Micropayments finally find a home online

Seventeen-year-old Alexis Corocan spends about $5 a month on clothes, accessories and eyes of various shapes and shades for her online persona on IMVU, a popular Internet hangout.

For 29 cents, for example, she can buy a set of deep gray eyes framed by dark lashes. Sixty cents gets her a white tiger. Or for $1.21, she could have an infant named Baby Candy.

Five dollars a month doesn't sound like much, but through these microtransactions — payments of little as a quarter for a virtual item — IMVU Inc. reaps roughly $1 million in revenue each month.

Micropayments have been one of the Internet's most-hyped and least-successful ideas — until now, as virtual world creators and video game companies are beginning to expect, and even depend on, players to buy virtual goods in little chunks.

The idea has already taken hold in Asia, where piracy is widespread, making it harder for companies to profit from the traditional model of selling the games themselves. Now some game companies in the U.S. are taking a stab at micropayments as a serious source of revenue.

Instead of charging for each virtual item separately, companies sell chunks of credits — through PayPal, credit card transactions or physical game cards bought in stores like Target — usually for $5 to $25 at a time. Users then spend the credits in small installments, which often amount to just a few cents.

Corocan, of Aurora, Ill., says the money she spends is worth it, but anything more a few dollars a month "is taking it too far."

South Korea's Nexon Corp. has based its entire $266 million business on giving away games for free and charging small amounts of money for little extras that enhance the playing experience, such as virtual clothes for online characters and a $4.40 "slime stick" in the role-playing game MapleStory. Min Kim, the company's vice president of marketing, compares it to the classic model of selling razors cheaply and making money on razor blades.

The company, founded in 1994, is an established success in South Korea, and now is expanding to North American markets, where most video game money is still made in brick-and-mortar stores. This year when Nexon launches SugarRush, its first game specifically for a North American audience, players will be able to customize their cartoon-like characters and battle with or against their friends.

Already, Nexon's $10 and $25 game cards are big sellers in big retailers like Best Buy Co. and 7-Eleven Inc. In Target stores, Nexon says, its game cards are the second best-selling prepaid card after Apple Inc.'s iTunes. Target Corp. spokeswoman Brandy Doyle wouldn't confirm that but said "I can say that we are very happy."

Large U.S. game companies such as Electronic Arts Inc. are taking notice. The company's chief executive, John Riccitiello, told a recent investor conference that micropayments will be crucial for EA's business as it distributes more games directly to customers online.

As an example, he cited Spore, a highly anticipated game launching Sunday in the U.S. after years in the making. The game lets players create an evolving universe, from single-celled organisms all the way to civilizations capable of intergalactic travel. Spore does not yet use micropayments, but Riccitiello said he envisions eventually selling separate accouterments for the game like "body parts and planet parts and vehicle parts."

"The microtransaction potential for this game is huge," he said.

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