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How Online Gaming Companies Are Trying To Make Money From Kids

Joseph Tartakoff
May 13, 2009

One big challenge for online game companies is how to make money from children who play lots of games online but don't have any cash. At the LOGIN Conference in Seattle, panelists talked about some of the strategies that online gaming companies are adopting. Warning: Easily outraged parents should not read on.

Mobile payments: While kids might not have credit cards, they are likely to have cell phones, often paid for by their parents. So, one option is to introduce a payment method that lets gamers pay for virtual goods simply by entering cell-phone numbers. David Marcus (pictured, right), the founder of mobile payment company Zong, said it's an attractive option not only to get dollars from kids but from some adults too. "Let's imagine you're in a casual game where you can buy a virtual gift. You want to buy a two dollar (item). With a typical credit-card form, half way through you're like, what are you doing?" he said. People are about 10 times more likely to complete a purchase if they only have to enter their phone numbers, he said.

Pre-paid cards: Rob Goldberg of GMG Entertainment talked about offering pre-paid cards, which parents can buy for their children, at retail outlets. Goldberg said some of his clients create documents that kids can then take to their parents so that parents know exactly what their kids want.

Surveys: It might not be glamorous, but those "Fill out this survey, get a free iPod" offers do work. Instead of iPods, gaming companies can offer virtual goods. Adam Caplan of Super Rewards said his company offers all sorts of sign-ups?from a subscription to The New York Times to acne cream. When people sign up, the gaming company gets a cut.

The panelists all acknowledged their solutions are far from perfect. Fraud, for instance, can be a problem. One particular challenge, they said, was "friendly fraud"?i.e. when parents call to say they didn't authorize a transaction on their credit card. But for online gaming companies who can't rely solely on ads to make money, it's apparently worth the risk.





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