Thursday, September 25, 2008

Virtual world payment trends 2008 - Post 2 (Interactive Toys)

This is the 2nd of PG's post's on 10 payment trends for virtual worlds and mmo's/online games so far in 2008. This time we look at payment trend #1, Interactive Toys. PG could write a treatise on this fascinating emerging payment topic that would be longer than War and Peace. But given most readers are too busy running their payment business or virtual world to read long posts this will be short and to the point. Besides, being a greedy ruthless capitalist PG keeps the detailed good stuff for the inner circle (otherwise known as paying clients ;)). PG is just too cynical and greedy give away free IP.

Anyway, interactive toys as default offline payment methods are a huge market opportunity for any virtual world publisher. This goes for those vw's with a recognizable avatar-brand (Penguin, HABBO, Neopets - of course!) as well as newbies. This is a simple and effective way to differentiate your new and emerging property from the competition. In many respects, an interactive toy, say a plush with a secret code that activates an online pet (ala Webkinz)

or a decorative item for your plush in the form of jewellery with a secret code to decorate and customize your real life plush and online pet (ala Webkinz)

is a truly great way to get eyeballs on your brand in the real world, trigger spontaneous purchases and user adoption and get parental approval for the purchase when it comes to kiddie or youth demos. Viewed as an offline payment method, interactive toys are great. There is no fraud, chargebacks in the form of returns are nominal and the user more closely connects with the avatar through the purchase and customization process. Perfect!

But distribution is key here. I mean, what is the point of having a portflio of innovative interactive toy merchandise connected to an online environment if no one can buy it? So how do you overcome old-fashioned distribution and logistics hurdles?

In Ganz Interactive's case with Webkinz, their original core business was merchandise, novelties, plush and gift-ware sold in "upscale" gift-stores normally found in malls. This unparalleled chintz/gift store distribution network is without equal in North America and was built over 50 years of hard work. Similarly, Ganz pioneered the practice of producing plush toys and giftware in low-cost China way back in the early 79's and figured out neat tricks like how to stuff as many cupie dolls in the back of a cargo plane as possible. So when Ganz launched Webkinz it already had a huge and sophisticated logistics supply and distribution chain for theose adorable plushies.

So how does an upstart virtual world publisher compete? Well, for one thing, finding good reliable Chinese and Taiwanese (they the same thing - right?;)) production of merchandise has never been easier. Anything from vinyl toys to surface to air missiles to rocket ships for space flights, you name it, the Chinese make it faster and cheaper. PG will not give all the contacts he has and names of best producers and suppliers but there is a broad selection of good ones to draw upon.

For very reasonable fees (think dirt cheap) these factories of glorious workers will produce a line of custom toys for your virtual world and ship them over to you in a couple weeks to you for distribution to your retail arm. And how do you develop a retail arm? Of course, it would be pretty impossible to get your line of interactive toys in WallMart or Target by cold calling before everyones kids or teens are playing your games online or know your brand.

That is why you need an agent or better yet, target the niche designer toy store network. And yes, PG has excellent resources on placing merchandise all across North America, EU and ASIA-Pac in boutique toy stores. Think the kind of places that sell designer toys ( or Tod McFarlane figures for example.

PG predicts it will be next to impossible for your virtual world, especially if it is a kiddie or teen virtual world, to achieve mainstream adoption and huge useage if you are not able to offer real life available interactive merchandise and products. For some hints and tips on where PG thinks the industry is headed look at UB Funkeys, Moshi Monsters Bella Sara
and CoolCamels by Napfolt KFT in Hungary ( See also

Think about designing a cool looking little avatar toy, hire a Chinese vinyl sweat-house to make 20,000 vinyl toys at 10 cents each, hang a secret code around their necks, get your devs to give them away to teens in a shopping malls as gifts for their girl/boy-friends and VOILA! Your in the interactive toy business baby! VC's will immediately start lining up to shower you with more money than you can spend.

And when it comes to internationlization and local launches in new and emerging markets, interactive toys as payment methods ARE THE SHIT. Full stop. PG firmly believes the interactive toy is the most innovative and effective payment method for new and emerging markets like the Muslim World and New Europe. Take the Muslim World. At the moment, with the exception of the wealthy Gulf States, online, mobile and prepaid buying and selling is a significant barrier to revenue generation and profitability. This payment obstacle can be hurdled in an innovative way with interactive toys.

PG thinks an interactive toy strategy is the smartest strategy to build a lasting long-term successful brand in new emerging markets. And achieve profitability, stable cash flow and parental "buy-in". So in each new market you target for your virtual world, focus on niche or high-up upscale retail distribution of interactive merchandise (following the Webkinz model) It has to be part of your payment plan if you want to innovate, differentiate, build sticky brand and make money (good old fashioned profits!) Just get it right the first time!
And if you cannot figure this out yourself, from this post and getting your devs to GOOGLE around for info, please drop PG a line. What can you lose? PG guarantees you will make more money - or your money back ;)

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