Taking software out of the box and moving distribution online was a hallmark of Web 2.0. It was a great advance, helping good applications find an audience without having to deal with the hassles of distribution and manufacturing. However, this had a downside. It became very easy for crappy software to flood the market creating a new competition for attention.
A new group of companies are tying their web based offerings to tangible goods to combat this problem. Interestingly, these companies all focus on the youth market, creating solutions that allow them to monetize audiences who don’t have access to credit cards and to gain access to the “allowance economy”.
The following examples are aimed at kids, but it is easy to imagine the application of these concepts to more traditional web services. A cardboard box around software is pretty useless, but there are many other product possibilities that can add value to your service, act as a billboard in the real world, and help reduce your customer acquisition cost.
Web Totems
Disney has developed an RFID platform “Clickables“(PDF) that is embedded into toys and provides access to content online. e.g. If you buy a charm bracelet for their “Pixie Hollow” virtual world you get access to special virtual goods. The innovative aspect of this is that if you swipe your bracelet against a friends in real life, you get to share each others virtual goods online. This is a brilliant way to spur virality.
Analog Avatars
WebKinz were the first big hit in this category and are still going strong. Each Webkinz is a stuffed animal that has a unique code associated with it. When you enter that code you can play with a digital version of your stuffed animal. Making the toy a stuffed animal was a stroke of genius because of the emotional bond kids have with them. How many video games would a kid cling to while sleeping? Disney is getting into this area with Cars and Club Penguin branded experiences. Mattel has their BarbieGirls.com offering and UB Funkeys, which is the latest addition to this product category. These plastic figures/USB drives, created in the Kid Robot/urban vinyl style, open up new games or portion of a virtual world.
Play Anywhere
A number of companies have tried to emulate the success of card games like Magic: The Gathering by adding virtual components to the traditional play pattern. WebKinz, NeoPets, Bella Sara, and Chaotic all produce games trying to crack this market. These companies realize kids can only spend a certain amount of time on the computer and combination digital/analog games allow you to play with the cards online or in the schoolyard, extending the reach of the brand.
The Eye of Judgement card series brings this idea to another level by using an augmented reality technology. Each card has a unique symbol that can be read by the PS3′s camera attachment and when it does a monster literally pops out of the card. A very cool technique that brings a new dimension to the game play.
Prepaid Debit Cards
Prepaid virtual goods debit cards were popularized by Nexon in Korea and are used by many US and European based virtual worlds like Habbo, Gaia, Zwinky, and IMVU. This model is so popular that the virtual good/prepaid card product category is now the fastest growing at Target stores. At a base level they are an easy way to process transactions, but they also play into the “dress up” themes prevalent in many of these worlds. An 11 year old girl may not be able to make independent decisions or use a credit card while shopping with a parent, but at Stardoll.com she can choose the exact clothes she wants and model adult shopping behavior by using their own “credit card” to buy them.
Mass Customization
Mass customization is starting to make inroads into the toy market. The Build-a-Bear Workshop is certainly the most famous example, but a few notable companies are enabling kids, with the aid of the web and videogames, to personalize their play experience.
RideMakerz is like a boy focused Build-A-Bear and is launching a new virtual world/custom toy hybrid. Using their service you can build a car online and have it manufactured to your specifications OR you can go to one of their retail locations, build a physical car then play with a cyber version when you get home.
A bit further off in development is using 3D printing services to bring your avatar from a video game to the real world. FigurePrints allows you to do this now and EA has shown prototypes of a similar service that would enable you to have your creation from Spore brought to life.
The Future
The pendulum is already starting to swing back. Start ups are finding it more difficult to get shelf space for their offerings, but this development opens up a world of new possibilities for consumers and opportunities for companies who can tie the two worlds together. The virtual goods market is growing quickly and is highly lucrative (nearly 100% margins). Virtual goods combined with analog artifacts provide a chance for tech focused companies to disrupt the $20B+ toy industry that has been dominated almost entirely by marketers.
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