We Rule has a built-in social layer, which is actually pretty good for users that have already found their friends. However, finding friends and other gamers isn’t easy. As Canadians join the “We Rule” beta, many gamers are left looking to find other users and have turned to forum sites and paid sites to exchange data (gamernames, current levels, businesses owned and open) on becoming in-game friends to help one another outperform the competition.

Better than turning to forums, which require signing up (and sometimes associated fees), feel free to use the comments section below to list your information to exchange with others.

This is the preferred format for exchange:
Plus+ ID: sook
Level: 14
Open Businesses: 16

Gamers: Please feel free to check back in and leave a new comment (or exchange request) as you find your number of customers decreasing.

I often provide strategy and product development guidance to some of our portfolio companies; however, I wanted a more immersive experience and to be part of the excitement of startup life. So over the last several months, I increased my assistance to a particular portfolio company in the Toronto area, which I believe is well positioned in the marketplace. Strategy discussions with management of this company led to a conversation to bring me on-board as Product Manager of a new mobile social game at the idea stage. Eager to help the company succeed and to gain additional experience, I undertook a more formal responsibility on evenings and weekends as Product Manager. It was a perfect fit for both the company (lacked product management capabilities) and my career ambitions.

As part of the team, I faced my first challenge: Figure out the best way to manage the development team and the product. I evaluated several methods of product development and eventually settled on SCRUM since it is ideal for agile development with rapid iterations and incremental updates — perfect for an iPhone game.

For product managers that are new to SCRUM, be sure to check out the SCRUM Reference Card (great overview) and beginners SCRUM Guide (fairly basic). These were helpful resources in my quest to better understand this product development process.

It was my next goal to conceive of a process to coordinate everyone’s collective efforts on the team to come up with ideas and potential features for the game and to convert that list into the Initial Release Plan and Product Backlog for the game. I created a spreadsheet in Google Docs and shared it with the team. I wanted to be a very transparent Product Manager and show the team everything that I saw — idea list, resource planning, timeline estimates, business value associations to product features, etc… I did this because I believe that transparency will help the team better understand my points of view and decision-making rationale.

Since I am continuing to learn, I invite you to have a look at the Initial Release and Version planning spreadsheets that I created to manage the product development process. Naturally, I stripped out any game-specific information, removed the names of people involved and altered values so that it would no longer represent our plan in any fashion. Other small changes to this public version include:

• For the idea list tab, each item should be a minimum of 4 hours to a maximum of 16 hours only; tasks less than 4 hours should be placed on each developers Scratch Pad and aggregated into an item on the list; tasks greater than 16 hours should be broken down into components (if possible) to fit within the 4 – 16 hours window for ideal planning purposes.
• Each developer would have his or her own “Scratch Pad” (the demo version only shows 2).
• The only tab that was completely removed was the method by which we determine business value for each product feature.
• The “Product Backlog” tab is dynamically driven from the “Idea List” tab and broken-down into version and sprint for each assessment; a tip for collecting the unique “Groups” is to export the long list of Groups from the “Idea List” into Excel and create a Pivot Table, then select the grouping and extract the unique elements to import back into Google Docs.
• In the “Product Backlog” tab, you should determine your own complexity factor for the project  (a guide to determining this factor can be found in the SCRUM Guide linked above).

I would love to hear your questions, comments and (hopefully) suggestions to further improve what I have already created in hopes of making this effort more successful. If you would like a copy of my example spreadsheet, please let me know and leave me your email address in the comments section below; I’ll make sure to get you a copy either on Google Docs or as an export to MS Excel.

My next post will discuss putting this plan into action.

Metagame Design – Presentation Transcript

1. MetaGame Design Reward Systems that Drive Engagement Amy Jo Kim CEO, Shufflebrian
2. What is a Metagame?
3. Using out-of-game info or resources to affect in-game decisions Gaming definition
4. Layering an rewards system onto an existing activity
5. Metagames are Everywhere
6. Collecting Complete Collections — Gain Status, Access, $$
7. Behavior Chart Collect Stickers – Earn Privilege or Prize
8. Karate Develop Skill – Earn Rank, Prestige, Powers
9. Scouting Complete Tasks – Earn Badges, Rank, Prestige, Powers
10. Frequent Flyer Programs Spend Money – Earn Points – Redeem for Flights
11. Arcade Spend Money – Earn Points – Redeem for Items
12. Text RPG Complete Missions – Earn Points – Redeem for Items
13. Contest/Raffle Take Action – MAYBE Win Item
14. Contest/Raffle Take Action – Maybe Win Item
15. Tournament Play Sport – Enter Tournaments – Earn Ranking/Trophies Leagues & Teams are part of this
16. Tournament Play Sport – Enter Tournaments – Earn Ranking/Trophies
17. So how do you design a Metagame?
18. Metagame Design Framework Viral Outreach Feedback & Rewards Points
19. Metagame Engagement Loop Post updates, give gifts, send taunts Get feedback, earn rewards Take actions, earn points
20. Act React Customize Create Earn Spend Step 1: Assign points to actions Viral Outreach Feedback & Rewards Points
21. Which ACTIONS earn points?
22. Which REACTIONS earn points?
23. 3 Types of points
    • Experience Points (XP) – earned directly via players’ actions – track & reward socially/economically useful player actions
    • Skill Points (Score, Rank) – earned via interacting with the system – based on mastery of the activity or game
    • Influence Points (Rating, Reputation) – earned via the actions of other players – proxy for quality/reputation/influence – track & reward socially valuable contributions & actions
24. Is your points system tracking skill, experience, or both?
25. Is your points system assigning ratings to people or objects?
26. Can you Spend your points?
27. Levels Leaderboards Roles Reputation Missions Challenges Achievements Collections Step 2: Add Feedback & Rewards Viral Outreach Feedback & Rewards Points
28. Levels are shorthand for participation and achievement
29. Leaderboards identify, motivate and reward your most devoted players
30. Social Leaderboards drive competition and enable missions
31. Leaderboards can cause problems – don’t be afraid to remove/hide/change
32. Missions tell players what to do next
33. Mission-driven engagement loop Post updates, give gifts, send taunts Get feedback, earn rewards Accept Mission Update Mission List Take actions, earn points
34. Reputation and Ratings track quality/skill + motivate contributions
35. Achievements provide short-term goals + sense of progression
36. Motivate newbies with easy-to-earn rewards
37. Motivate power-users with scarce resources
38. Motivate contributors with a rating system
39. Updates Gifts Sharing Invites Step 3: Grow through Viral Outreach Viral Outreach Points Feedback & Rewards
40. What are the ‘social moments’ in your game?
41. Competition Bragging, Taunting, Challenging
42. Cooperation Sharing, Helping, Gifting
43. Self-Expression Check out my character/outfit/farm/page
44. Case Study: Farmville
45. XP + coins earned by completing tasks
46. Customize your character
47. purchase seeds
48. Plant & Harvest Crops
49. Help Neighbors
50. Design & Develop Your Farm
51. Buy exclusive items with $$$
52. Tutorial introduces pts, levels, rewards
53. Earn coins, level up, buy more stuff
54. Leaderboards facilitate social interactions
55. Achievements come early & often
56. Achievements displayed as collections
57. Achievements displayed as collections
58. Help your neighbors, then brag about it
59. Many opportunities for self-expression
60. Gifting pulls people into the game
61. Case Study: Stack Overflow Technical Q&A site w/crowd-sourced moderation
62. Ask/answer good questions to build Reputation
63. Leaderboards for Reputation score
64. Earn badges by performing basic site tasks
65. Question: why no viral outreach?
66. 5 Tips for Designing a Compelling Metagame:
    • Create a coherent experience that unfolds over time
    • Define a points system (XP, social pts, redeemable pts) that supports your purpose and audience
    • Introduce feedback and rewards that motivate newbies, enthusiasts, and contributors
    • Design rewards that players will be eager to share
    • Use “game pacing” to grant rewards over time

See Amy Jo Kim’s profile on GDC 2010.

The paper analyses the viral spread of an application and how/why are these processes occurring. SocialTimes.com did a great post that summarizes the academic paper. Alternatively, you can view the entire paper here.

Some of the key findings are summarized below:

• On average, each inviter has invited 26 friends while the median number is 10
• Just 10% of users account for 50% of successful invites
• Around 90% of users share their locale information
• Around 40% of users share their friend list
• Only 1% of users share their relationship status
• Invited users remain in the game longer: over 50% kept on playing for more than a day and 20% of all invited users were still playing 80 days later.
• Around 80% of non-invited players leave the game within the first day
• Overall, they find that invitation strategy is more important than demographics in determining invitation success rate

To determine how to create a profitable social game, please explore my previous blog post on the importance of Customer Acquisition Costs for startups.

After being pitched countless times by startups, as a VC I’d like to identify a common misconception that web-based startups often have about their own growth potential and the costs associated with their plans. Management of web services companies, SaaS companies and mobile (web-based) applications commonly believe that because they are situated online, customers will come across their service, submit a purchase order (or subscribe) and notify friends or other companies to use the service as well. Although this may happen from time to time, it is very rare for any company to experience sustained viral growth.

Many companies don’t understand the difference between viral marketing and viral growth. Viral marketing is essentially “word of mouth” or “person-to-person distribution” and is the latest buzzword. Viral growth implies a K-factor greater than 1 (i.e. for each new person who tries a product/service, they will each invite more than 1 registered user of the product on average). Since true viral growth is so hard to achieve in practice, many companies miscalculate the actual costs it will incur to acquire customers. As David points out in his article, the majority of startup pitches lack detail/emphasis on how much it will cost to acquire customers. I second this statement entirely.

Business Model Viability
For a business to be profitable on each new customer, startups must balance two variables: (1) Cost to Acquire Customers (CAC); and (2) Lifetime Value of a Customer (LTV).

CAC can be calculated by taking the business’s entire cost of sales and marketing over a given period (including salaries and other employee expenses) and divide it by the number of customers that the business acquired in that period.

LTV can be calculated by looking at the Average Revenue Per User/Customer (ARPU) over the lifetime of a business’s relationship with a customer.

As Steve Blank mentioned in his recent post, an early indication that a business has found the right business model is when the cost of acquiring customers becomes less than the revenues generated from the customer. “For web startups, this is when the cost of customer acquisition is less than the lifetime value of that customer. For biotech startups, it’s when the cost of the R&D required to find and clinically test a drug is less than the market demand for that drug.”

Credit: David Skok.

Zynga is a great example of a company that has managed to decipher the business model of online social gaming. After thousands of A/B tests and experiments, Zynga finally found a business model where CAC was less than LTV. Once they cracked the nut, the company spent so much on customer acquisition that it was rumored that they accounted for upwards of 30% of Facebook’s revenue in 2009 though its aggressive social ad buying strategies. Similar business models and opportunities exist in virtual worlds, massively multiplayer online games (MMOGs) and many other online businesses. Many social games, such as those created by Zynga, leverage virtual currency, micro-transactions, emotional response mechanisms and social influence to promote the sale of decorative and functional virtual goods.

Before investing in a web-centric startup, good VCs will look deep into a company’s business model and know to look for CAC and LTV metrics. In fact, Trident Capital recently held a meeting with their online advertising and ecommerce companies to help exchange best practices for customer acquisition and improving LTV. My advice to startups: prove out your business model and you will have a much better shot at raising VC dollars. Skok suggests that two key equations be followed by web startups:

• CAC < LTV (3x appears to be a rough minimum for SaaS businesses)
• CAC should be recovered in < 12 months (for subscription businesses)

Startups, if you’ve already figured out your business model and how to make CAC < LTV, stay very quiet and add as much fuel to the fire as you can afford. Your competitors will likely try to hone-in on your tactics and fight back for their share of the market.

Credit: Steve Blank.

Leverage Startup Metrics
Startups are different from larger companies and therefore need different metrics than larger companies. Metrics will give startups a lens into how well the search for the business model is going and help to identify when to scale the company. Besides CAC and LTV, some essential metrics that startups should be familiar with include Viral Coefficient (K-factor)  and Customer Lifecycle. Dave McClure from Founders Fund recently updated his Startup Metrics for Pirates presentation for web sales pipelines. Take a look!

Questions to my Readers
Please consider the following questions and share your perspectives with my other readers and the tech community at large.

1. What metrics do you consider the most valuable?
2. Do you use any tools to help measure specific metrics for your business?
3. What mistakes have you made (and corrected) that can help others succeed?

After some successful digging, playing the game and reviewing Apple’s Developer Agreement. Some red flags were raised…

Eliminate Pro, a game developed by ng:moco, is an action-packed first person shooter (FPS) game that progresses very slowly. The game uses this tactic to charge impatient users to play and progress through the game at a faster pace. The game allows users to buy more battery packs or cases (Power Cells) through the In-App billing system. This allows users to recharge faster, compete to earn more “credits” so that they can upgrade their fighter’s armor, weapons and other items (virtual goods). Power cells are the currency of the game.

What I want to know is where Apple is drawing the line in the sand in terms of what is considered a virtual currency and what isn’t. As per Apple’s iPhone Developer Program License Agreement (the “Agreement”), Apple states:

Additional Restrictions

2.1 You may not use the In App Purchase API to enable an end user to set up a pre-paid account to be used for subsequent purchases of content, functionality, or services, or otherwise create balances or credits that end users can redeem or use to make purchases at a later time.

2.2 You may not enable end users to purchase Currency of any kind through the In App Purchase API, including but not limited to any Currency for exchange, gifting, redemption, transfer, trading or use in purchasing or obtaining anything within or outside of Your Application. "Currency" means any form of currency, point, credits, resources, content or other items or units recognized by a group of individuals or entities as representing a particular value and that can be transferred or circulated as a medium of exchange.

Specifically, item 2.2 of ‘Additional Restrictions’ within ‘Attachment 2′ of the Agreement raises some obvious questions about how Eliminate Pro got approved. Eliminate Pro uses Power Cells (the virtual good that they sell) to buy additional energy (a resource) that they can use in a game to earn credits, which are redeemable for weapons, armor and other inventory items.

This seems to be in direct violation to the Agreement. Unless, however, Apple is okay with allowing “indirect” forms of currencies to work (Buy Energy > Spend Energy for Time > Use Time to gain Credits > Use Credits to buy Virtual Goods (weapons, etc…)). Some clarity please?

It would be great if some people (Apple execs, developers, anyone) could weigh-in on this matter. What types of “economies” or “currencies” can be established while still being compliant with Apple’s policies?

Please share your perspective below.

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.

The demo shows how the gameplay stays consistent across device types, and features such as their “trash talk wall” (or “chat”), leaderboards and social discovery engine all work.

For convenience sake, I’ve simply embedded the video below (view it at socialdeck):

I particularly like the reference to South Park.