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Real Networks sees “try-before-you-buy” model in decline
The casual market is changing fast, and Real Networks’ recent actions suggest that the “freemium” model is rapidly replacing the “try-before-you-buy” model that has bedevilled the casual games sector for a decade.
Not only are consumers spending less, but so are advertisers. While impressions are up 11% and click rates up 13%, CPMs (cost per thousand advertising impressions) are down 25% from last year.
Real’s response is to ramp its game syndication business, where its games are hosted on other sites. Playfish and Zynga, two of the fastest growing games companies in the world right now, have a similar model, although they rely exclusively on social networks such as Facebook and MySpace. In contrast, Real Networks is going for any platform it can find: 650 sites, including those run by Comcast, Spil Games and Time Warner.
I believe that the “try-before-you-buy” model is in as much decline as the physical goods market. It’s a terrible way to market to people on the Internet. You spend vast amounts of time, money and effort to get your users to download your game and play it for an hour. Then you give them a split second to decide if they want to spend $19.99 to buy the game; if not, you tell them to go away. It’s like going on a date, having a nice evening, and just before you pick up the tab, saying “you are going to sleep with me, aren’t you?”
One chance. And you blew it.
Web businesses are moving from being “products” sold in a single hit to “services” which involve building a relationship with consumers. Building trust. The “freemium” model which lets you play for as long as you like without paying is quickly going to destroy the “try-before-you-buy” model.
Syndication is only a fillip for RealNetworks’ problems: it will enable them to put a lot more trials in front of consumers, but won’t change the fundamental economics and the declining unit prices.
Real needs to start moving to a freemium model, and fast.