The Business Blog at Intuitive.com

Dave Taylor has been involved with the Internet since 1980 and is widely recognized as an expert on both technical and business issues. He has been published over a thousand times, launched four Internet-related startup companies, has written twenty business and technical books and holds both an MBA and MS Ed. Dave maintains three weblogs, The Business Blog at Intuitive.com, focused on business and industry analysis, the eponymous Ask Dave Taylor devoted to tech and business Q&A and The Attachment Parenting Blog, discussing topics of interest to parents. Dave is an award-winning speaker, sought after conference and workshop participant and frequent guest on radio and podcast programs.

Glimmers of the virtual economy: Nexon's $250 million Kart Rider

I'm just fascinated by an article in BusinessWeek entitled Dude, where's my digital car? It's about Korean gaming company Nexon Corporation and its wildly popular Kart Rider [Korean language site]. Why's it interesting? Because much more so than Sony's Everquest and other online virtual games, Kart Rider is free, phenomenally popular and makes Nexon millions of dollars every month!

I know what you're asking: If it's free, where's the revenue stream coming from?

What a great and obvious question! The answer is that Nexon has figured out how to apply the Razor Blade theory of marketing to online gaming, in a spectacular way. The Razor Blade theory, you might recall, is that you should give away the razor so you can sell the blades.

In this context, Nexon allows Koreans -- and remember that about 75% of the Korean population have broadband connectivity -- to play the multi-player cartoon racing game for free.

The money comes from selling virtual upgrades. From fancier looking cars to rockets you can fire at other racers, to balloons and other cute things, these $0.50-$2 items add up fast.

BusinessWeek even cites a 9-year-old who paid $2.50 for a new avatar, $3.50 for a faster car, $2.50 for goggles that prevent smoke from blocking your vision while racing, and more. To a total tune of $150 USD.

But it's more amazing than that: there are now professional Kart Rider racers who are paid by sponsors to have company logos on the side of their little Karts. A true 21st century job if I've heard of one.

One of the secrets of Kart Rider is that it's also a short game, perfect for a 5-10 minute break at work or as a break from a more demanding task. Compare that to the weeks or months of a full Everquest campaign or any of the other massively multiplayer worlds. Certainly Nexon knows quite well that there are manyfold more casual gamers and people online seeking a quick entertainment that's fun, funny and not particularly demanding. And, with an income last year of $110 million and a projected 2005 revenue of $250 million, they're right.

Image from The Korea Times

They're really, spectacularly right. In July of 2004 Nexon reported 0.9 million registered users. By November of 2004 they had 5 million registered users. January of 2005 saw 8 million users, March of this year had 11 million and Nexon reported that there are now more than 12 million registered Kart Rider users, as of May 2005.

But here's the figure to chew on: More than 25% of the population of Korea have participated in at least one Kart Rider race.. Wow!

If you'd like to try Kart Rider but aren't based in Korea, don't worry. Nexon has announced plans to expand to Japan and China in the near term, and further down the road? Who knows, sounds like a brilliant game for someone like Yahoo Games to be investigating, doesn't it?

If you've played Kart Rider, I'd love to hear your experiences too!

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