The world of games is a compelling glimpse into new business models

games and vanity
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If you want to see where technology is going, so they say, watch pornography and games. Whoever ‘they’ are (and they obviously spend too much time watching both), they are probably right. Even if you believe that the recent data scandals will trigger a pendulum swing towards more real activities, friendships and common sense, both porn and gaming will continue to stretch new technologies.

While the application of virtual reality in the world of pornography (and the ability to replace one person’s face with another’s) doesn’t need a lot of explaining (and certainly not here), the world of games is actually more interesting (no, really).

A couple of press releases from research house Juniper Research initially baffled, then intrigued us. One announced that the Loot box and Skins market would be worth $50 billion by 2022. The next said that loot boxes and in-game spending would create an overall digital games market that will surpass $160 billion by 2022.

Which caught our attention.

Our first task was to find out what loot boxes and skins actually are. It turns out that a loot box is a box of items that are a random selection of desirable things – including better and bigger weapons – that can be purchased, sometimes won, ‘in-game’. Skins are vanity products that make you look cooler and cleverer and appear once a loot box is bought and opened. [See here: Fortnite]

The point is that the market is big and possibly a model for what might be taking shape in the wider digital world. It is a microcosm of providing compelling in-app (or game) purchases. It proves that vanity still sells (people will buy what they want to buy and do what they want to do rather than what they need to do).

It also proves that regulation is definitely needed. Although China is among the biggest markets for loot boxes and skins, the games are (obviously inadvertently … not) targeted at the younger generation. Eleven percent of 11-16 year olds in the UK have used skins for gambling purposes.

Worryingly, ‘money’ earned or won within the game can be turned into tradeable or usable currency online, and quite commonly traded into real money as well.

Setting aside the regulation side of the equation, and under-age gambling needs to be looked at carefully, it is worth looking at the gaming market as a source of ideas for monetizing what used to be called the internet. In-app purchases, rewards, competitions and advertising models in return for free access have all been tried to a certain extent, but the way that gaming and gambling publishers execute their business model is slick, interesting – and definitely worth a look.

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