Part 3: In-game items are a $50 Billion market, why am I missing out?

How Developers Can Capitalize On This Market

*This is the 3rd post in a 3-part series. Click HERE to start at part 1.

Previously, we discussed how in-game items make-up a $50 Billion market, yet developers are failing to break into this market. We then looked at how unauthorized secondary “gray” markets have emerged to take advantage of gamer-to-gamer item sales, at the expense of the developers who created this content. In this post we’ll explore the solutions to these challenges.

It Starts with Technology

First, developers need tools to effectively create, manage and market their in-game items. These include core systems that allow for in-game inventory management, user authentication & management, and secure payment processing. These tools need to unify all of the places where items can be sold — i.e. both from primary sources (in-game) and secondary markets — to create a single, accurate record of each item. They need to be able to sync these items at the game engine and game service level to ensure a player’s inventory is always up-to-date. And of course, rule number #1 is these tools should never, ever slow down or impact gameplay.

In order for these tools to really bring value, they also need to be available in a variety of ways (from back-end API through to fully built applications). This allows the developer to integrate them in the way that best suits their game and maximizes their gamers’ experience. Similar to the last point in the paragraph above, these solutions need to enhance the gamer’s experience without ever adding friction or hindering adoption.

And Add Some Smart Thinking Around Gameplay and Monetization

Where, how and when in-game items are implemented requires careful thought. Developers who want to include monetization in their games, need to do so without alienating their core audience. This often requires a balance of making some items available for purchase and other items solely available through achievement. Developers need to understand their gamers and stay away from extreme pay-to-win or over-monetization scenarios. With the right combination of technology and smart thinking, developers can move quickly, test new monetization strategies, and accelerate the path toward finding the optimal balance of monetization and gameplay.

Once they’ve identified that balance, they’ll be able to focus energy and resources on implementing new collections, series, and DLC. This is not to understate the change in resources and mindset required to implement on-going in-game monetization (they are considerable). However, combining that change with the right technology allows developers to be agile and embrace this model the right way.

Sounds Great, but What Does This Get You?

While the benefits from these tools are numerous, they can be generally segmented into two important categories:

Higher & More Stable Revenue — there’s a great deal of discussion around successful game development and navigating the cashflow peaks & valleys of a typical launch. As more developers explore games-as-a-service and free-to-play models, in-game items will continue to grow as a core part of revenue strategy. They give the developer an opportunity to bring stability and longevity to their game and their cash flow. Ideally, they can turn the “peak & valley” scenario into a “peak & on-going steady stream of recurring revenue” scenario.

In addition, the ability to open secondary market trading creates a new revenue stream. With the right solution, secondary market trades can not only be safe for the gamer, but also allow the developer to set basic guidelines for how and when their items trade (e.g. an item can only trade after six months of sale in the primary market). This gives developers comfort to embrace the secondary market. Developers can now participate in the economics of these transactions, align them with their primary market sales, and create a royalty-like revenue stream that brings further stability to their business.

Deeper Gamer Engagement & Insights — One of the things that’s been so consistent in conversations with our developer partners is that they truly care about their players. Of course, they pursue (and really want) financial success, but that’s only part of the picture. At their core, developers want to launch games that are compelling and will inspire gamers.

In-game items offer an opportunity to keep a game fun and engaging. The introduction of each new skin or utility item — whether through purchase or in-game achievement — enhances the game experience. It keeps existing players coming back and brings new players into the title. In-game items should be seen not only as a way to monetize an existing audience, but also as a way to expand the game’s audience over the long-term.

Developers also need feedback. They need data. They want to understand what works and what doesn’t, so that they can make the current title — or the next one — even better. In-game items, with the right tools, bring a wealth of data. Imagine the insights that can be gleaned from understanding all of the interactions with each item. Large AAA publishers typically have this down to a science. For example, Bungie can tell you what style of weapon is most popular at any given point in time; they have the technology and teams to analyze this data on the most granular level. Imagine making these valuable insights available to mid-size and indie developers — they too would be able to create the specific content their players want.

What Should I Do About It?

Ultimately, when you try to answer the question: why are so many developers missing out on this $50 Billion opportunity, you realize there is no SINGLE answer. It comes down to having the right technology, embracing new models and ways of doing business, and having the willingness to see things through with conviction.

At C0NTACT Systems, we’re building the solutions to help developers navigate this exciting opportunity. (Yep, we’re inserting a little shameless self-promotion here). We provide developers with the tools they need to easily monetize existing in-game items, tap into secondary revenue, build their gamer audience, and focus their efforts on creating great content. Contact us at ContactSystems.io to learn more… or to tell us we’re crazy. Either way, we’re excited about the changes ahead for the gaming market and look forward to working with you to make it happen.

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Raleigh Harbour is CEO of Contact Systems in Manhattan Beach, CA.

Raleigh has +15 years of startup experience in gaming, SaaS software, online media, digital advertising, and ecommerce. In 2012, he advised a game streaming company called GxStream and has had a passion for the industry ever since. He’s currently playing Call of Duty Modern Warfare, Gears 5, Pokeworld, and taking turns on Agar.io and Angry Birds with his 6-year old son.

Learn more about Contact Systems at ContactSystems.io