Nexon America's pre-paid card empire

Nexon America CEO Daniel Kim tells an interesting story about how his company created one of the biggest phenomena in gaming retail lately: The pre-paid card. Nowadays, you can find rows of pre-paid cards for Nexon's microtransaction-based games like MapleStory or Vindictus lining the shelves of any 7-11 or Target. But a few years ago, both Target and its customers had to be sold on the idea.

Kim and his company came up with a way to teach customers how it worked, right inside a browser-based MMO. "We had a quest in-game, to go to Target in-game, to the section where they had the game cards," Kim says. Target kept the cards not in the gaming section, but in the music section alongside iTunes gift cards. "So three months leading up to the actual release of the card, we actually had a quest in-game to go get allowance from an NPC, go to the Target store, go to the music section, go find a CD card."

The training worked. "Day one," says Kim, "the cards were released, they were sold out in so many stores. They called us and said, 'We gotta print more cards.'"

As shared in a recent press event, Nexon's numbers are pretty ridiculous. Its Dungeon Fighter Online game (a browser-based mashup between an MMO and a character-based brawler) proclaims to have 200 million registered users worldwide. One in six people in China have played DFO, and as Kim said, "there are a lot of people in China." And even in North America, Nexon has some amazing stats: It boasts 12 million users in this region across all games, and the first and most popular of these is MapleStory, with 7.6 million registered users. These are dedicated players, too -- over the last quarter of 2010, MapleStory hosted 44 in-game weddings per day. Nexon keeps breaking its own records; for overall registered users, for revenue from them, and for concurrent users around the world.

So who are all of these players? They're relatively young, though not as young as you might expect. "Our median age is really 17, 18, 19," says Kim. "That's the peak of our curve." And many of Nexon's players aren't gamers, or at least aren't online gamers. "A lot of our users, Maple Story is their first MMORPG. They've been playing games, but they haven't been playing online games, so this is their first online experience." Kim says that most of MapleStory's players only got into it because they were asked to play by friends, and the reason they jump in rather than playing a game like World of Warcraft is that "there's no barrier to entry. If they have a computer and an internet connection, they can download the game and play for as long as they want."

All of Nexon's titles are driven by microtransactions, so players can buy almost any item in the game, from cosmetic skins and armor to extra health potions and even "convenience items" like XP boosts and superpowered buffs. And they're all selling -- Nexon made $29 million in revenues in 2007, rising to $45 million in 2009 and double-digit growth over that last year. Where's all this money coming from? Kim admits that a lot of it is from parents' wallets, but kids would spend it anyway. "There is something like $1.5 billion of available cash in the pockets of people 17, 18 years old," he says, and Nexon is just taking its share.

What about the people who don't bother about an upper limit, who gladly spend entirely too much money on an online game? "We have some people spending thousands of dollars a month with us," admits Kim, who says that fraud is always a concern. "We've had cases where a kid will steal their parents' credit card and rack up a bunch of charges. We have to watch out for those cases."

But Kim says that even beyond fraud, the company is always watching sales and keeping an eye on customers who pour money into its games. "Obviously, if it gets to a ridiculous amount, for many reasons we want to get to know them a little better, right? Not only because they're spending a lot of money with us, but also because we're very conscientious about -- is this real?" Even if it is, Kim says Nexon has a responsibility to keep its players from seriously overspending. "We want to make sure that's a legitimate player, and we want to make sure it's not falling into some sort of a weird situation."

The company's next North American release is a WoW-style 3D MMORPG called Dragon Nest, due out later this year, and Nexon America is confident it will be an unpredecented hit. "We're confident in what we're doing and in our games," says Min Kim, VP of Marketing. "We're here to call our shot and say that this is going to be one of the biggest games of the year." Min Kim also says, however, that the company is trying to "redefine what a hit is" -- rather than go after big releases and "blockbuster" status, Nexon's titles represent a slow burn that builds on relationships with their customers. "We look at this as a service, not a product," says Daniel Kim, as he compares Nexon's titles to TV series like The Simpsons or Cheers rather than a big summer movie.

In the end, it comes back to the pre-paid cards, which cracked the code of how to get Western audiences to spend money on these games outside of the tangled credit card system. "We basically introduced that category of products here in North America," says Daniel Kim. "That makes it possible for us to monetize and have a healthy business here." Behold, the power of an in-game quest.