[THIS POST ORIGINALLY APPEARED ON ADRIAN CROOK’S FREETOPLAY.BIZ SITE.]
Panel discussion led by Chris Early. Throwing up raw notes because that’s better than nothing. Please excuse spelling mistakes. This was a great panel… lots of good advice and some numbers too. Worth a read through the raw notes.
Panelists:
- Daniel James, Three Rings CEO
- Min Kim, Nexon VP of Mktg Nexon America
- Lisa Rutherford, Two Fish
- Andrew Sheppard, Hi 5
- Craig Sherman, Gaia Online
Nexon
- $29.3M in 2007 in virtual items sold in NA
- Driven by new content but also by new payment platforms
Gaia
- 8M uniques/month
- PCU 100K every afternoon
- 2 diff currencies
- soft currency is attention-based currency – secondary market for this has over 100K completed auctions per day for virtual currencies and goods
Two Fish
- Virtual economy data platform provider
- collects data from within game worlds, then feeds it into analytics db
- Allows you to optimize user experience
- Has about 20 customers
- Helps to set up economies, balances sources and syncs, tweak
3 Rings
- $4M/year in rev for PP
- Whirled has similar economy with 3rd economy allowing for UGC creators to cash out
Hi5
- 63M users
- Open social supporter
- 40 currencies, 70 langs, 60 payment methods
- 10x size of myspace games is their game site
Two Fish
- When starting, understand what your goals are and what you’re monetizing
- approach design from bottom up – asking where company wants users to spend and earn
Gaia
- did not manage economy when they started
- want ppl to earn quickly for initial wow experience
- down the line, someone who has been playing for months and months get really rich – what is left for them to buy?
- need to manage these disparities correctly from the beginning
- company has one full time economist balancing it
Nexon
- 1999 or 2000, company stumbled on microtrans
- tons of ppl in beta for quiz game
- turned on charge switch and everyone left
- switched to f2p
- heuristic process
- recommends learning from playing and purchasing items and deconstructing what they’ve figured out
- a lot of it is a function – time = vanity, etc
3 Rings
- don’t screw up
- mudflation – overinflation of currency is easy to introduce if you are not being rigorous about sources of attention currency
- need to have some level of instrumentation… need to pay attention and be set to react when something goes awry
- it is a discipline that is tough to master
Early (Moderator)
- Most games are a command economy – decisions about game economy made by a govt or central body, not market forces. Do you give the market any control ?
Nexon
- Nexon controls all re game economy
- ppl think of biz models first
- most important is to think of what game ppl wnat to play… high levels of engagement
- ppl playing your game casually… playing it 5 times, etc… unlikely to play
- need to get higher enggement times
Gaia
- in these conferences, you’ll see two answers for how to run these games
- socnet are driven by viral loop or manufactured virality
- core brand or long term user base coming to a destination site
- we are in the latter category see a close tie to making an awesome product and getting a higher level of monetization
- others are more focused on pushing people into a monetization model early on
Hi5
- 3 different levers:
- engagement
- monetization
- virality
- with a hard currency, has to be a command economy
Early (Moderator)
- what are the leading indicators you measure and what do you do with them
Two Fish
- looking at macro flows. in and out of economy, both real and virtual money
- measure how quickly they are coming in and out of game
- are women having money coming through their accounts quicker or slower than men?
- look at what they pend on on… retail optimzation methods… correlated against demographics and pricing and how pricing changes over time
- a lot of data and charts but you have a repsonsibly to be benevolent
Nexon
- how people are flowing in
- how they are churning out
- unique users per month
- ARPU for that month
- pay rate based on subs they have
- economy balances itself… quickly they are going to determine if they want to pay for your game… in some ways the players dictate how you charge for your game
2 Fish
- difference between people paying and what happens within game
- within game world itself, thinking about what you are giving your users… you want them to have an economy they feel is balanced
Nexon
- we do not tie attention and real money currencies together
2 Fish
- some ppl do tie those two currencies together
Gaia
- best measure of what you’re doing right is
- retention analysis
- length of time spent
- ultimate measure is customer retention
3 Rings
- any metrics are useful for testing hypotheses, but if you’re wrong you need a new one
- how much cash are people holding?
- going to be a tension between hoarding and what you need them to do, which is spend so they need more money
- really interesting metric
- puzzle pirates is a command economy – cash prices fixed by us
- in world, player creators price certain items
- I would like to take back that control… users don’t do a good job
- players tend to price too cheaply
- we will likely have to seize control of pricing from the users as they are acquiring things to easily
Early (Moderator)
- wealth management has come up as a topic – are there things you can do that aren’t massively disruptive?
3 Rings
- incredible opp to take fantastic amounts of wealth and turn it into a one-time exclusive item
- when we shut down alpha server we challenged people to throw Pieces of 8 into a hole… winning group got their name on top of a list
Gaia
- we wanted to redo our amazon-like stores within the site, so we created a fiction inside Gaia that stores were getting shut down because of recession… asked users to help donate to help build higher quality stores… we created a concept of leaderboards… where largest donating teams got their names in lights… they felt as though they were getting status within the site
Nexon
- you want your players to spend all the money they have so they need to get another payment card, etc
- you should offer your players lots of diff ways to spend their money
- players are not buying 1 item at a time… they are batching… buying $10 of virtual currency at a time… so you need lots of options for purchase so people don’t have money just sitting there
Early (Moderator)
- do you measure inflation? have an index?
Hi5
- no, we don’t… we have 40 currencies… every country has its own purchasing power for a user
- a lot of people when they are thinking in metrics talk in ratios… very dangerous to measure app performance in ratios… tells you nothing about success… one could be making $1, one could be making $1M
- need to look at overall
Early (Moderator)
- why have multiple currency types, why not just 1?
Nexon
- if you want one currency, you probably lose control
- if you can’t control it, the players might not need you anymore
3 Rings
- very risky to have just 1 currency
- Linden has just 1 currency… from the outside it is terrifing
- they say they are a country – maanged like a central bank
- second life is not a game, so they don’t have the same compulsion loop
- stripping out that game aspect means they can probaby get away with 1 currency
- whenever you have a faucet that is your real money currency – espcially if it is uncapped – you can wake up and find it hacked or duped and you have to press reset
- dupe bug for soft currency or farming method is bad, but you don’t need to find it in 30 mins… where you would with hard currency dupe bug
Nexon
- take a couple items and make them purchasable by soft and hard currencies… most players will work hard to purchase with soft currency
3 Rings
- the ppl who do take credit card out are buying the time and attention of the people who don’t
2 Fish
- in general, dual currency is what we recommend
Early (Moderator)
- you hinted at exchange between soft and hard currency… where is the legal liability… regulations
Gaia
- we need to be clear… if you can get your money out, then it is a big issue
- SL has a currency where you can invest your time and get it out in real dollars
- as soon as you do that, you can run into regulation issues, but more primarily, people will try to game the sytem… bots, farming, etc
- if you are going to go down that path, plan on having half your dev team working on managing exploits for the next few years
- you have then become the best target for money laundering
- we chose not to do that… greatly simplifies life… branding decision as well – is your site a place where you can spend time and earn money? a career? or is it a fun experience where you put in your money but don’t expect to get it out
2 Fish
- working with two companies that are in the skill based gaming sector… getting money out
- we use a double entry ledger system… duping is harder
- huge fraud risks
- comes down to modeling behaviour… looking for abnormalities
Gaia
- if you want to let money out of your system, you need to do games of skill not chance
Early (Moderator)
- how do you price things?
2 Fish
- i love pricing… counterintuitive in some places
- barrier pricing… i.e. everybody wants one of the cooler cars
- initial thought is that cars should be expensive
- but really they should be cheaper as they are a barrier item
- once they have a new car they can spend more on customizing it
- think about what kind of behaviours you want and price to encourage that
Nexon
- we actually do sell cars for $10
- we sold 120,000 cars for $10 apiece
- agrees re: barrier
- but barrier for ppl in game is not 10c, but $10 for initial payment… so you need enough items to justify that
- if you have 100 ppl playing game, what % are going to pay and how much
- what items can you create to get to a $15 ARPU
Gaia
- we do exactly that re: modeling an ARPU
- interplay between getting ARPU up vs getting percent of people who pay up
- clearly they should be complementary
- but fascinating thing is that we are not really clear on which one matters more, we go with what is easy
- getting dollars per player up is always easier
- people who want to pay are willing to pay a lot of money
- relatively easy to find small % of ppl who pay and pay
- more interesting thing is how to get a higher percent of ppl to pay
- that has more ramifications on long term business health
- barrier is getting the money into the game via cc or payment card
Hi5
- we work with developers on pricing
- if you don’t test a variety of price points initially… you are liking to optimize around a suboptimal price point
- also important to take into account how much money is being spent per minute of engagement
- if you do allow exchange of soft and hard currencies, need to ensure the price is not punitive – with one dev, we halved it from $5 per half hour to $2.50 and doubled their ARPU
Gaia
- ways to avoid hitting the 1% chargeback
- not allowing you to purchase on day 1
- maxing the amount ppl can spend in a month
- making sure ppl can’t pull money out
3 Rings
- we hit chargeback problems … we hadn’t switched on address verification… turned it on and problem went away
- WoW has big chargeback isseus as people farm on stolen CCs
Gaia
- median user age is 18
- under age 18 I would be looking at sub models
- bad if you have to ask mom each time you want to spend another dollar
3 Rings
- habbo hack for under 18 microtrans – $4.95 club habbo sub that gives you virtual currency… allowance from folks… can also buy more currency
- hoping users get comfortable with that and give more money
Nexon
- betting on teen market
- kids are fickle… in and out quickly
- once club penguin kids grow up, they will spend money on virtual economies.. right now their parents are saying no to premium subs