sse virtual currencies_us-europe_group8b
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A STEEP-analysis of virtual currencies, and a competitor analysis of Facebook Credits.TRANSCRIPT
Virtual Worlds and Gaming IndustriesSTEEP analysis of Virtual Currencies in US/Europe and
Competitive Analysis of Facebook Credits
Instructor:Group 8b:
Robin TeiglandCharles Florman
Johanna SjöblomCourse 2404
Karin RimbäckMedia Management
Carl Waldenor
Group 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Executive Summary
This is a report investigating the industry of online platforms in the US and Europe that have adopted their own virtual currency. In order to analyze the industry on a broad level an analysis has been made of the Social, Technological, Economical, Environmental and Political (STEEP) trends affecting the industry. On a deeper level, a competitive analysis of the new currency from Facebook was conducted. From the STEEP-analysis we found some trends that in the future will come to affect the online platforms providing virtual currencies, such as growing importance of smart phones and mobile devices, new and better technology together with low COC which enables growth and expansion on the market. However, this growth will also imply larger digital footprint and more legislative and political pressure on the virtual economies. From the competitive analysis, we found that the virtual currency of Second Life (Linden dollars) does not imply a very large threat to the Facebook Credits as of today. What actors that should be kept under close observation are rather Apple and MySpace.
Group 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
1. Background information of Virtual Currencies2. STEEP – Future outlook of virtual currencies
i. Socialii. Technologicaliii. Economicaliv. Environmentalv. Politicalvi. STEEP Conclusion
3. Facebook Credits – A new economy?4. Competitive analysis of Facebook Credits5. Conclusion of Facebook Credits6. Bibliography7. Appendix
Group 8b Course 2304
AgendaIntro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
• A virtual currency custom made for a virtual world
• Virtual money can have real value• Needs sources and sinks• Can be compared to a
contemporary economy• Can be used to buy, trade and
repair
Group 8b Course 2304
Background on Virtual CurrenciesIntro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
• In the US it is estimated that 17 % more people will play at least one game on social networks (from 2010 to 2011)
• The social games industry has a very large and diversified demographic who distribute their time among major titles and many smaller games.
• Games on mobile devices will continue with a massive growth• The newest games will create unique social experiences by
tapping into users' real-life interests and hobbies.
Group 8b Course 2304
Future social trends for virtual currencies
A diverse range of people tend to be interested in online gaming, and preferably games associated with real life experiences that could be played on mobile phones.
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
• Software development is moving forward– New graphic engines like Virtway World– Adobe AIR
• Hardware development is moving forward (Moores law)– Telephones– Tablets
• Always connected– V.v. Facebook has gone mobile with 200 operators in 60 countries
Group 8b Course 2304
Future technological trends for virtual currencies
New and better technology together with innovative software and mobile internet will create huge opportunities for exciting and new economies in virtual worlds
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
• Business cycle (US/EU) Recovering global economies
• Inflation & interest rates - Inflation expected to remain low worldwide until 2012 - Interests rates expected to stay low in the present future
• Industry growth VW industry revenue expected to reach $3.9 billion in 2011, $6.0 billion in 2012• Purchasing power Industry strategy of micropayments includes more consumers
• Industry structure Market actors closing down or consolidating
Group 8b Course 2304
Future economic trends for virtual currencies
With low inflation and interest rates, exchangeable virtual currencies can keep stable. COC low, enabling growth and expansions. Together with micropayment strategies, this leads to high growth rates. However, industrial structure is changing.
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
• ”Data centers are among the most energy-intensive facilities imaginable”
• Facebook, Apple, Google etc are under hard pressure from Greenpeace to use renewable energy sources
• Example: Facebook’s new plant in Oregon is 300’ sq ft big and could supply about 30’ households with electricity
• …or is virtual purchases actually good for the environment?
Group 8b Course 2304
Future environmental trends for virtual currencies
As cloud computing increase, so will the environmental pressure on the actors providing it as well.
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
3 pressing issues in 2011 and the near future;1. Larger focus on Cyber thefts and online fraud (e.g. in 2011,
400 million poker chips stolen in Zynga, $30 M Carbon Credits in ETS) Increased pressure from regulatory framework in EU and US
2. Expectations of only the U.S market for virtual goods to reach $2.1 Bn in 2011 Taxation debate intensifies in U.S Congress and IRS Local sales tax issues (e.g. in 2011: Resolution interactive, Stardoll)
3. Environmental organisations (e.g. Greenpeace) put pressure in politics The more similar to a real economy the more legislative and political pressure
What will be the consequences? Legislative and political pressure on virtual economies intensifies We will increasingly see lawsuits, fines, regulatory order, civil and criminal penalties on the European and American market in the next years.
Group 8b Course 2304
Future political trends for virtual currenciesIntro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Group 8b Course 2304
STEEP ConclusionsIntro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Present Comment Future
S Big interest in social and real-life games Diverse target group Mobile phones/pads
S
T New and better technology together with innovative software and mobile internet will create huge opportunities for exciting and new economies in virtual worlds
T
EWith low inflation and interest rates, exchangeable virtual currencies can keep stable. COC low, enabling growth and expansions. Together with micropayment strategies, this leads to high growth rates. However, industrial structure is changing. E
E Ecologically harmful– pressure on companies and politicians EP Legislative and political pressure on virtual economies intensifies
lawsuits, fines, regulatory order, civil and criminal penalties on the European and American market P
• Facebook Credits is a virtual currency you can use to buy virtual goods in over 100 games and applications on the Facebook platform
• You purchase them with credit card, PayPal, mobile phone or in physical stores (such as Walmart)
• The intention is to make it easy for people to purchase games and virtual goods within them
• However, on every purchase Facebook takes 30 % of the game developers’ revenue
• Some argue that Facebook Credits will develop into F-commerce while other think it will stay to only games
• In a study with almost 3000 respondents; Will you be buying and spending Facebook Credits?
– 17 % Yes, absolutely – 58 % No, absolutely not– 25 % I have to learn more
Group 8b Course 2304
Facebook Credits – a new economy?Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Group 8b Course 2304
ObjectivesCurrent goal? Turn focus from businesses to consumersGoal Performance? World GDP increased in 2010, but neg. trendGoals likely to change? No, but customer retention likely to become focusStrategyInnovation, performance and user experience in focusSimplify payment mechanism internationallyWeb initiatives: Linden Dollar marketplaces, Avatar social network
Resources & capabilitiesStrengths: Strong brand, established platform, exchangeable
to USD, establish exchange institutionWeaknesses: Too few users, GDP declining
World GDP Break-down (USD millions)
Competitor Analysis: Linden Lab
PredictionsIn order to create a bigger user base, LL’s consumer focus will probably have to be sustained in the coming years. No changes of goals are hence expected.
Response to FB Credits is unclear, although rumors of enabling use outside of SL.
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Group 8b Course 2304
Competitor Analysis: Other networking platforms
Number of users
Globalreach?
Paidstuff?
Facebooklogin?
+500m YES YES YES
Qsone 200m NO YES NO
Twitter 175m YES NO NO
Habbo 162m YES YES YES
MySpace +130m YES YES NO
WindowsLive
Spaces120m YES NO NO
Bebo 117m YES YES YES
Vkontakte
111m KIND OF YES NO
Orkut 100m NO YES NO
Competition on need level
Possible consumer needs- Extensive network- Casual games- Music- Gifting
Plausible competitors
MySpace.com- Have been planning own currency for years
- Casual gaming, music and gifting- 5th largest social network globally
Apple- Mobile platforms- Casual gaming and utilities- Organized payment system; “virtual wallet”
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Group 8b Course 2304
Conclusions of Facebook Credits
• July, 1, 2011, the deadline • The prediction of a stable economic environment
+ advantageous launch of the credits + initial survival of the connected game developers.
• 600+ mn members Facebook highly affected of the increase in environmental and political pressure on the industry in general.
• Competition from Second Life decreases (decline in GDP, small member base)• In the future, Facebook is recommended to watch out for Apple and MySpace.
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
+ + = Outlook
What if?Predictions of 1 Billion members in Oct, 2011 + Facebook Credits
= A New Economy?
Slide 4http://www.scientificamerican.com/article.cfm?id=virtual-world-economists-on-real-economies (March 2010)http://www.slaw.ca/2010/11/16/virtual-money/ (Nov 2010)Slide 5http://www.mnilive.com/2011/01/us-social-gaming-market-to-surpass-1-billion-in-2011/ (Jan 2011)http://www.ayeahgames.com/blog/bid/54963/Outlook-for-the-2011-Game-Industry-Good (Jan 2011)http://marketinghub.bayt.com/news/social-gaming-trends-2011 (Jan 2011)http://mashable.com/2010/12/26/gaming-industry-predictions-2010/ (Dec 2010)Slide 6http://onaired.com/2010/11/virtway-world-3d-virtual-worlds-to-jump-from-pc-to-mobile/ (Nov 2010)http://www.thestarphoenix.com/business/Here+keys+find+right+social+dashboard/4190185/story.html (Feb 2011)http://arstechnica.com/hardware/news/2008/09/moore.ars (Sep 2008)http://www.facebook.com/press/info.php?statistics (2010)Slide 7http://www.pdfchaser.com/World-Economic-Situation-and-Prospects-2011.html (Dec 2010)http://www.thisismoney.co.uk/news/article.html?in_article_id=521258&in_page_id=2 (Jan 2011)http://www.engagedigital.com/2011/02/02/kzero-39b-global-revenue-from-virtual-worlds-in-2011/ (Feb 2011)http://www.huffingtonpost.com/2011/02/03/news-corp-myspace-sale_n_817977.html (Feb 2011)Slide 8http://technology.timesonline.co.uk/tol/news/tech_and_web/article5489134.ece (Jan 2009)http://www.datacenterknowledge.com/archives/2010/11/11/facebook-plans-north-carolina-data-center/ (Nov 2010)http://www.greenm3.com/2010/03/greenpeace-targets-cloud-data-centers-environmental-impact-and-use-of-coal-power.html (Mar 2010)http://www.techrepublic.com/blog/datacenter/big-data-centers-big-environmental-footprints/112 (April 2007)http://climateprogress.org/2010/06/21/internet-energy-use-myth/ (June 2010)Slide 9http://bits.blogs.nytimes.com/2010/09/28/virtual-goods-expected-to-grow-by-40-percent-next-year-studysayshttp://www.gamestudies.org/0302/castronova/http://www.networkworld.com/newsletters/2010/051710sec1.html (May 2010)http://www.enisa.europa.eu/media/press-releases/new-guide-on-cyber-security-incident-management-to-support-the-fight-against-cyber-attacks (February 2011)http://themonetaryfuture.blogspot.com/2010/03/currency-design-for-social-networks.html (March 2010)http://www.silobreaker.se/momsregler-kan-tvinga-framgngssaga-att-lmna-sverige-5_2264328670300602415 (February 2011)http://www.jvwresearch.org/page/volume_2_number_4_virtual_economies_virtual_goods_and_service_delivery_in_virtual_worlds (February 2010) www.virtualworldlaw.com/Virtual%20Currency.pdf (2010)Slide 11www.facebook.com (Feb 2011)http://mashable.com/2009/04/04/facebook-credits/ (April 2009)Slide 12http://www.readwriteweb.com/archives/second_life_economy_at_record_high.php (Apr 2010)http://www.engagedigital.com/2010/09/10/second-life-q2-economy-nearly-unchanged/ (Sep 2010)http://blogs.computerworld.com/16303/second_life_layoffs (Jun 2010)http://web.nmc.org/files/2010-slpro/tom-hale-keynote.pdf (Feb 2010)http://www.youtube.com/watch?v=bE1PMdcmfBQ (Apr 2009)Slide 14http://bitshare.tumblr.com/post/2061881391/facebook-will-reach-1-billion-members-in-2011 (December 2010)
Group 8b Course 2304
BibliographyIntro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
• STEEP - Environmental trend – Renewable electricity (p. 17-18)• STEEP - Political trend – Cyber theft examples (p.19-20) • Facebook Credits – Usage, pictures, examples and quotes (p. 21-27)• Interview with Christian Björkman - Chief Marketing Officer, Mindark (p.
28-30)
Group 8b Course 2304
AppendixIntro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Environment - Renewable ElectricityGroup 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Environment – Renewable Electricity
” Unless cloud data centres are strategically placed to utilise or be co-developed with renewable sources of electricity, the data centre operators are stuck with the same problem everybody has, and having to accept the mix of clean and dirty energy sources that the electric utilities rely upon”
Group 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Political – Cyber theft 1Group 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
2011/01/21Political – Cyber theft 2
Group 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Facebook usage• Facebook users from the U.S.
spend 33 % of their online time on Facebook
• Asians are the most heavy Facebook users devoting 40 % of their online time there (see graph)
Group 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Facebook CreditsGroup 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Facebook CreditsGroup 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Facebook CreditsGroup 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Facebook Credits• Facebook Open Source collect customer data even offline the
Facebook site• By tailoring customer offerings and facilitating the purchase process,
Facebook will help businesses increase both transactions andrevenues
” With virtual gifts and games expected to top $6 billion by 2013, the move to secure online is a smart bet on Facebook’s part, especially because not everyone uses PayPal or credit cards online. With the real-world purchased cards (e.g. in Walmart), those people will now have access to virtual Facebook products.”
Group 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
”F-commerce”
“From simple, social interactions to true social commerce”1
XXXX http://www.socialmediaexaminer.com/facebook-credits/
Group 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix
Quotes about Facebook Credits from 2011
”If you can store some money in a Facebook account and pay for anything just by clicking a button to connect your Facebook profile, this will facilitate a huge amount of transactions.” Mitch Joel, President of Twist Image, February 4 (4)
”As Facebook grows and starts to host all sorts of commerce, perhaps it's time to stop thinking of the social network as a company. Maybe it's best to think of it as a country.” Fortune, January, 28 (5)
”As Facebook achieves world dominancy, it will be evaluated as a critical political hub”Apurba Sen, co-author at Trendspotting, 2011 (1)
”Facebook's payment system could soon compete with credit cards”Danielle Robson, CreditNet, February 2 (3)
“Think about the fact that Facebook has a population of 500 million people. If even 10 per cent of those start trading Facebook Credits then it would potentially be a more powerful currency than say the Aussie, Hong Kong or Singapore dollars”
Brett King, author of "Bank 2.0”, February (2)
Group 8b Course 2304
Intro
Agenda
Background
STEEP
FB Credits
Competition
Conclusions
Bibliography
Appendix