Anger From 1 Ripoff + 2 MBAs = a Game Plan
Monday, November 6, 2006
Here's how Jon Dugan's business idea was born: Last year, Dugan, a student at the University of Maryland, went to a used-video-game store with his brother and a pile of Xbox games. For a stack of 17 used titles, they got $34 in store credit. Out of curiosity, the two went back to the store the next day. The games they traded in had been put on the shelves with prices ranging from $12.99 to $32.99.
"We got ripped off," said Dugan, 23.
It wasn't the first time he had felt like that, but this time he came up with a plan. This summer, he launched a Web site to help game fans get a better deal -- and eventually make some money for himself. On Goozex, gamers can save some bucks by connecting with each other online and trading games through the mail.
Dugan, a senior criminal justice major, runs the site with two partners, friends who recently graduated with MBAs.
This isn't just a few college guys with a hobby and a Web site; it's a registered business seeking venture capital investment. Goozex Inc. is incorporated in Maryland and has three employees, each with a title: Dugan is the chief operating officer, Mark Nebesky is director of marketing, and Valerio Zanini is chief executive. All are lifelong video game fans who have sought internships or jobs in the industry, but it's a tough field to crack. Dugan, for example, has a friend at game-publishing giant Electronic Arts Inc. who did copying and gofer work for three years before landing a job as a lowly bug tester.
Goozex members pay a dollar per transaction to use the site's matchmaking service and store up points that serve as a form of currency toward future trades. Send out an old Game Boy title and you might earn 100 Goozex points. Send out a new-ish Xbox 360 title and you might rack up 850 points. You spend the points when somebody else has a game that you want. The business model is similar in spirit to such trading services as Lala for CDs and Peerflix for DVDs.
Goozex is a shortened version of Dugan's original, less-snappy name for the service: "Goods Exchanged." Friends encouraged him to go with the shorter name -- and it didn't hurt that the Goozex.com domain name was available.
Goozex has 1,500 users trading a collective library of almost 7,000 games, for systems ranging from the defunct Sega Dreamcast game console to the Xbox 360. The service's most avid user is a guy in Colorado who somehow goes through 20 to 30 games in a month, Dugan said. With the recent addition of a customer in Alaska, the company has a user in every state; the next goal is to make Goozex available in Canada.
Video games can be an expensive hobby. Take the new Xbox 360 console: The premium unit costs $400, and many games for the system cost $60. Many users would also want a spare controller ($50), a year-long online subscription ($50) or a wireless network adapter ($99). It adds up quickly, especially since some of the most avid players are cash-strapped college students.
Like any good MBA, Nebesky can recite some of the numbers for his target market off the top of his head: The used-game market is estimated to be an $800 million business, according to research firm NPD Group Inc. Some industry researchers say the business will double by 2008.
But discount-game experts say trading games is a tough business model to make work. "If I thought I could make money off of this, I would do it myself," said David Abrams, known to gamers as CheapyD online. Even though Abrams is something of a skeptic, his Web site has been one of the biggest sources of new Goozex users.
Goozex has a few competitors that sprang up quickly after the site's launch in July. But at bargain-hunting Web sites such as GamerDad, readers and users have been leaning toward Goozex. It has a reputation for having a better selection, an easy-to-use interface and responsive customer service.
"People ship stuff in very good condition, they ship when they say, and wrap it well and it arrives in a timely fashion," Michael Anderson, a fan of handheld games, said in an e-mail interview. Anderson has unloaded six old games from his collection and received five in the mail from his fellow members. He had planned to buy some of the games he got through Goozex at a retail store but saved about $120 by trading instead.
Nebesky hopes that such satisfied customers will spread the word. Most of his marketing work is done online, at such sites as GrrlGamer and Evil Avatar, but when Nebesky went to a wedding on the West Coast a few months ago, he made side trips to college campuses and handed out Goozex fliers. He has also been brainstorming about how to reach gamers in the military, another target demographic.
Dugan and Nebesky said they have used their own service. Nebesky is playing a game he recently got called Lego Star Wars II, and Dugan is expecting Saints Row for the Xbox 360 in the mail soon. But the two said the demands of their new venture have taken a toll on their favorite hobby.
Between classes and business calls, Dugan said, "I hardly have time for games these days."