China Next Kids MMO Reinvented

We will be seeing a huge numbers of ‘Club Penguin’ copycats sprouting out next year very fast once Taomee China 1st ‘Club Penguin’ goes IPO in NASDAQ next year *1 billion IPO. Kids MMO online games will be a new sector of growth in China and worldwide. The trend is already building up in the States as we speak with new giant players like LEGO and DREAMWORKS.

To Succeed Look for the New Genre

One thing to note is that just like any games categories it will be split into different ‘genre’ and age group again. Club Penguins style kids virtual worlds are great for kids aged 4 to 8 and this is also an area where majority of the cartoons (animations) and toys are centered and design for in China. Then there will be the demographic for male / female audience, in the States there is Barbie.com and in Europe there is Stardoll.com whom fills this gap.

The Huge Genre that’s basically Untouched.

There is an age group genre in China that is currently untouched the 8 to 16 years old teenagers. The Chinese animations sector had been concentrating mostly on the 4 to 12 years old segment and had been very successful such as ‘Pleasant Goat and Big Big Wolf’, ‘Fruity Robo’ and ‘Kaixin Bao Bei’. On the animations side only a handful of experts in China had noticed this empty slot and ALPHA in 2011 will come up with ‘UTRA FORCE’ an animation similar to their Live action TV series ‘Armor Hero’ to tap this age group.
On the online games side we will see THE 9 moving into this gap too with FREE REALMS by SOE and Giga Media with SPONGE BOB world. FREE REALMS in the States had been very successful indeed with more than 12 million users so far.

FREE REALMS is actually going after the RUNESCAPE market and not the Club Penguiners. Runescape have been super popular for the teens MMO segment since 2006 attracting millions of players. Runescape still has over 10 million monthly unique users. Nine million of those play the game for free; 1 million of them subscribe each month. RuneScape's users pay $5 a month for access to extra playing levels and better customer support. That suggests more than $50 million in annual subscription revenue for Jagex.

In the 12 months to March 2009, Jagex generated revenues of £38.4 million and profits of £18.0 million (approximately $58m and $27mm, respectively). That’s an operating margin of 47%, despite spending “tens of millions of pounds” on the failed Mechscape project. 94% of that revenue comes from subscriptions and slightly over £2 million every year in ad revenue.

Runescape users range from 7 to 15 years old as the key target group.

The 89/10/1 Revenue Rule for Kids MMO

The 89/10/1 rule says that 89% of your players won't spend anything, 10% will spend the bare minimum, and the remaining 1% will spend extravagantly. In the case for FREE REALMS it would account to be for their 12 million users:

• 10,680,000 spend nothing ($0 total)
• 1,200,000 spend $5/month ($6,000,000 total)
• 120,000 spend $30/month ($3,600,000 total)

Not bad revenues for a kid MMO!