Economics of EverQuest II

Ted Castronova, Dmitri Williams, Cuihua Shen, Yun Huang, Brian Keegan, Robby Ratan and Li Xiong have published a paper dealing with the economy of EverQuest II based on analyses of huge amouts of log data. See Dmitri’s post at Terra Nova. Congrats! I know it must have been a huge amount of work.

I don’t quite agree with their concept of mapping and the idea of talking about MMOs as if they were somehow worlds apart from the real world, but the paper offers an extremely nice quantitative view into some of the internal workings of a MMORPG economy. HIIT’s Tuukka Lehtiniemi published similar work on macroeconomic indicators in EVE Online last year in his Master’s thesis (including some criticism of applying the concept of GDP to a virtual economy, which Castronova et al. should perhaps have a look at).

It’s been almost customary for social science oriented papers dealing with MMOs to at least mention the idea of using MMOs as a large-scale research platform to contribute something to social sciences. With this work on EQII and EVE, it looks like the tools are starting to be in place — perhaps that contribution is not too far off.

Castronova, E., Williams, D., Huang, Y., Shen, C., Keegan, B., Ratan, R. (2009). As real as real? Macroeconomic behavior in a large-scale virtual world. New Media & Society. 11(5) p. 685-707.

15% discount – Engage! Expo

Tomorrow (Aug 14th) is the last day to register with the earlybird registration fee and with a code VERNVIP you’ll get additional 15% off. (The code will work after the earlybird registration deadline as well).

The two-day Engage! Expo comprises four parallel events: Social Media Strategies, Virtual Goods Conference, Digital Law Conference, and 3D Training, Learning and Collaboration (3DTLC) Conference.

Our very own Vili Lehdonvirta will be speaking at the first session of the virtual goods track – ” Analyze This: The Virtual Goods Marketplace & State of The Industry”.

Overview of the schedules.

Game design as marketing: How game mechanics create demand for virtual goods

Hamari, J. & Lehdonvirta, V. (2010). Game design
as marketing: How game mechanics create demand for virtual goods.
International Journal of Business Science & Applied
Management
, 5(1), 14-29.

In short: In this paper, we consider the question of
what leads consumers to purchase virtual goods. Most previous studies
adopt the individual user as their unit of analysis, focusing on
motivations and decision processes that lead to virtual good
purchases. We adopted a complementary approach, focusing on how the
rules and mechanics developers build into MMOs encourage virtual good
purchases.

Download
paper here
and read more below.

The patterns identified in the paper, can be divided
into two categories. The first category consists of mechanics that in
marketing terms create segmentation of users and enable
differentiation of virtual goods; in other words, game mechanics that
divide service content into differentiated contexts along vertical
and horizontal lines, and in the process create a need for
corresponding virtual goods.

Design

In marketing terms

Towards

Aims to

Stratified content

Segmentation, differentiation

Rules, environment

Create segmentation, enable differentiation and
generate incentives for repeated purchases

Status restricted items

Differentiation, planned obsolescence

Items

Enforce segmentation and generate incentives for
repeated purchases

Increasingly challenging content

Segmentation, differentiation, planned
obsolescence

Rules, environment

Enforce segmentation and generate incentives for
repeated purchases

Multidimensional gameplay

Segmentation, differentiation

Gameplay

Create segmentation and enable differentiation and
create differentiated additional settings for virtual goods

Avatar types

Segmentation, differentiation

Avatar

Create segmentation and enable differentiation

 

The second category includes mechanics that are used
to create demand for virtual goods and encourage repeated purchases.
Inconvenient user interface elements and similar gameplay factors
have also been used as means to create need for complementary and
value-added services that augment the core product. Special occasions
related to real-world culture as well as to virtual world -specific
contexts have been used in the seasonal promotion of virtual goods.

Design

In marketing terms

Towards

Aims to

Item degradation

Planned obsolescence

Items, rules, environment

Create incentives for repeated purchases

Inconvenient gameplay elements

Core product -> Augmented product

User interface, gameplay

Create settings for additional virtual goods and
services

Currency as medium

Psychological pricing

Create incentives for (repeated) purchases

Inventory mechanics

Items, avatar

Create incentives for repeated purchases

Special occasions

Promotional

Environment, items

Benefit from cultural patterns that encourage
buying behaviour and create settings for additional virtual goods

Artificial scarcity

Exclusiveness

Items, environment, rules

Make selected virtual goods more desirable

Alterations to existing content

Environment, items, rules, gameplay

Create new settings for virtual goods to have
value

More detailed discussion in the paper.

Game design as marketing: How game mechanics
create demand for virtual goods

Abstract

Selling virtual goods for real money is an
increasingly popular revenue model for massively-multiplayer online
games (MMOs), social networking sites (SNSs) and other online
hangouts. In this paper, we argue that the marketing of virtual goods
currently falls short of what it could be. Game developers have long
created compelling game designs, but having to market virtual goods
to players is a relatively new situation to them. Professional
marketers, on the other hand, tend to overlook the internal design of
games and hangouts and focus on marketing the services as a whole. To
begin bridging the gap, we propose that the design patterns and game
mechanics commonly used in games and online hangouts should be viewed
as a set of marketing techniques designed to sell virtual goods.
Based on a review of a number of MMOs, we describe some of the most
common patterns and game mechanics and show how their effects can be
explained in terms of analogous techniques from marketing science.
The results provide a new perspective to game design with interesting
implications to developers. Moreover, they also suggest a radically
new perspective to marketers of ordinary goods and services: viewing
marketing as a form of game design.

Keywords: online
games, social networking, virtual world, virtual goods, business
model, sustainability, captology