Virtual goods forum_uk__vikas_v1_6-17-10

Real Money in Virtual Goods: Consumer Spending Habitsand Strategies for Growing the Pie
Powering Virtual Economies Worldwide

Agenda
About Social Gold
Quick recap of Social Gaming
Virtual Currency: The spend driver
Consumer Behaviors & Habits
Growth Strategies

About Social Gold
The leading virtual goods monetization platform
Launched in Sept 2008
Grew 2000% in revenue in 2009
Founded by ex-Amazon veterans
In-game payments, Secure in-Flash payments

About Social Gold
A platform that allows you to . . .
 monetize through virtual currency
 merchandise your virtual goods
 optimize your virtual economy

The Social Gold PlatformAll the Critical Tools to Help Manage Your Virtual Economy
Micropayments
&
Subscriptions
Virtual Currency
&
Inventory Mgmt
Analytics
&
Reporting
PLUS:
Fraud Management
Customer Service

About Social Gold
Social Games | Casual Games | Virtual Worlds

Virtual Goods & Social Games
Timeline
2007 Facebook platform
Casual Apps
SuperPoke, FunWall, Hug Me
2008: Dawn of the Games
Green Patch, Mob Wars, Friends for Sale
MySpaceplatform
2009: Flash Based Games
Farmville, Pet Society, Happy Aquarium

Bite sized chunks of engagement
Timed visits
Casually Immersive
Users pay for power-up, faster ways to grow in the game

What makes this space so exciting?
Social Networks are an Engaged Audience
Games act as fillers – perfect fit
Distribution via News Feed leads to low cost viral growth
Social Networks provide Distribution
Games provide engagement + monetization

Some Examples of High Spenders
$14,794
$11,635
$25,540
$13,960
$19,054

Defining Virtual EconomyWhy do people buy Virtual Goods?

Virtual Currency: Means to an Experience

Why Virtual Currency?
Separate “Value” from “Cost”
Virtual currency is “cheaper” than “money”
Train User Behavior
Economy around user generated content

Defining Virtual Economy
Lessons from the Real World Economy
“Labour is the real measure of exchangeable value.
Wealth is power of purchasing labour.”
Value in your economy is in your goods.
Currency is a means, not the end.

Consumer Behaviors & Habits
How Much do People Spend on Virtual Goods?

Some Caveats
Data spans publishers on Social Gold network
LTV and behavior in games varies considerably
Social Gold tends to drive higher LTV and user spending

Virtual Goods enable much higher spending behavior in loyal users

Loyal Repeat Purchaser: $250
One time purchaser: $12
Loyal purchasers spend the same as about20
one time purchasers

Highest Spender: $25,000
Loyal Spender: $250
One high spender spent the same as about100 loyal spenders.

Strong Global LTV Anchored by Europe & NA
Average LTV: $60

Average Spender: $60
Roughly 2-4% of all your users spend money
“Revenue potential” from virtual currency per user:
$1-$2
What is your cost of customer acquisition?
What does it cost you to serve this user?

How do you grow the pie?
Get more users (peasants)
Convert more users to spenders (farmers)
Get spenders to spend more money (knights)
Serve and retain your high spenders well (kings and lords)

Growing more users
Viral Growth
Viral Factor > 1 implies exponential growth
Good Viral Factor in new games: 0.7
Build Friends into the game
Focus on the User Experience
Retention reaps bigger rewards than pure viral
Cross promote, Buy traffic

Functional Goods drive more users to pay
Experiment with price points
Understand your user demographics and customize for them
Keep them engaged for longer

“Sales” and “Specials” drive people to spend more money

Make repeat purchase experience extremely seamless
“Encourage” higher price points
Make sure the game is still engaging

How many?
Average: 50% of all spenders  9%
Best Farming Game: 30%  15%
Worst Farming Game: 63%  4%
Best Social Game: 36%  51%

Growth StrategiesTop 5 Strategies to Grow the Virtual Goods Pie
Increase conversion of “like customers” (CRM 101)
Expand offerings to reach different consumer segments
Increase ARPPU
Merchandising
Promotions (price, seasonal, etc)
Loyalty programs (recognize “high click pressure”, feed it, reward it)
Increase stickiness / addictiveness of the experience (eg, product innovation)
Cross-promote and migrate users to new experiences

Summary
Focus on Experience, Retention, Economy
Loyal purchasers spend $250 for virtual goods
Building seamless purchase experience (e.g., Social Gold in-Flash) builds more loyal repeat purchasers
How much a user spends depends on the experience you provide them

http://getsocialgold.com
Powering Virtual Economies Worldwide
vikas@jambool.com

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