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.

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Are Social Media Games Reaching Market Saturation?

020909121934gameBig_farmville Social media is a fickle industry, and long-term success requires near-constant innovation and commitment. Yet social media games from titans like Zynga are drawing in millions of users while remaining fundamentally unchanged.

Could social gaming be in for its own version of the dot com bubble of the 2000's? Pixels and Policy investigates the risk of saturation in the growing social gaming market.

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Zynga’s Surging Revenue Shows Online Gaming’s Increasing Clout

6735_110500212090_683847090_2715127_968184_n Recent negative press about FarmVille developer Zynga has done little to rock the financial prospects of the "social gaming" giant, recent reporting by CNN and CNET reveals.

In fact, Zynga is poised to outdo the previous quarter's impressive performance before posting even more impressive financial figures amid a global recession and market turmoil.

Pixels and Policy investigates why Zynga has weathered the publicity storm, and why gaming companies are thriving in one of the largest economic contractions in decades.

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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.

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Can Virtual Worlds Promote Social Activism?

Haiti If you're one of FarmVille's 60 million active players, you've probably seen the option to invest your farm bucks into some truly special sprouts.

Zynga, the owner of addictive Facebook games like FarmVille and Mafia Wars, launched the "Sweet Seeds for Haiti" with the goal of lifting hundreds of impoverished Haitian families from destitution. It may just be working.

By channeling the power of its hundreds of millions of active players across multiple browser-based games, Zynga hopes to be the first major success story in the field of "virtual awareness." Pixels and Policy investigates.

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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.