On Thursday, seemingly on the heels of the gold-farming information I wrote about a week ago, the World Bank Group's infoDev program released a scholarly research paper entitled Knowledge Map of the Virtual Economy. Funded by the UK's Department for International Development, it looks into a more inclusive topic, the entire global virtual economy. Since it runs 75 pages, it's a fairly substantial read and - as you might expect - rather dry. Nonetheless, I was interested enough to wade through it.
There's too much even to attempt a full summary. That said, one part tells us that according to figures from a 2010 study commissioned by KOCCA, an agency of the Korean Government, the entire online game market had a value of approximately $12.6 billion in 2009. This was made up of China $4 billion, Korea $2.9 billion, Europe $2 billion, North America $1.8 billion, Japan $900 million and other countries $1 billion. Last year's figures were still forecasts rather than final estimates: China $5 billion, Korea $3.7 billion, Europe $2.5 billion, North America $2.2 billion, Japan $900 million and other countries $1.1 billion for a total of $15.4 billion.
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The authors of the paper then go on to address the size of the third-party sector, where gold-farming is the largest component, followed by power-levelling plus pre-made characters, which are grouped together. While stating clearly that there's room for uncertainty, they nonetheless estimate that in 2009, its value was around $3 billion. This is clearly a pretty significant chunk of the entire market - nearly a quarter.
Next, they present estimates for regional participation ratios, meaning the percentage of online gamers who buy secondary market gaming services. Here, those who think the figures skew distinctly lower in the major western markets are in for a surprise. They actually fall in a rather narrow range. At the low end, North America, Europe and Japan are grouped together at 22 percent. China is highest, although not by very much, at 24.9 percent, while Korea and the rest of the world slide in between at 24.5 and 24 percent respectively.
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Naturally, this leads to the question of how much users spend. In this area, the authors derive their estimates from multiple sources. For Korea, Europe, North America and Japan, using some KOCCA survey data, they peg the average revenue per paying user around $369 per year. If we assume 22.5 percent participation across all users in those markets, this works out to over $83 each. For China and other developing countries, they use information from the China Internet Network Information Center to arrive at an ARPU of $87.50, or just under $21.80 for all users.
Due to the sheer magnitude of its online gamer population, China is still the largest RMT market despite its low ARPU, accounting for half of the $3 billion mentioned above. Korea represents around 20 percent, slightly more than Europe, North America and Japan combined, leaving the rest of the world just over 10 percent.
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The paper also serves up some interesting although questionable information on the companies that sell third-party gold and characters to consumers. It says typical retailers may be Chinese operations located in a regional capital. And they can be quite sizable. According to "an informant", eight in that country bring in over $10 million per year, while another 50 to 60 top the $1 million mark. What's more, they may source their goods from thousands of gaming studios.
In addition, while it's not hard data, we see that an un-named "industry expert" feels half the virtual currency sold by retailers is generated by bot farms, compared to 30 percent by human farmers. This isn't a surprise; my gut feel, while unsupported by even anecdotal data, is that the disparity may actually be even greater. The remaining 20 percent isn't produced; it comes from hackers who steal it.
And what does all this mean? Is it just information for its own sake? What does it tell us about things that are happening in the MMOG space? Does it point to or suggest possible changes and shifts? For me, what stands out above all else is the huge value of the third-party market, not just globally, but in North America and Europe where, based on some of the numbers above, we're apparently talking about something in the vicinity of $1 billion last year.
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It will probably be even more in 2011; 20 percent feels like a reasonable guesstimate. Regardless of what the growth rate ends up being, I wonder how much longer game publishers as a group will be able to resist trying to get a much more substantial piece of the proverbial pie, if not all of it. Clearly, any moves in this direction will run into flak from the current user base. However, how realistic is it to think they won't even try to push the envelope?
As noted, the paper addresses more than I have here. Anyone interested enough to read more can download it as a PDF document here.
