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"Selling virtual goods means that a small enthusiastic user base can carry a game’s economics"

By on June 22, 2011

PocketGamer is carrying a post written by Ray Sharma, CEO of XMG Studio, a mobile developer based on Toronto, Canada.

He extols the virtual of in-app purchases for mobile games, saying:

“Here at XMG, approximately two-thirds of our revenue now comes from virtual goods, up from only 10 percent a year ago…The reason is simple – selling virtual goods means that a small enthusiastic user base can carry a game’s economics.”

Regular readers will know that I believe that the power of free is to enable you to reach the widest audience possible, and then keep hold of those people who love what you do, and will pay for it. Ray agrees:

“We can choose, for example, to try to sell a game broadly for a dollar. Alternately, we can offer the initial download for free, capture a million installs, from which 50,000 become enthusiastic users who love the game and will pay for virtual goods.
Based on our experience, one million free downloads and 50,000 engaged users can drive modest sales in the hundreds of thousands dollars.”

He even answers the question of why people will pay for virtual goods, using the words of his eight-year-old son.

“My Xbox light saber will never get old or broken, and I can’t lose it. It’s way better than getting the real thing!”

It’s a great validation of the virtual goods business model, and definitely worth going to PocketGamer to read it.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: