Out of This World

Opportunities abound in online gaming.
Magazine Contributor
3 min read

This story appears in the February 2008 issue of Entrepreneur. Subscribe »

An August report from Parks Associates states that 34 percent of adult internet users play online games every week. That's more than the percentage of adults who watch videos or use social networking sites. Online gaming and virtual worlds are booming as both casual and hard-core gamers gravitate toward internet offerings. With them come virtual economies with goods and currencies that can be turned into real-world cash--which means opportunity for entrepreneurs.

The trading, buying and selling of virtual currency from popular games like World of Warcraft and EverQuest has been a largely underground market--until now. Sparter built a platform where users can trade, buy and sell virtual currencies from online games and virtual worlds. Co-founders Dan Kelly and Boris Putanec officially launched the website in beta form last February and have already made waves in the online gaming community, with sales expected to exceed $250,000 for their first year.

"We did a lot of research," says Kelly, 40. "People clearly saw value in buying and trading virtual goods. We thought there should be a viable long-term solution not only for gamers, but also for the industry." Sparter costs nothing for buyers; the company makes money by taking a commission from sellers on each completed transaction. Sparter supports currency trade for a variety of online games and handles international transactions as well. Gaming-related startups need to keep the international nature of the industry in mind when building their platforms.

Entrepreneurs who are considering getting into different areas of online gaming have to be prepared to adjust to a rapidly changing marketplace. Says Putanec, "The market is still fragmented. Doing the usual startup thing is good, but build an infrastructure that will be able to scale."

While Sparter chose virtual currency exchange as a hot area, there are plenty of fledgling markets for entrepreneurs. "There are other opportunities for people who can build tools or technology to solve some of the problems we are dealing with," says Kelly, who points to cyber-currency fraud and micropayments. He adds that one of the big opportunities for entrepreneurs is informational services, which provide forums, walk-throughs, guides, tips and more for gamers.

Entrepreneurs need to be prepared to talk with the online game developers who create the virtual worlds that fuel this industry, whether it's to get feedback on products or develop potential partnerships. "The game industry is growing and the online-world space is growing," says Kelly. "There is going to be more need for good information and products that help people enjoy their experiences more."

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Google Checkout may be the new kid on the online payments block, but it's gaining users at a fair clip. Google is competing on the basis of low fees for credit and debit card transactions. Beginning on February 1, Google Checkout will charge 2 percent plus 20 cents per transaction. Some Google AdWords subscribers will be eligible for free credit card processing on Google Checkout sales. A payment guarantee that applies to 98 percent of transactions helps protect sellers from chargebacks. The bottom line? The more payment options you can offer your customers, the better.

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