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Consumers who participate in online games, social networking sites and virtual worlds all use prepaid cards to make purchases online, says Susan Choe, CEO and founder of OutSpark, a San Francisco-based computer game publisher.
"Just like the iTunes card that you see at...various stores, the prepaid card is a way for them to buy virtual items in our game to help them play their games better or to help them personalize their avatar," Choe says about players.
Choe estimates players of online games spend millions of dollars each month. They buy two kinds of things-functional items and vanity items, Choe says.
Functional items would include an improved virtual skateboard a player could use in a skateboarding game to perform better tricks or accumulate points more quickly than with a standard board, Choe says. Vanity items include clothes, pets or music for a virtual character in an online game, Choe says.
"The motivations for why people buy is linked to the motivation why these people play games online," Choe says. "The biggest thing is social–the desire to make friends, whether for dating purposes or to have a friend to play games online."
Gamers also buy items because they want to become good at a game or show off for other players, Choe says.
A third reason gamers buy virtual items is the fun of accumulating toys, Choe says.
Outspark offers its games for free because the game play and social interaction are strong enough motivators to get gamers to buy items, Choe says.
"More often than not, people will end up buying stuff," Choe says.
Items in the games can cost from 10 cents to $50 or more, Choe says. Players can buy "Sparkcash" that lets them buy items in any Outspark game online with credit cards and prepaid cards, or they can mail in payments, Choe says.
The company plans to launch its own prepaid card in 1,600 Target Corp. stores in early September. Players can buy $15 and $25 cards, and the players likely will purchase multiple cards, Choe says.
"We actually have a pretty high average revenue per user, so it may last a month or less," Choe says of the average prepaid card.
Prepaid card company PayByCash plans to tap into that growth by offering a card players can use in nearly 300 games in stores around the United States, Kevin Higgins, company president, tells Prepaid Trends.
PayByCash, a subsidiary of PlaySpan Inc., announced this month consumers can purchase its Ultimate Game Card, a prepaid card for playing online, multiplayer games, at 5,600 7-Eleven Inc. convenience stores in the United States. 7-Eleven is based in Dallas.
PayByCash, which is based in Charlottesville, Va., has signed an agreement with Atlanta-based Interactive Communications International Inc., known as InComm, to distribute the cards.
Consumers can buy the cards in 12,000 stores around the United States, Higgins says.
The company plans to make them available in 20,000 stores by the end of the summer, he says. The card is available in $10 and $20 denominations, the company says. PayByCash also began to offer the cards in Canada this month, Higgins says.
One of the biggest markets for prepaid gaming cards is consumers younger than 18, who typically do not have credit cards or bank accounts, Higgins and Choe agree.
Because of that youthfulness, PayByCash has limited the games its cards support to those it considers "family friendly," Higgins says. That decision could boost sales because parents do not need to know exactly what game their child is playing and so do not need a card specific to that game. Also, parents need not worry a child will become bored with one game and leave funds on the card, he says.
Prepaid cards help online game publishers reach children, a large audience without other means to pay online, according to Michael Cai, director of broadband and games at Parks Associated, a market research firm based in Dallas.
Cards branded for specific games can serve as a marketing tool, too, Cai says. "If some of the games are not very well known, retail could be a fairly good channel to promote the games at the checkout counter along with other cards," he says.
While he does not have an estimate for the size of the market for multiplayer online games, Cai says 8 million households in the United States have at least one multiplayer gamer. World of Warcraft has at least 10 million subscribers worldwide paying $14.99 per month, he says.
Prepaid cards are suited to games that are free to play but offer items for sale, Cai says, instead of games with an admission charge, such as World of Warcraft.
About 10% of players in the free-to-play games buy things, but the amount they spend is on par with the monthly subscription fees for the World of Warcraft-type games, she says.
Choe says the business model requires a lot of small transactions. While she declines to give specific numbers, she says Outspark has "millions of dollars" in transactions each year.
Building volume guides the PayByCash strategy as well, Higgins says. The company wants to emulate the U.S. Postal Service in terms of its availability, he says.
"No matter where someone lives in the U.S., there will be an Ultimate Game Card in a store within a couple of miles of where they live," Higgins says.
