Economic Approach to Social Game Design

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Slides from a talk given at Virtual Goods World 2010 in London, England.

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Economic Approach to Social Game Design

  1. 1. A Wholly-Owned Subsidiary of RealNetworks The Economy is the Game An Economic Approach to Social Game Design Russell Ovans
  2. 2. Introduction <ul><li>Many social games are really just virtual economies </li></ul><ul><ul><li>Freemium monetization model </li></ul></ul><ul><ul><li>Players compete by accumulating wealth over long periods of time </li></ul></ul><ul><ul><li>Cooperative, non zero-sum game </li></ul></ul><ul><li>This is not the only way to build a successful social game that monetizes well </li></ul><ul><ul><li>other models may work better, faster, stronger </li></ul></ul>
  3. 3. An Economic Approach <ul><li>Taking an economic approach to anything involves three basic premises: </li></ul><ul><li>1) Resources are limited </li></ul><ul><li>2) Consumers act rationally </li></ul><ul><li>3) Control is decentralized </li></ul>
  4. 4. #1: Limited Resources <ul><li>Free game play is limited </li></ul><ul><ul><li>5 to 10 minutes per day </li></ul></ul><ul><li>Players can't have everything </li></ul><ul><ul><li>...unless they are willing to pay $ </li></ul></ul><ul><li>Examples of limited resources: </li></ul><ul><ul><li>achievements, virtual currency, friends, virtual goods, skill, time... </li></ul></ul>
  5. 5. #2: Rationality Hypothesis <ul><li>Players face a resource allocation problem </li></ul><ul><ul><li>game play involves choices about how to spend their virtual currency or what to do with their virtual goods </li></ul></ul><ul><li>Rational = maximize utility </li></ul><ul><li>Two types of utility </li></ul><ul><ul><li>strategic: improve score in the game </li></ul></ul><ul><ul><li>social: improve status within community </li></ul></ul>
  6. 6. #3: Decentralized Control <ul><li>Players interact with each other directly </li></ul><ul><li>Players share an environment </li></ul><ul><ul><li>the game defines a market </li></ul></ul><ul><ul><li>the actions of one affects everyone </li></ul></ul><ul><li>Examples: </li></ul><ul><ul><li>rankings </li></ul></ul><ul><ul><li>marketplace buying/selling </li></ul></ul><ul><ul><li>gifting virtual goods </li></ul></ul>
  7. 7. Virtual goods are social objects <ul><li>A game is social iff it lets you do something to your friends </li></ul><ul><ul><li>Social verbs: challenge, give, sell, trade... </li></ul></ul><ul><ul><li>Social objects: game instances, virtual prizes... </li></ul></ul><ul><li>Scarcity of social objects makes them valuable </li></ul><ul><ul><li>e.g., limited edition, difficult to win </li></ul></ul><ul><li>Necessity also makes them valuable </li></ul><ul><ul><li>e.g., stage advancement blocked ( friction ) </li></ul></ul>
  8. 8. Virtual goods can be worthless <ul><li>A virtual good has no intrinsic value unless it: </li></ul><ul><li>1) is coveted by other players (limited) </li></ul><ul><li>2) can be used as the owner chooses (rational choice and free will) </li></ul><ul><li>3) can be exchanged with other players (market) </li></ul><ul><li>Intrinsic value leads to pay-to-play </li></ul><ul><ul><li>people will spend real $ to acquire virtual goods that increase strategic and/or social utility </li></ul></ul>
  9. 9. At Backstage, we don't make games... <ul><li>Scratch and Win is not a game </li></ul><ul><ul><li>a gifting app where the prizes are won through virtual gambling </li></ul></ul><ul><li>Our user community turned the market for rare win-only prizes into a competition </li></ul><ul><ul><li>In response, we built the in-game Marketplace </li></ul></ul><ul><li>Over time we added game mechanics </li></ul><ul><ul><li>stage advancement, achievements, rankings </li></ul></ul>
  10. 10. ...we build virtual economies. <ul><li>Scratch and Win implements all three premises of the economic approach </li></ul><ul><ul><li>Daily credits (virtual currency) are limited </li></ul></ul><ul><ul><li>Win-only prizes create friction </li></ul></ul><ul><ul><li>Marketplace provides decentralized trading </li></ul></ul><ul><ul><li>Community forums (social utility) are HUGE </li></ul></ul><ul><ul><ul><li>8 minutes of game play, 3 hours in the forums </li></ul></ul></ul><ul><ul><li>3+ years old </li></ul></ul><ul><ul><li>still makes at least $0.02/DAU </li></ul></ul>
  11. 11. Pros and Cons of Approach <ul><li>Pros </li></ul><ul><ul><li>addictive: engagement (DAU/MAU) is high </li></ul></ul><ul><ul><li>economy keeps bringing people back </li></ul></ul><ul><ul><li>monetize well </li></ul></ul><ul><li>Cons </li></ul><ul><ul><li>not inherently fun: it's a slog </li></ul></ul><ul><ul><li>not inherently viral </li></ul></ul><ul><ul><li>players have a love-hate relationship with the game </li></ul></ul>
  12. 12. Summary <ul><li>People will pay real money to acquire virtual goods/currency, but only if: </li></ul><ul><ul><li>they are limited </li></ul></ul><ul><ul><li>they have agency over what to do with them </li></ul></ul><ul><ul><li>there is a market for them </li></ul></ul>

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