Archive for October, 2009

Virtual Goods: Market, Types, User Psychology

Virtual Goods have begun to penetrate social networks like Facebook and mobile applications like Tap Tap Revenge (by Tapulous) and I Am T-Pain (by Smule). They have spread like wildfire, with game developers itching to better understand the economics of virtual goods and the psychology of gamers. This post will explore the rapid market growth, types of virtual goods, user psychology and steps to launching virtual goods in your application or game.

Market Growth

The estimated market size has gone from a nascent space in 2008 to approximately $500 million (Aug. 2009; Source: Viximo) to over $1 billion by end 2009 (Oct. 2009; VentureBeat) only 2 months later. If you are at all surprised by this vast market size, you should know that the Asian virtual goods market is seven times bigger than US (estimated at $7 billion for 2009).

Zynga, one of the leading social games companies, launched a game called Farmville in June 2009, and has already become the most popular game application on Facebook with 62.4 million active users as of October 29, 2009 and will easily break through $150 million in 2009 revenue.

Types of Virtual Goods

Developers are very creative. So far, the types of virtual goods can largely be placed into 2 buckets:

  1. Decorative Goods: Do not affect game statistics / game play (e.g. avatars)
  2. Functional Goods: Affect game statistics / game play (e.g. Farmville tractors — did you know users bought 800,000 of them yesterday)

Since functional goods affect game play activities, game developers should give users the ability to either earn these items/goods through game play or provide a shortcut in acquiring them with a virtual currency. Functional goods can be managed to have low or high value price points; generally, the value of these functional goods can be set by carefully managing and understanding scarcity. Ensure to have some items that are very common (Developers: ensure to “prime the pump” by getting users familiar with using some free and low-cost items), and some that are very rare and expensive.

While A/B testing how much users will pay for items, understand that as the aggregate number of social interactions per user increases within an application, each rare item’s value will proportionately increase for those users. Another consideration while establishing demand for your virtual goods is whether or not you need a secondary market where users can sell, trade or profit from their virtual goods (See more from Bill Grosso’s presentation on Managing a Virtual Economy).

There are many reasons why a user would pay more for certain items. Let’s try to better understand game user psychology.

Psychology of Purchasing Virtual Goods

Users will buy virtual goods for many different reasons. Buying decisions will be based on a number of factors including user motivation, several forms of influence, boredom and competitiveness. If you’re a developer, think carefully about users of your applications: Why would they want to buy a virtual good within your application? What added value would they receive? Which other people would see they bought this good, and could they benefit as well? Below, I outline a number of different reasons why users choose to purchase virtual goods:

  • People are impatient (time = money) and want to advance through game play more quickly
  • People are competitive and want to get ahead (of friends, peers, the world)
  • People want to express themselves in unique ways (akin to the culture of decorating cell phones in Japan)
  • People want to feel good about themselves (donating to charity and publicizing)
  • Gifting allows people to foster and maintain existing relationships with others in an increasingly electronic world
  • Gifting allows people to create new relationships
  • People will return gifts due to the rule of reciprocation (influence), which prompts us to repay what someone has given us
  • Provenance (e.g. did a famous user own this item in the past?)
  • Branding (virtual goods branded by real-world companies)
  • Rarity (scarcity)

5 Key Steps for Launching Virtual Goods

In a presentation by Amy Jo Kim, CEO of Shufflebrain, about why and how virtual goods work, she outlined 5 steps for launching virtual goods.

  1. Create meaningful content
  2. Prime the pump with free goods or currency
  3. Create demand for premium content
  4. Offer fresh content at a range of price points
  5. Make it easy to purchase currency

There are many different companies that offer solutions to help with your virtual currency. If you’re looking for good vendors, try: PayPal, Gambit, boku, Zorg or $uperRewards.

Why are your users buying your goods? How did you generate interest or scarcity in your application? Please share your story and learnings about user psychology and buying decisions in the comments area below.

  • Share/Bookmark

Geeks Love Halloween

The rumors are true. Technology geeks do have a thing for Halloween. Mashable scoured the web and found some great pumpkin carvings well representing the current state of web technology and social media. The Twitter Fail-Whale (below) is great and there’s a fantastic carving of Diggnation hosts Alex Albrecht and Kevin Rose.
See more at: 12 Awesome Social Media Halloween Pumpkin Carvings.

failwhale-pumpkin

Source: Scott B. on Flickr via Mashable!

The iPhone App Store is also cashing-in on the Halloween frenzy. The App Store is promoting its “Halloween Apps & Games” section where you can carve virtual pumpkins with “iCarve” and play Halloween-themed games.

apple-store-smort-zombies

One notable oddity, a game called Attack Of The Zombie Bikini Babes From Outer Space was launched in the App Store two days ago. Smort (rumored to be Smule’s Evil-Twin by Techcrunch) launched the game. As TechCrunch puts it, Smort looked at common themes popular within App Store games, and generated a list: Bikini Babes, Zombies, Bombs, and Bloodshed. This game is the result of that (innovative? smart? creative?) thinking. What are your thoughts? (see video below)

Personally, I think this is really smart. Now, although this game doesn’t necessarily look that compelling, I think that Smort has the right thesis: Research. Build. Launch. Iterate. Repeat. App Store trends are constantly changing. Therefore, monitoring user behavior and download trends can lead to new learnings about your target audience.

My advice: If you’re a startup/entrepreneur, go research your market (do a quick market survey if you wish), build your app and launch it! Review your analytics/metrics, iterate and launch again quickly. There are some app-hungry consumers out there.

  • Share/Bookmark

Switching from Blogger to Wordpress

Over the last 2 days, I have undertaken the monumental task of switching my blog from Blogger to Wordpress. To say the least, it was an experience. I thought I’d share my findings, and explain how to do this without losing any data, tags, RSS subscribers or Google rankings.

bloggertowordpress

First, check out the tutorial from Digital Inspiration; it saved my life. The tutorial covers Wordpress installation, Blogger account import procedure, 3 steps to handle redirects from old Blogger pages to your new pages on Wordpress.

It is particularly good for ensuring the 301 redirects from Blogger to Wordpress successfully. It worked for me the first time with no problem. It will also be easier for you if you’ve been using a service like Feedburner to manage your feed, since that address will stay the same. Make sure to read below, because you may still hit a few walls with the tutorial above, as I did.

Permalinks

For example, you are probably going to want “pretty permalinks”. You can set these in the Wordpress admin by going to “Settings” –> “Permalinks”; choose “Custom Structure” and type: “/%year%/%monthnum%/%day%/%postname%/” (no quotes).

If you are getting an error when trying to set this custom permalinks type, you probably don’t have the mod_rewrite function working. If you are running on an IIS6 machine, as I am, you can get around this fix by creating a file called “.htaccess” and storing it in your root folder on your FTP server. Add this into the “.htaccess” file, save and close:

# BEGIN WordPress
RewriteEngine On

RewriteCond %{REQUEST_FILENAME} !-d
RewriteCond %{REQUEST_FILENAME} !-f
RewriteRule . index.php [L]

# END WordPress

Turn Categories into back into Tags

You may also notice that the Blogger import made all of my tags into categories. Luckily, if you go to “Tools” –> “Import” within the Wordpress admin area, there is an option called “Categories and Tags Converter” that will get this fixed for you very easily.

If you’re going through a similar process, I hope you find this helpful! If not, I hope you enjoy the new blog layout and widgets. Please let me know your thoughts, as I always invite conversation below. Soon I’ll add Facebook Connect integration to make commenting much easier for my visitors.

  • Share/Bookmark

Me: Rebranded

RIM just recently launched BlackBerry Messenger 5.0 (or BBM 5.0). In doing so, they have given each person a “trendy” new way to identify one another. Here’s my new identity:

It’s a QR Code, or a 2D-bar code, for those of you getting acquainted with the technology. Fairly new to North America, it’s actually been around since 1994, first developed in Japan, and quickly adopted by South Korea.
It’s actually very smart. By using this technology, RIM has developed buzz. Instead of having to be a computer science major, anyone can now add each other to the BBM community. Hold up your BlackBerry and scan a QR Code, and viola, you’ve just added a contact. Nice!
People are excited about these foreign images and are eager to upload, scan, share and discuss the process with their friends. The only problem is if you have too many friends: Kevin from Crackberry.com posted this to Twitter … 2 hours later, he had over 10,000 requests and his BlackBerry became unusable. Who said popularity was a good thing?
  • Share/Bookmark