Economic Approach to Social Game Design
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Economic Approach to Social Game Design



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

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



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Economic Approach to Social Game Design Presentation Transcript

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