A talk I gave on 12.February.2010 at the Casual Connect Conference in Hamburg on virtual goods economies.

1. Margaret Wallace, CEO margaret@playmatics.com Twitter: @MargaretWallace

2. 1996

3. Making Free-to-Play Games Work for You

4. Successful Use of Virtual Goods Touch on Core Experiences Decorative Items Consumables Social Accelerators

5. Know What Motivates Your Audience Values & Belief Systems Are they loyal to any brands? How much disposable income do they have? What motivates them to come to your game? Socializing? Being Creative? Zoning Out? Killing Time? Competition?

6. Type of Free-to-Play Game  Users Virtual Goods

7. Gear Weapons Functional Items Clothing Earth Eternal

8. 50% Functional 50% Decorative Puzzle Pirates

9. Virtual Goods Make Up 85% Of Habbo Revenue -- $70M in 2008 Social, Decorative Items Consumables Habbo Hotel

10. 60% -- 90% of revenues selling virtual goods ranging from digital farm buildings to poker chips. Predominantly Items that Allow You to Tend to Farm Farmville

11. Enhance Game Play Access New Levels Customize characters

12. Gifting & Flirting!

13. Integrating Virtual Goods Into Free-to-Play Game Experiences

14. In-Game / Functional

15. Social Status

16. Decorative Playfish sells around 20M items in Restaurant City every day - in either money- or time-based currencies. Source: “Building Social Games at Scale” Panel, Social Gaming Summit, June 23, 2009

17. Gifting Playfish titles are typically released with just 20% of their final features developed and implemented. The rest is introduced over time in response to the demands of the community and success of the title. Source: “Building Social Games at Scale” Panel, Social Gaming Summit, June 23, 2009

18. Collectibles & Rare Items Limited number, niche appeal, unique appeal.

19. Setting Goals

20. Trading / Exchange

21. Rewarding Behavior

22. Conferring Status

23. Metrics Must have metrics in place!

24. Metrics & Reporting Sample metrics needed to track and have at your finger-tips anytime:

25. Measuring Active Users What percentage are returning players who do something significant in your game? For MMOs = Once every 30 days For Social Games = Measured Daily

26. Average Revenue Per User (ARPU) Measuring Average Revenue Per User Allows You to Gauge the Success of Your Service. Total Monthly Revenue / Active Users = ARPU € 2 Million / 150,000 = € 13 ARPU € 2,000 / 150 = € 13 ARPU Gaming the System!

27. Lifetime Value of User How Much a User is Valued Over Time ARPU x #/Months on Site = Lifetime Value € 13 x 6 months = € 78 Facebook game churn is around 8 weeks.

28. Average Revenue Per Paying User (ARPPU) How Much Paying Users Spend Monthly Revenue / Paying Users = ARPPU € 2 Million / 20,000 = € 100 ARPPU NOTE: Factor in Cost Per Acquisition, which can cost up to .70 to 1.50 Euros Per User

29. What Does This Mean? Social Games ARPU = .30 – 3 Euros ARPU for MMOs sometimes reported as higher, but they may have far fewer players.

30. Common Mistakes

31. Common Mistakes Retrofitting virtual goods into an already-existing design – and making stupid design decisions to compensate for that. Not preparing your community for changes. Not responding to community. Not having a content plan once first set of goods released.

32. Common Mistakes Having a set price for purchasing virtual currency, independent of the payment method. Not designing enough “sinks” in the economy – i.e., selling back items @ 50%, having enough consumables. Having bad metrics in place.

33. Questions? Contact: Margaret Wallace, CEO margaret@playmatics.com Twitter: @MargaretWallace