Microblogs in Asia eye games, virtual goods for revenue

As microblogging sites like Twitter search for ways to become profitable, services in Asia may have more options for making money, such as offering games and selling virtual goods, owners of those services say.

Several Twitter rivals have emerged in China and other parts of Asia, where Twitter itself is less popular than in the U.S. Like Twitter, those Asian services are considering advertising and paid services for businesses as ways to generate revenue. But virtual goods are also popular in Asia, and are seen by some as a strong potential source of funds.

"In China, one possible way is games," said Alex Mou, CEO of the Chinese microblogging service Zuosa. The Chinese sites can add games to their services and sell in-game tools that help users win, Mou said. Just like Facebook offers game applications, microblogs could add game sections to their sites and let users buy, for instance, better tires for their car in a racing game.

Chinese users might also pay for virtual images or other decorations to spruce up their profile, and membership upgrades that give their account new functions, Mou said.

Online gaming is a huge industry in China and other local companies have had success selling items such as weapons and armor to their players. Tencent, a local portal that offers a hit instant-messaging client and a set of services around it, is often cited for its success selling virtual goods. Tencent reported revenue of nearly 5 billion yuan (US$730 million) from Internet and mobile value-added services in the first half this year, a nearly 90 percent rise from a year before.

One of Tencent's top revenue-makers is a service where users can buy virtual items like clothes and jewelry to outfit an online avatar, according to digital strategy and research company Plus Eight Star. Others include games that are free to play but allow users to buy items to help them with tasks such as raising pets, according to the research company. Just a small slice of Tencent's revenue comes from advertising.

"You can learn a lot from China about how to make money on the Internet," said Alvin Woon, a cofounder of Plurk, a microblog site popular in Asia. "There has to be a better way than advertising."

Venture capital firms sometimes doubt that a Web site user would pay for virtual items, Woon said. The model is far more unproven in the West than in Asia. "It's not something you can use in real life like an iPhone," he said.

But friends often use their online images to communicate in countries like China.

"Their virtual identity is actually more important than their real one," Woon said. "It's something they can afford, a dollar or two for new jeans, but when you multiply that by 9 million users or something, then you make good money."

In China, that model may fare better than analytic tools or paid accounts for corporate users. Chinese microblogs do not yet have enough people talking about brands to offer valuable analysis of user discussions to businesses, said Sam Flemming, founder and chairman of CIC, an Internet word-of-mouth research company in Shanghai.

Twitter could offer that service, Flemming said. But microblogs in China are competing with other online forums where users already go to express their thoughts. The most common, bulletin board systems, are sometimes specialized around topics like cars or basketball and already have the discussion level needed to interest a company, he said.

"The challenge is, there are already so many places to talk," he said.

China still has a huge sea of Internet users that microblogs could tap. Over 120 million people, or one in three of China's Web users, currently use social-networking sites, according to the country's domain registry agency. Half of those users post microblog entries online at least once a day, the agency says, though that figure likely includes messages like status updates on Facebook.

Zuosa, Plurk and sites like them are currently focused on building a user base more than bringing in revenue. Chinese microblogs will need time to start turning a profit.

"I think it will take three to five years," said Mou of Zuosa. "You can only make money after reaching a certain size."

Copyright © 2009 IDG Communications, Inc.

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