Friday, March 19, 2010

Monetizing Social Games

All social game designers face the challenge of monetizing their games. The problem they face is this: Providing premium entertainment does not by itself guarantee revenue, especially in a world where customers are reluctant to pay large sums of money for a product, and a precedence for free product exists.

This is especially true of iPhone development, with its vibrant Apple App store and thousands of free games, but also troubles social networking sites, console platforms and stand-alone game sites.

The solutions to the problem are many, and new solutions become available as disruptive technologies are introduced, especially in the fast-changing mobile environment. But what are the ingredients designers use to try to beat the system?

Virtual Currencies. Virtual currencies have become the bread and butter of revenue generation amongst most social games. While some designers opt for direct sale of virtual goods for real-world cash, many have found it is advantageous to introduce virtual currencies. Virtual currencies help maintain a user's suspended disbelief and immersion in the game world, and by doing so distance them from the reality of paying real dollars for something with no real-world value. Virtual currency can be purchased in blocks that encourage further real cash investment.

For example, by pricing some premium items slightly higher than the largest purchasable block of virtual currency, users can be encouraged to purchase more currency than would normally be inclined to. Such practices may be deemed unscrupulous by users if directly explained, however, under the guise of getting the better sword (or whatever) the reality doesn't sink in.

Virtual currencies can also be used to create a network of games that cross-promote each other, and serve to lift and shift users from game to game similarly to how loyalty program points can be used to lift and shift users from brand to brand in the real world. Instead of changing user buying habits, they can shift user play habits, by giving them premium access to a game they might not otherwise try.

For example, a user amasses a sum of virtual currency in one game, and is allowed to take it, at face value or at an exchange rate, to another game for a head-start advantage.

Reward Systems. Reward systems give users something for reaching milestones and achieving things in games. And by creating 'meta rewards' - rewards about playing games, opposed to attaining in-game achievements - designers can encourage users to spend more time playing more products. The concept thrived in the console world and spilled over into social games. Users like to support their intellectual and emotional investment in games by collecting 'stuff'. As with all collections, however, a balance must be struck between offering collectibles and offering too many. Having too many rewards leads to user confusion.

Marketing offers. Marketing offers have a bad rep in the social games world, and most of that can be attributed to profiteering companies with loose standards pioneering the industry. Marketing offers can work, in systems where virtual currency is earned by users in exchange for carrying out some kind of marketing activity.

It's important to note that users sometimes treat offers as originating from the game where they find it - so reputation is key. On the positive side, quality offers with reasonable rewards will be well received by users. And on the negative side, users can hold the game developer responsible for a bad offer experience.

Advertising and Location Based Advertising. Advertising in games must be done in a non-disruptive way that does not intrude on the game experience. Most developers shy away from including ads because by the very nature of advertising users are encouraged to think about something other than the game when they engage with an ad.

There is a great opportunity, however, for advertising in mobile social games through location based systems. By acknowledging that users playing games on mobile platforms are likely not sitting in front of a computer or game console, but are out in the world, ads can offer users real value alongside the game experience.

For example, a user playing a mobile game while at a coffee shop would likely positively view a special offer from the same coffee shop. The user is already at the location and making use of the offer would be a minor disruption to their game play experience. Location based ad systems can offer that kind of granularity, and will gain popularity as they develop over the next few months.

Designers can reap the greatest value from these ingredients if they are used to build a platform that evolves with its users. By developing the various monetization aspects of the platform, and intelligently integrating new technology opportunities as they become available, social games can continue to be enticing, revenue generating entertainment experiences.

© Jeremy Buehler and Rogue Tendencies ( 2010.

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