Today Viximo announced a new development platform for iPhone that would allow users to develop and sell their own applications using a simplified version of XML, reports TechCrunch. Called VixML, this new platform ties in to Viximo's $5.99 True Flirt premium app, also announced today. Users can develop and sell their own "Flirts" using a mark-up language based on XML. If they are not so developmentally inclined, they will also be able to purchase and send other users' Flirts.

The Flirts that users can develop with VixML are essentially virtual goods that act as greetings, sensitive to forms of user input like blowing on the microphone, tilting, or tapping on the touchscreen. VixML also supports a 3D engine that will allow flirts to incorporate particle effects among other visuals. Anyone who has the premium True Flirt installed can buy and send Flirts from their iPhone. Users who receive a Flirt that don't already have the premium app can download a free, limited version of the program that allows them to receive and interact with Flirts, but not to create them.

As the iPhone does not support any true microtransaction system, True Flirt users will be forced to purchase Flirts as part of "Flirt Pack" combos. Individual creators of Flirts must submit their Flirts to Viximo, which in turn submits them for addition to the App Store as part of a Flirt Pack. Viximo has announced that there will be a revenue-sharing model to allow developers of Flirts to receive a cut of the profits every time their Flirt is purchased from the store, but details of the arrangement are not available at this time.

Even with so many details about True Flirt and VixML still forthcoming, this announcement still represents an exciting advance in bringing virtual gifts to the iPhone. Countless new developers will now have a chance to create their own virtual good programs quickly and easily and to turn a profit on their endeavors. What remains to be seen with VixML is how favorable the revenue split between Viximo and individual developers will be, though the company already has a solid stable of developers for its online gifts, and exactly how rapidly True Flirt sells to iPhone users. As one of the first major virtual gifting apps for iPhone, there can be little doubt that True Flirt will find an audience.

Other developers, including Viximo, have worked on creating virtual gift wallets: inventories that aren’t tied to specific social networks. They let users “own” their gifts in a slightly more independent fashion. While these new gifts seem tied to the iPhone, it also represents a whole new opportunity for virtual goods: the pocket. Instead of living in a purely online environment, virtual goods can now go everywhere their owners do—something that, I think, makes them a little more real.

Turbine is one of many competing MMORPG publishers struggling to make headway against market-leader World of Warcraft. On Jan 1st, Turbine announced a new position that suggests a major change coming to Turbine's current business model. Turbine is looking to hire a Microtransactions/eCommerce Manager who "will be responsible for delivering and maximizing the revenue derived from Turbine’s micro-transaction-based in-game store." No such store currently exists in any of Turbine's ongoing MMORPG titles, which include Asheron's Call, Dungeons & Dragons Online, and The Lord of the Rings Online.

The change, though, will be for an upcoming title. A post from a Turbine's community representative at the LOTRO official forums states that the new position will not affect any of their existing titles."We know the recent job listing has caused a bit of a stir, but please be aware that this posting is for an unannounced future project. We appreciate the thoughts and feedback on both sides thus far," said Sapience, one of Turbine's Online Community Managers. 

Turbine has previously run their titles according to the traditional Western model of generating triple-A MMO revenue, which requires players only to pay a monthly subscription fee in order to play. Generally this revenue model stands on its own, without the ability to purchase in-game virtual goods. Currently, only Sony Entertainment Online is experimenting with virtual goods integration in the new Station Cash service available in the otherwise subscription-based MMOs EverQuest and EverQuest II.

Virtual goods primarily play a role in MMORPGs developed by Eastern companies situated in nations like Korea, China, and Japan. That a Western company like Turbine is clearly going to adopt some type of virtual goods model in an upcoming project is a major development. Free-to-play virtual goods-oriented MMOs are frequently more popular with casual players, and the overall trend of the MMORPG market in the past few years has been toward making already-popular games even more accessible. With more triple-A publishers and games looking at microtransactions for revenue, that growth is sure to spread.

Roughly fourteen months ago, Facebook made waves in the world of virtual goods by making an open call to discuss the development of an in-house microtransaction system. While interested developers had to sign NDAs, they were also promised goodies like early access to a beta test of what the company then called "Payments on Facebook". Industry watchers could only read this as a desire by Facebook to take control of a service currently provided by third parties like PayPal and Zong in Facebook apps.

After what may have been a year of deliberation, Facebook has put plans to take microtransactions in-house on hiatus. Inside Facebook reports that Facebook has decided not to disrupt ongoing relationships between Facebook app developers and third-party payment services. For the foreseeable future, devs will continue to freely choose which third-party service handles microtransactions in their Facebook apps.

"We’ve been excited by advertising and payments solutions provided by the market, and we currently do not have anything to share around a Facebook Payments system at this time," stated a Facebook representative to Inside Facebook regarding the situation.

What isn't clear is exactly why Facebook has decided to put plans for an integrated payment system for Facebook Platform on hold. While figures for virtual gift revenue on Facebook are still scarce, the market is clearly large enough that Facebook could turn a healthy profit off of transaction fees. An integrated payment system could also lure more Facebook users into spending in platform apps, by ensuring that all apps are accepting payment from a uniform source.

Still, Facebook hasn't stated that plans for an integrated payment system are being scrapped outright. It is entirely possible that at some point in the future, Facebook could still attempt to displace services currently provided by third parties with its own payment system. Inside Facebook has speculated that what Facebook is really doing here is prioritizing growth of Facebook Platform over a desire to immediately monetize the current community of apps. If so, then it's just a matter of time before an in-house Facebook microtransaction system becomes a reality.

It appears that hackers have found a leg into an attack on the newest version of the PSP by exploiting a corrupted save file in the game GripShift:



This does raise a couple of issues:

1. Even if the new PSP was "unhackable", the need for games to be backwardly compatible means that there are many, many older PSPs that are still easily attacked.

2. This does raise the interesting question for the PSP as to why the console continues to sell well even as there are very few games released for it. It could be that basically people buy the console & get all of the games in pirated form. This is not great of Sony, but they would make some money as long as the system itself is sold at a profit.

3. There are a couple of core technical problems here that do not appear to have been fixed by the PSP 3000. First, the PSP should not "trust" its own storage system. Save files should either be digitally signed or authenticated via a secret key in the console itself. Second, firmware updates should be truly irreversible. There is little need for game saves to be exchanged between devices, so having some sort of authentication and integrity for game saves would be prudent.

4. Console developers should consider game developers "the enemy", or at least outsiders, from a security perspective.

K. Erickson (2009), "Hackers Cause a Run on GripShift", http://www.pspworld.com/sony-psp/news/hackers-cause-a-run-on-gripshift-009652.php

K. Erickson (2009), "Is PSP Piracy Increasing?", http://www.pspworld.com/sony-psp/news/is-psp-piracy-increasing--009649.php

Mira Burri-Nenova has just posted a working paper on SSRN: "User Created Content in Virtual Worlds and Cultural Diversity "

User created content (UCC) has often been celebrated as a grassroots cultural revolution that as a genuine expression of creativity, localism and non-commercialism can arguably also cater for a sustainable culturally diverse environment. The present article puts these claims under scrutiny and in a more differentiated manner seeks to identify the value of UCC within digital game environments considering the constraints upon players and upon creative play that these impose. The article subsequently tests whether UCC in its dynamic sense of a creative and communicative process can be seen as a channel for the promotion of cultural diversity and if so, what the State should (and could) do about this.

It is a brilliant paper.  Burri-Nenova manages to synthesize the current thinking on user-generated content and virtual worlds in wide variety of fields.  She presents a wonderfully sophisticated analysis of the policy issues presented.  (Photo Credit: Clairegren)

In a savvy move, seven online game companies in China have announced a deal with Chinese security software firm 360 to include anti-trojan software with their games or as a recommended partner.

This is a good move on both sides. The game companies have substantial customer service costs due to trojans (and phishing attacks), so subsidizing security software for their clients makes great sense. The security company, of course, gets a nice, healthy revenue stream and radically lowered customer acquisition costs. I'm sure both parties have a revenue share on any security product upsells.

The companies including the software are: NetEase, The9, Perfect World and Ourgame

and the companies recommending the software are: Shanda, Holdfast and Giant

This actually could also be done in the US either in cooperation with a smaller security firm or as a discounted/recommended product.

Win / win for all.

ChinaTechNews.com (2008), "Seven Chinese Internet Game Operators Fight Viruses", http://www.chinatechnews.com/2008/12/30/8373-seven-chinese-internet-game-operators-fight-viruses/

One of John Smedley's (CEO of Sony Online Entertainment) most interesting (and, I think successful) moves was to get into the virtual trading business. Interestingly, SOE recently launched a venture with the trading card company, Topps, to create physical cards for Free Realms.

Trading cards (especially virtual trading cards) seem to have huge promise. They are firmly 2D art, so they are a lot less expensive to develop than 3D graphics, they are trade-able, which, as Magic: The Gathering, baseball, and pretty much everyone else has shown creates a huge opportunity in its own right, and they can be meshed with any number of abstract game mechanics creating a lot of interesting game play opportunities at reasonably low cost that are also widely accessible.

What is even more interesting is how few people in the games industry, or outside it, have really built on the power of trading cards or a trading card business model. Online trading card numbers are not often disclosed. Wizards of the Coast has not shared any details of Magic: The Gathering Online and SOE Denver, formerly Worlds Apart, had some impressive numbers that I vaguely recall - something like $70 per MONTH per paying customer (see Denver Post).

WOOF!

I really think that the Free-to-Play model should move towards the "virtual booster pack" model used in trading card games. You don't buy individual items, you buy booster packs that give you an assortment of "stuff". This facilitates an interesting secondary market (controlled by the game company) and makes purchasing items more interesting for everyone.... you only have to look at the "Prize Boxes" in Giant Interactive's ZT Online to see the added appeal a bit of "item roulette" adds. This approach can also be used to standardize rewards - instead of allocating items, you allocate booster packs that people can win by game play or purchase... no more "loot drops" just "booster drops". With proper game design, this can also finesse the crazy level treadmill and bias against new players that plagues many MMOs.

.. an interesting alternative to the dual currency approach that Matt Mihaly wrote up a while back.

D. Leonard (2008), "Sony's online card trick", http://money.cnn.com/2008/11/24/technology/sonyonline.fortune/?postversion=2008112511

PayByCash announced today that in January it would launch a new payment alternative allowing online merchants who take credit cards and debit cards to accept codes from the  PayByCash Card, a prepaid digital code issued to users. The new system complements PayByCash's Ultimate Game Card, which sells in retail stores as a generic prepaid card for hundreds of online games and virtual worlds. The PayByCash Card, though, can be accepted through traditional checkout pages, according to the company, just like credit and debit cards.

“This is a great leap forward for the payments industry,” said Kevin Higgins, president of PayByCash. “Not only does this open up huge new markets, but in these economic times of tightening credit, many customers in countries where credit card use is common are losing access to their cards. The PayByCash Card provides those customers with the ability to retain the convenience and value associated with Internet shopping. The PayByCash Card is the only pre-paid card with truly global reach. It’s a payment vehicle that merchants can safely accept from customers virtually anywhere in the world.”

[Editor's Note: Contributing writer Simon Newstead is CEO & Co-Founder of girl avatar game Frenzoo, a 3D fashion startup.  He can be contacted at: simon at frenzoo dot com.]

Billing itself as one of a new breed of pure play web publisher, True Games Interactive opened shop at the beginning of 2008 is expanding its team and title list. We invited CEO & Co-Founder Bob Drobish to reflect on their first year and where free-to-play social games are heading.

How did you start True Games and how has the first year been?

We began True Games by stepping back and doing our home work.  We looked at player interests, trends in the industry, and the gaps between the two. From that we built a business model and a plan that was compelling enough to attract the best professionals and business partners in the industry.

We were fortunate enough to attract people like Peter Jarvis formerly of NC Soft and Peter Cesario formerly of Namco Bandai.  We were also fortunate enough to attract business partners like Petroglyph, GOA, and Possibility Space.  Of course, one of the highlights of the year was connecting with global media giant UTV as both an investor and strategic partner.  It has been a great year.

Your first game announcement was Warrior Epic.  Are you focusing on any particular type or genre of games?

We have exclusively focused on micro-transaction based online games.  Our immediate titles are exclusively designed for PC.  The two titles that we have announced so far, Warrior Epic (Developed by Possibility Space) and Mytheon (developed by Petroglyph) will be downloadable clients, but with a twist…

From a gamer point of view, are there any synergies between games on your platforms?

Yes, there will be synergies in terms of billing and currency, but we feel that this isn’t the most compelling aspect to gamers.  We believe that it is the overall quality of the player experience throughout the full lifecycle of a game that gamers want and need.  That being said, our platform will offer user-friendly, mechanical conveniences that will add to the quality of the overall player experience.

How do you view the economic climate and how that will affect the F2P market either good or bad?

The economic climate is of course challenging for us as it is for all business.    As an industry however, I think that online, micro-transaction based games offer a uniquely compelling entertainment value proposition.  In these economic times, we’d expect that the most cost-effective entertainment options would have an advantage and we think our business model fits into that category.  Gamers do not have to spend $60 up front on our games.  They can download it at no cost, play as much as wanted with no subscription charges; while having options for micro-transaction purchases.

Is True Games targeting a global audience or focusing on US and English speaking markets?

All the IP’s that we establish are designed with a global audience in mind. Some western markets we will serve directly. Others we will serve through syndication partners with local expertise; but always designed for and distributed to a global audience. Player interest in games is global.  The internet is global.  So yes, we have developed games from the ground up to cater to players all over the world.

Many believe that old subscription models will give way to pure micro-transaction models, what’s your take?

There is an undeniable trend toward micro-transaction based models.  Our research shows that this will continue in the years to come.  However, I think the market will continue (at least for the foreseeable future) to offer subscription and micro-transaction based models; in some cases both for the same title.  We believe there will be a rise in various hybrids of the two forms.  Ultimately, the most successful model will be the one to serve the player best.  This will require extensive testing and research.

What is the most exciting development you anticipate in 2009 for the industry?

The most exciting development we anticipate in 2009 (and what our business is built upon) is the launch of AAA games with a free-to-play model.  Clearly, there are a lot of free-to-play games and AAA games.  However, there is no successful AAA game with a micro-transaction based model in the western market.  To develop this will be our most exciting endeavor in 2009-not just for our company but for the industry as well.

Terra Novans, related to the Worlds.com patent story below, I thought you might be interested in Randy Farmer's blog posting today on the IMVU-Forterra "word balloon" patent lawsuit which came to a messy conclusion last year after a 2 year drama (and a full patent reexam by the USPTO). Both Randy and I worked on this case. All the documents were made public due to the reexam.

Direct URL:
http://thefarmers.org/Habitat/2008/12/the_demise_of_the_word_balloon_1.html

This case as well as the Worlds.com move are representative the sorry state of the IP/patent system and reflect the  "corrupted" nature of business, government and general bad behavior throughout today's society (for which we are finally starting to pay the price).

Sigh... hoping for change in '009.

Thanks for bringing this to our attention Randy!

Bruce

According to a story in The Register, Worlds.com made good on its promise to go after MMOG companies using its patents.  Playing the role of Mr. Potter, Worlds.com lawyers delivered a lawsuit to NCSoft on Christmas Eve, saying that NCSoft "willfully and deliberately infringed on its patent."  They are seeking "an unspecified amount of damages along with prejudgment and postjudgement interest, or 'in no event less than a reasonable royalty.'"

The Register article also notes that "the patent was filed in August 16, 1999 and granted to Worlds.com on May 4, 2004. (Note that City of Heroes was released April 2004, before the patent was issued. Lineage was released in 1998, before the patent was even filed.)"

Others have already come up with various reasons this patent (and the others along the same lines that Worlds holds) are, or should be, considered spurious and worthless.  How long Worlds.com will be allowed to continue with these strongarm tactics based on IP they didn't invent remains to be seen.

Tim Arango of The New York Times has an interesting article on the growing problem of real-time piracy of video broadcasts of sporting events. All sports are taking this issue seriously and there are discussions between sporting organizations globally.

I suspect this problem is going to be very hard to fight.

There is a massive, growing underground sports betting business (see previous articles) and I suspect that these video pirates are supporting that business (a lot of the illegal wagering is coming out of Asia as are most of these pirate video services).

[This was not discussed in the article, but is my conjecture]

This creates a real problem as it is not likely that traditional economic incentives or technical measures will deter these thieves as they are being supported by a large, lucrative business (sports wagering).

My guess is that at the end of the day, sports leagues are going to legalize and regulate sports wagering globally so that they can protect the integrity of the sport, monitor players, and freeze out illegal betting operations.

But this is going to be a long, difficult battle.

T. Arango (2008), "Online Piracy Menaces Pro Sports", http://www.nytimes.com/2008/12/29/business/29piracy.html?_r=1&ref=technology

NetDragon Websoft has had success fighting private servers / pirate servers for its game Eudemons Online according to Redline China. The private server problem has been a growing trend in 2008. Basically, these are unauthorized game servers for various MMOs that are run where the company "isn't looking" or laws are difficult to enforce.

The size of China makes is a major center for these types of pirate services which (usually) charge a discounted price for the service.

One of the myths of MMOs is that they solve the piracy problem by running the game on the server.

Actually, precious little of the game is really on the server - the bulk of the cost of development is in the graphics & code on the client side, so it is often not too difficult to reverse engineer the game server (a database, mostly). Also, many games have very simple underlying mechanics, so they can be emulated by an independently developed server.

... and, of course, game companies have had a number of problems with theft or compromise of game server code.

I would also think that the pirate server problem is more serious in areas where there are a lot of Internet cafes as the pirate server companies can cooperate with the Internet cafes to create a good business while not attracting a lot of attention online.

NetDragon seems to be getting good cooperation from the provincial governments in Fujian and Fuzhou.. I suspect this is helped by the fact that the company is based in Fujain.

Another side note is that it is interesting that I have not heard much about private servers for World of Warcraft even though there are a lot of them, it does not seem that Blizzard has taken much public action on this issue.

The9 and Blizzard are investigating the leak of the Wrath of the Lich King client for World of Warcraft, according to Pacific Epoch. The client is a Chinese language version which accesses North American servers (so, it is "the gold farmers" version?).

I would think that this would make The9 more unhappy than Blizzard.

What is puzzling is that this is considered a problem. If Blizzard implemented a proper license key system, there should be no way for a fake client (or even a real client) to connect to the game without a valid (purchased) license key.

While it is nice to make money from the client, the "big bucks" come from subscription revenues, so the "piracy" of an MMO client is little more than an "alternate distribution channel".

The biggest problem here, at least to my view, is that this client damages Blizzard's management of its channel licensing with The9 - I suspect that The9 has "exclusive rights" to WoW in China and a client that connects to a North American server is somewhat troubling (though The9 should expect Blizzard to do IP filtering based on GeoIP to help control this problem).

Adam Martin has a superb article on thinking about the real implications of "online games are services" and customer relationships over at his blog - T=Machine.

Andrew Chen at Futuristic Play has done a really nice assessment of the "Freemium" business model at AdultFriendFinder.com (FriendFinder Networks Inc.) - which is about to go public (hence a lot of useful details).

The numbers seem to match up nicely with those for online games in terms of revenues. One interesting difference is that AdultFriendFinder seems to pay a lot for search engine advertising and has a strong affiliate network... however, all of its content is in the "user created content" category

I haven't gone through the actual SEC filings, but it would be particularly interesting to look at the chargeback data and compare it to what we are seeing in the online game industry.

General Thought:

Online games do not seem to do nearly enough with affiliates and channel partners (I think a channel model would be particularly useful and a great way to work with fan sites).

I don't know about you, but I received a ton of Christmas spam and phishing attempts this year.

I'm tired of it.

An awful lot of spam and phishing attacks are based on a very simple form of email fraud - the crooks spoof email content & source addresses to convince readers to open, read, and act on email.

This actually works with "snail mail" as well:

I create a pretty envelope that looks official and "FROM" whomever I want, send it to you... you read it because it looks credible (my latest such junk mail has been a wave of "GE Warranty" offers for my appliances and car).

There are a lot of anti-phishing proposals out there. The key to almost all of the proposals is that they have a business model tied to them:

1. Charge people for "junk" email.
2. Digital certificates of some sort (see previous article on why PKI is worthless from a security perspective).

Now, I'm not going to stop all spam and phishing, but my goal is to raise the bar a good bit...

and (unfortunately), I'm not going to make a dime (I think there are a number of Internet security problems that are in this category which is why they are lingering)... at least not directly.

Basically, my proposal is to make the "return address" (the sender) meaningful by tying the mail message to the return address.

I do this by mailing an "envelope" rather than the mail body (or multiple body parts). The envelope includes the "From Line": sender@itglobalsecure.com.

I call it the Simple Envelope Transfer Protocol.

All of the message body (including any plaintext) is indicated by a Relative URL to that person:

http://itglobalsecure.com/sender/[uniquemessageID]/body.txt

which is included in the message envelope as:

../[uniquemessageID]/body.txt

for each message body part and attachment.

So, if you want to send a message and make it appear to be from me, you have to have access to my web/mail server or spoof DNS (hey, I didn't say I was solving every problem).

There are a large number of advantages to a mail system that sends envelopes and not messages (and some disadvantages)....

but it makes the "Stupid Spoofs" of email for spam and phishing a good bit more difficult.

.. and its free.

I wrote a white paper on this a while back, so check it out at IT GlobalSecure

Merry Christmas.

Security is not math. Starting with cryptographers & RSA, moving on to Verisign and continuing to this day there is a bizarre notion that public key cryptography in general, and public key certificates in particular, have some "security" value.

In some sense, all certificates really are is a payment receipt.

You pay your money, you get your certificate.

Does the certificate telll you that the party you are talking with is "trustworthy"? No. Does it even tell you that you are communicating with who you think you are communicating with? No, as wonderfully demonstrated by Eddy Nigg at Join The Revolution!.

Basically, he bought a certificate to exercise an email-based man-in-the-middle attack.

The companies involved don't really care. If they did, they'd at least use Compromised Key Lists (CKLs) or Certificate Revocation Lists (CRLs) to deny "bad" certificates.

Also, if applications really cared about "security" and public key infrastructures (PKI), they'd properly implement CRLs and CKLs (most don't even bother).

Another option would be for certificates to have a short shelf-life (say a day) and that web sites and other certificate users would need to go get a new certificate regularly. This would bypass the utterly stupid CRL/CKL system (which has never worked and was really designed for security environments where communications with a central server is expensive).

But no one really cares about security, they just care about getting paid.

... actually, they don't care about getting paid too much. Getting a public key certificate is pretty darn cheap from a service perspective, you do some math, you send some bits (and not too many at that)... So, if you don't get paid, you really aren't "out" anything that is valuable.

What is sad is that there is a massive business opportunity associated with certificates that have real value. This opportunity has been sitting around for years and whomever picks it up is going to make a way, whole lot of money.

The next, great security firm is still waiting to be born.

(sigh)

... any VCs want to buy me lunch?

Whyville and vSide have signed up as distributors for Virtual Greats' licensed, celebrity-themed virtual goods. Doppelganger says that it is evaluating several collaborative items for vSide, but nothing is ready for announcement. Jim Bower, CEO of Whyville-developer Numedeon, is planning to launch virtual goods in mid-February tied to the recently launched Pearls system that lets parents set monthly allowances in the form of virtual currencies.

"We're actually surveying the kids about which of four clients, two of which [Virtual Greats] is close to closing, the kids would most be interested in in terms of virtual goods," said Bower. "The top one they're interested in is Paris Hilton and the second is Elvis—and actually fairly close behind. There's a surprise: 12-year-olds are almost as interested in Elvis as they are in Paris Hilton."

After the launch Bower plans to continue the surveys, essentially conducting market research, looking for new celebrities that users are interested in and presenting the case through Virtual Greats to bring them in.

While certain celebrities, like Snoop Dogg, are considered inappropriate for Whyville's kid and tween audience, Bower says the community does a good job regulating itself.

"We can trust them, but part of the commitment, our part, and why they're interested in working with us is that we're not inflexible. It's a community decision," he said. "Any celebrity we produce will produce a huge amount of discussion in Whyville on all sides. If kids are able to buy Paris Hilton custom earings or Elvis guitars, there will be an opportunity provided by us to comment. Anything we introduce is like that, but something that is strongly cultural is definitely like that."

Whyville has sold branded goods before. When it brought in musicians like the Cheetah Girls for concerts, the items worn during the performance were sold on eBay with the profits going to a charity of the artist's choice.  Based on that experience, Bower says he expects the virtual goods to perform well, but to need to evolve to meet the market.

Likewise, Numedeon is betting that the Pearl system will be a hit in Whyville. In its first month, Bower says the Pearls had 100% growth over the previous WhyPass subscriber system. Since then it's grown steadily at 15-20%. Additions like Virtual Greats' goods should boost that and provide a strong complement, or alternative, to the sponsorships that fuel Whyville.

"The difference is that sponsorships are periodic and episodic. Virtual goods sales are regular and predictable," said Bower. "The big episodic sponsorship things are important because it gives us the opportunity to launch and build new content. On the other hand, you need some revenue just for basic maintenance, so the virtual goods piece of the revenue model gives us that base.  Many sites run on banner ads, but it's becoming recognized that that just doesn't work. Everyone's going to be looking for other systems."

Skill games are spreading around the world. For many aspiring game businesses, they have the advantages of gambling without the legal risks.

My guess is that "skill games" gives people in a lot of places a lot of wiggle room, legally... though these companies may have some of the problems that US firms have found with trying to dodge gambling regulations in different ways.

In India, Games24x7.com offers a total of over $20,000 (1 Million Rupees) in prizes a month for games including rummy and chess... Chess has got to be a bit scary to offer as there are more smart Chess programs than all other types of game "bots" combined, I'd guess. They also support carom, a game similar to pool but played with disks similar in size to checkers pieces (also called "Carrom", I think)... which should be very vulnerable to analytic attacks, just like pool.

On the legal front, from the site:

Is playing on www.games24x7.com legal?

Absolutely! The main reason for this is that the games offered on www.games24x7.com are games of skill which means that the chance/luck element is negligible ensuring that there is nothing illegal about playing on www.games24x7.com. Games24x7 is highly selective about the games it hosts. All games hosted by Games24x7 are carefully designed and the jurisdiction of prize winners is strictly monitored to ensure legal compliance with the laws governing gaming in India.

Our Supreme Court and related court decisions have clearly sanctioned ?games of skill? as distinguished from ?games of chance? and exempted them from the purview of the Public Gambling Act. The court and subsequent interpretive decisions have defined games of skill to include games that are ?mainly and predominantly? games of skill and specifically included in this category, chess, rummy and carom, among others. See State of A.P.VsK.Satya Narayana, A.I.R 1968SC825, reaffirmed in subsequent decisions. All Indian states, with the notable exception of Assam, have legislation that adopts the same principles. Assam however, does not state that it is illegal to offer games of skill; the issue is that the legislation in Assam is vague in this regard and hasn?t been interpreted by the courts as a result of which we have left it out.

Is it legal to accept cash prizes if I win tournaments on www.games24x7.com?

Accepting a cash prize on www.games24x7.com is like accepting a prize on Kaun Banega Crorepati (KBC). It is completely legitimate, in fact you are entitled to accept the cash prize and have the right to have the prize sent to you. Since the venture is entirely legal, the consequence of it is also entirely legal and hence accepting cash prizes for winning tournaments on www.games24x7.com is legal. For additional information or copy of a more in depth legal analysis please contact: Bhavin Pandya (bhavin.pandya@games24x7.com).

(via Press Release)