Fred Wilson explains the various types of revenue models for gaming companies – and sheds some light on why the trend toward “gamifying” social media, which we’ve previously reported on, is so potentially profitable.
According to Wilson, gaming companies are the only firms which have successfully employed “virtual goods” revenue streams – e.g. buying a tractor in Farmville. Virtual goods are an example of “freemium” models – revenue models where users get an initial product for free but subsequently pay for upgrades.
Your typical Xbox/Playstation game operates on the premium model – pulling in money on a single purchase of the product. Of course, some of the most wildly addictive Internet games operate on the subscription model, such as World of Warcraft.
The post is an interesting supplement to last week’s post on mobile revenue streams.