Random Musings

my last panel of the conference

• Adam Caplan, Super Rewards
• Matt Mihaly, Sparkplay Media
• David Perry, Acclaim
• Anu Shukla, Offerpal Media
• Moderator: Joel Brodie, Gamezebo

Q: Is there the danger of a virtual good bubble?

AS: Virtual economy still appears to be healthy even though regular economy is tanking.  People have different entertainment profiles, so they develop loyalties towards certain worlds.

MM: There is no demand for virtual goods.  There is a demand for games, which will cause gamers to start valuing the context of the game.

DP: People just want choice.

Q: Conversion rate from free to pay to play?

AC: In social networking space, we have about 30-35M monthly active users. approx 12-15M come to super rewards offer page on monthly basis, 50% would click on one of the offers. 20-25% would complete the offer.  in sum, = 5% of users are converted.

MM: This is a bad distinction. a $5 paying player is essentially a free player and a $2000 player is not.

AS: you must separate by game type. an engaging multiplayer game at its height of popularity, close to 50% of users will be paying in some way. if its just a virtual good or softer avatar game, then 5%.

DP: we have 7M users, $70-$75/player - lifetime, but there is also a cost per player. we do not feel like we are doing a great job - we are listening to people talk about the “funnel” and that is really important.

Q: What is the psychology of getting someone playing for free to convert to paying?

DP - charge a very low amount to do the first option. ex: $0.05 to gamble.

AC: allowing users to try before they buy, by having them fill out a survey, etc., so they are not pulling out their credit card, but they are participating.  you want to try to reach them at the 8 minute point, where they have played with the game enough to like it but not get bored with it.

AS: you need to let the user first get engaged with the game. so there must be some levels for free.  then you want them to compete to reach a higher level. competition ultimately makes people pay. but if its a competitive game, then you must make sure there is a level playing field - you cannot buy your way into a skill game. also, dating games have a different psychology - you want to impress someone.

Q: What % of revenues are from hardcore players (whales) versus avid or casual user?

DP: Console games which do not have this additional virtual goods layer, then they are missing a crucial revenue opportunity. Imagine Halo or Gears of War with a vitual good aspect.

Q: How do you set your price points?

DP: Start high because you can always adjust down, but users hate it when you adjust up.

AS: Watch for inflation - do they have enough to spend it on? do they value it enough?

MM: Try auctions and let your users decide.

Breakout session by Andrew Chen and David James. They are running this session as a case study of Whirled but I will be pulling out the major framework of the discussion for now.

Key metrics -in case you didn’t know how to measure. (with PuzzlePirates numbers in parentheses)

• average customer lifetime value (~ $115)
• conversion (from landing to registration) (~5%)
• retention (returing after one week) (~35%)
• purchaser (registration to revenue ~3.5%
• customer lifetime
• avg revenue per player per month
• avg registrant value (~$4)

Profit = lifetime value - cost per acquisition.

Reinvest value into user acquisition.  Look at the factors that drive up the acquisition costs of new users:

Source of traffic (ad networks, publishers), cost mode (CPM, CPC), user requirements* (install, browser plugin), audience and theme (horizontal vs vertical), funnel design (landing age, lengths, fields), viral marketing* (facebook, email), A/B testing process*** (none, homegrown). Of these factors, the most important are followed by *.

if your acquisition costs is less than your customer lifetime value, then you should go out and buy more traffic (to the extent cash allows).

LTV = (100%) * week1 revenue + (% retained) * week2 revenue + (% retained) * week3 revenue

Factors that drive revisit rate %: product depth* (casual, utility), notifications (news, user-to-user), community* (real friends, shared), events (holidays, bdays), usage model (daily, weekly). Of these factors, the most important are followed by *.

Panel 3 of the day (Virtual Goods Summit 2008) has the following:

* John Hwang, RockYou
* David King, Lil Green Patch
* Shervin Pishevar, SGN
* Andrew Trader, Zynga
* Moderator: Mark Wallace, Wello Horld

Q: What are the advantages/disadvantages of doing virtual goods in a social network setting?

john hwang - updates are important; refresh content to keep users engaged; userbases on social networks is growing which directly correlates to your own userbase growth.

andrew trader - you do not control the users, the social networks do. that makes fraud and cheating a bigger problem. harder to build fraud and and cheating prevention systems. wants facebook to offer a payment processing system.

shervin of sgn - recommends you build a standalone service to go with your FB or Myspace app.

Q: what % of users on social networks purchase virtual goods? average revenue per user (arpu)?

AT - depends. estimates of 3-8% all seem high. economies are complex and you have to figure out how to manage the economy. (note from earlier in panel, AT mentioned $4K-$5K daily revenue on yoville)

JH - 3-5% is possible, but we see abt 10% of users try to pay for currency into the game. of the 10%, only 10% actually complete the transaction. also recommends a limit on able to level up via currency because it creates inflation of points and ruins the experience.  sees $20-30 revenue per thousand active daily users on speed racer.

DK- very limited percentage of users want to pay, so it avgs out to less than penny per user.

SP - its healthy but we will not disclose.   (lol)

everyone seems to want FB to develop a payment system. this would 1) help with getting users over the account registration hump, 2) make it easier to manage fraud, 3) see #1:)  but after seeing the fiasco of beacon, do we really want FB to have our financial information as well?!?!

Q: barriers for entry?

JH - apps in social networks have more virality because people want to show off their personalized creations. they buy, mod, customize and then show all their friends. therefore, there is room for innovation and success by individual developers.

AT - the entry costs for developers in the social network business is going up.  games are becoming better quality and more rich in experience, so it now takes more to build and launch.  (JH - jokes that AT just wants individual developers to go work for zynga instead)

Audience question: what is the ratio of active users to registered users and what are your retention rates?

DK - says those numbers dont matter so much because there are so many other factors at play - size of audience, activity of active users, etc.

no one else wanted to answer the question.

audience question: Pros & cons of using real dollars versus points or other forms of virtual currency?

JH - think back to when you were a kid in an arcade. after you changed you money into arcade coins, you didnt know what you were spending. it encourages people to spend more.

* Susan Choe, Outspark
* Lee Crawford, Twofish
* Christopher Donahue, Live Gamer
* Karl Mehta, Playspan
* Moderator: Susan Wu, Ohai

Great audience question - to what extent is it good or bad to seed the economy by giving away free credits or points to get trading and volume moving?

susan choe - do not give anything away for free. period. that will train your community to expect free credits for free.
susan wu - it is better to teach members to do things for credits - like update email, give real name, etc, and then give them credits for that action. this creates a good expectation of reward for engaging in a particular transaction.
dan - reward time value - when ppl spend a lot of time on the site, reward loyalty.  some sites have two forms of currency which can buy two kinds of different kinds goods.  this helps alleviate the gap between the haves and the have-nots. allows members who are strapped for cash but loyal to participate.

at the virtual goods summit today - looks like its going to be an interesting conference - good crowd of attendees. also, i am impressed with the number of women at this conference - way higher than the norm at tech conferences.  wonder why? are women in tech all in virtual worlds?

first panel up today: Branded and User-Generated Virtual Goods

* Brian Balfour, Viximo
* Lee Clancy, IMVU
* Amy Jo Kim, Shufflebrain
* Sean Ryan, Meez
* Moderator: Margaret Wallace, Rebel Monkey

funniest thing to come out of this panel was a comment by sean ryan of meez.  apparently, the women in meez wanted their avatars to look more like they do in real life.  however, the default body type was thin. they received alot of feedback for more fuller figures and changed the options to included more plus sizes.  they still get comments that the plus size isn’t plus enough.  but for men, these issues do not really arise - the most common body type for men is “Buff”.   hilarious

interesting financial fact: imvu is an english only, US based product, but about 40% of their revenue is international.  perhaps the era of focusing only on US visitors is over?

overall sense of the panel is that branded goods are not in high demand as people think. users do not really want the premium branded items yet. and if you are creating a promotional item, it should be free.