All the Other Kids are Doing It

Rafe Needleman writes about a company that uses peer pressure as a marketing tool to sell online games:

Xfire, made by the eponymous company formerly known as Ultimate Arena, is an application that gamers run on their desktop, like an instant messenger client. The application tracks what game you are running and lets you see which games your friends are playing. You can just click on any friend's name and, if his (or her) game server has room on it and you have the game software, you'll find yourself in the same game, on the same server as your friend, so you can play with your pal.

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Xfire is free to users and is growing well—the product has been out for four months and has been downloaded over 500,000 times. So where's the money? Of course, gamers want their pals to be running Xfire so they can find each other. This means that the application should spread virally (and current download numbers indicate that it is). Xfire sells advertising in the client software, and it is highly targeted.

And here's the peer-pressure angle: if a bunch of your friends have a game installed that you don't, you won't be able to play with them. Xfire, though, will alert you—it will tell you, "Five of your ten friends are playing Far Cry, and you don't even own the game." Then it will sell the game to you, and make you one of the cool kids. Of course, the company takes a big cut of these transactions.