, Farmville (of
which your author is a recent addict), and Roller Coaster Kingdom. While these
games are entirely free to play, any serious player will find themselves
quickly limited unless they opt to invest real money in purchasing in-game
upgrades and currency. Mafia wars pic

Zynga, developer of
Mafia Wars, Farmville, and nearly every other big-name social networking game
on Facebook, draws a pretty penny from these “microtransactions” of anywhere
from one to five dollars, all the way to $40. 

These games aren’t a joke, and Zynga was right to bank on
the spendthrift tendencies of teens driven by immediate gratification. Zynga
recently closed nearly $50 million in revenue
on the backs of these easy-to-produce
browser games, and hauled in nearly 30 million active players. That’s a rough
average of a little over a dollar spent per player.

So what is the future of these virtual transactions? The Guardian shows no lack of hope:

First, the technologies behind virtual spaces are powering
ahead. It is even possible, indeed likely, that products will be constructed in
a virtual world and then "printed" out in the real world as a
tangible product.

While we may not be printing things out on three-dimensional
printers any time soon, Keegan is right to point out that technology shows no
signs of slowing. As the iPhone has shown, engaging games can be produced with
little start-up capital, increasing competition and raising quality. People are
willing to pay for the experience.

The economic world is changing, a dollar at a time.