Tuesday, September 28, 2010

Social Game Design: Monetization part 2, Offers and Paid Currencies

It should be obvious that if you want to make money from a social game there has to be a way for the player to put money into the game. The two major ways for this to happen are direct payment (they mail you a check, or input their credit card information) or they can do "work" for you. I use quotation marks there because what players do is not something you might consider work. Usually through a 3rd party, the player spends their time and attention on something that results in the generation of value for someone (hence "work"). It could be direct value to you, but usually you're busy trying to make a game, not harvest the work of the internet masses (if you wanted to run wikipedia, well, I hear that job's been taken.) So this third party asks the player to do some work and in exchange the third party pays you money. You complete the loop by giving the player something in your game. The industry term for these arrangements is "offers."

Now you have two methods for players who want more out of your game to give you money. What are you going to give them in exchange? You could offer them individual rewards for each offer they complete, or let them purchase each reward directly with their credit card. There are some problems with this, however. On the offers side, it can be difficult to standardize the offers to be of equal value. The offer providers will have many options that are not of equal value to them. If you force a standardization on them you'll be leaving money on the table - sometimes overpaying a player for a less-idea offer. Either that or you'll only be accepting a very few offers, and players won't be able to find an offer they find attractive ("work" that fits their preferences). On the credit card (or paypal, etc.) side, if you ask the player for direct payment for each little thing you sell them they will be annoyed. Also you'll probably want a minimum purchase amount on a credit card transaction (you pay fees on those, after all) which severely limits what you can sell to the player.

For a single purchase game, like a retail game or a traditional download game these wouldn't be big issues, but we're talking about social games here, where the microtransaction is king. All of this leads us to the need for an intermediate step, a currency within the game that can aggregate the player's payment in different amounts and from a variety of sources into one place. Then this paid currency can be used by the player in various amounts to buy things in the game that they desire. Freeing up the amounts both coming in and going out vastly improves the efficiency of the system and the happiness of all parties involved.

Using paid currency has other advantages as well. There is a significant psychological effect on the player of having a currency they are not natively familiar with. In the United States (for example) everyone knows the value of a dollar - it's the money they (we) use every day. Another currency, anything from yen to your game's paid currency, is less solid. The value of it is less clear and it has a bit of a fantasy quality. This is one reason people tend to spend more freely when on vacation - they can't quickly calculate the value in their native currency, and the foreign currency doesn't hold that intrinsic-value grip on their psyche. The paid currency in your game will act the same way.

When setting up a paid currency for your social game you will need to decide the conversion rate. How much of your game's paid currency does a player get for their dollar (or euro, yen, wan, peso...)? I hope it's obvious they should get better than 1 for 1. You want to make it difficult for them to convert, so I would avoid all strict factors of ten. If you observe some major and successful paid currencies you'll see numbers like 80:1 (XBOX live), or somewhere in the 760s:1 (Nexon). The two biggest reasons for these inflated numbers are: giving the player a feeling of value, and reducing the size of your smallest price. When you pay $5 and get 400 paid currency you feel like you're getting a good deal. When you're shopping in the game's store and you see something for a mere 10 paid currency, you feel you can easily afford it because that's what? Some small fraction of a dollar that you can't be bothered to calculate because you've already clicked "buy" and moved on.

There's a lot more to talk about with in-game currencies, so you can expect a return to this topic in the future.

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