Editor's Notes

1. This is your Chief Revenue Officer, or whoever wears that hat in your company. He cares about revenue. If you listen to him, you can end up like this guy…
2. Big things poppin. So why do we care? Well, we really need to think about the things that drive revenue and the things that don’t…
3. These are two very different things in the same Farmville game. By the way, has anyone else noticed that the app name for Farmville isn’t actually Farmville? It’s On The Farm. Anyway, so what’s the difference between these two?...
4. The stuff on your wall is what you (and everyone sees). Those are viral mechanics designed to up the number of users. The stuff on the canvas page itself are the game mechanics of the game….
5. So what does the Chief Revenue Officer care about?...
6. He cares about viral mechanics. He doesn’t give a damn about game mechanics. He wants to get you to get your friends on the site so his cost of acquisition goes down. Well, he does care about game mechanics a little bit…
7. He cares about game mechanics *when they’re good*. He fucking loves this shit when they work. He game mechanics that are so well done that people pay to do the same shit even more, or faster, or with an advantage, or with some kind of limited edition social proof (we’ll get to that in a bit)…
8. But unless you’re selling additional functionality inside your app – either virtual goods or some premium features, he really doesn’t care. Even if you’re engaging users so much that they’re seeing thousands of pages a session, remember that the CPM for each additional page view goes down until you’re getting barely breakeven (at best) CPMs on your remnant inventory. So there’s really a limit to monetizing engagement in and of itself. Except….
9. We have pretty clear data that the most engaged users are the users most likely to pony up for add-ons. Whether those are additional features, virtual goods, improvements in the experience, time savers, or whatnot –Good systems that spur engagement also end up spurring purchases, making whom happy? …
10. Making this guy happy.Which does what?...
11. Makes you rich.Big thingspoppin!…
12. So who was at Friday’s MIT Business in Gaming conference? What is 2%? [It’s the percentage of social gamers that engage in microtransactions.]Who was at the Freemium Summit in SF back in March? What is 2%? [It’s the percentage of Evernote users that pay.]I’ve heard this 2% number so many times that I think there’s something about 2% as a magic number for getting people to pony up. I’m not sure what that means or how to use it in any sophisticated way, but that’d be the number I’d aim for for direct monetization of my web app or game – whether it’s freemium or microtransactions.So…
13. So both viral mechanics and game mechanics can increase revenue. Viral mechanics increase distribution, which lowers customer acquisition costs. Game mechanics increase engagement, which makes users more likely to do things that increase direct revenue – whether it be upgrade to higher tiers, purchase add-ons, view more pages for increased advertising revenue, or whatever else it is. But this only works when…
14. Whenthe Chief Revenue Officer and your Normal user are aligned.(BTW, I apologize for the clip art. It’s cliché’d and insulting the women in the audience, but I put this together last night after the Beer Summit.)So let’s talk about game mechanics that increase engagement…
15. Here’s the simplest kind of game mechanic output (what I called trust metrics in the first version of this talk): a score. Scores are explicit, and they’re just simple aggregates - +1 for up, -1 for down, and sometimes a zero for a neutral. The Amazon one gets you to an effective score of 402 if you want to assume the 198 who did not find it helpful are minus 1’s. But that one requires a bit of work for users. Math! Eek! Next…
16. Here’s the more classic example when people are thinking about game mechanics in web apps: the “progress bar”. I think we all first saw this on LinkedIn. I’ve also shown examples from OKCupid and SlideShare. In addition to the percentage, they all indicate a next action and what the results of those next actions will be. This is a very easy way to not only give credit to activities already completed, but it 1) suggests new activities and 2) provides strong incentives by giving a concrete immediate benefit to the user when she completes the action. Doesn’t matter if the user will see tangible benefits from new recommendations, photos, or demographic information – they get points!I was convinced that on LinkedIn that it was actually impossible to get to 100% completion; I thought they’d always have additional hoops to jump through to get additional percentage completions.Interestingly, I can’t find the progress bar on my LinkedIn after their most recent redesign – perhaps its outlived its usefulness – to LinkedIn? Or perhaps I’m at quote/unquote 100% completion?...
17. Here’s a third example after points and progress bars: badges, or as they were originally called on Xbox Live, achievements.Badges and achievements absolutely encourage engagement, as they built on top of points but do so with very discrete rewards. They also give someone an intermediate goal or a retention bonus…
18. Badges and achievements may encourage engagement, but their promotion is iffy – they may actually just *take advantage* of engagement.Again, the rewarding of badges to the user is 100% benefit to the user; the tweeting of the badges being earned has viral utility to Foursquare as well as some, limited, social proof utility to the user.OK, let’s get into this dynamic in depth. Bear with me, lots of stuff happening on the next slide:
19. Now, the exact shapes may differ depending on your particular app, but I posit to you the following three things:The utility to the company/site at any given ping is higher than the utility to the user. Think about the utility Zynga gets from someone publishing to their wall versus the utility the user gets. They both get positive utility for the first few pings, but Zynga always has more to gain from a new user joining than the user gains from having any particular Facebook friend join.The diminishing returns to the user are relatively linear; the diminishing returns to the company are linear, but on a less severe slope until the point where the utility falls off a cliff because they may have incited the user – or her followers – to stop sending/receiving these messages. Worst case, a user quits because she was spamming her friends too much. You see this with the auto-tweeting of Foursquare badges even when checkins themselves aren’t tweeted. You need to be careful about this stuff or you’ll lose your ability to spread virally. Facebook, for example, had to start enforcing better behavior around this because users couldn’t find way to turn this stuff off. You might just lose your access to the user entirely.So….
20. So remember when I said 2% was the magic number for freemium and microtransactions? Well, right now, in most web apps, we monetize in a freemium fashion – getting people to pay for a higher tier. But what if we start using game mechanics more and more? …
21. So this is Jesse Schell, the writer of The Art of Game Design. If anyone knows anyone who works in gaming, it’s pretty much a seminal work. There’s a copy of this book in the office of every game studio in the country, and every single good game producer has a copy at her desk. Anyway, at the most recent GDC, Schell gave this talk that kind of messed with people’s heads. I’m not going to go over the whole thing – a link is in the bibliography for this deck – but the “oh shit” moment came at the end when he said….
22. Some day, we’re all going to get points and achievements for toothbrushing. We should all be brushing anyway, but if we turn it into a game, we can get more people to do the things they want. Now, this is kind of dystopian, because you need some serious Big Brother shit to make it work, and the fact that it would work – and it sure would work as long as we don’t have a shift in human response to the game mechanics of today – is either exhilarating or depressing.But before we end up in a world where we get points for brushing, we’re going to get points for our interactive behavior. So what could some of that look like? …
23. Let’s say Twitter wanted to use points and they started tracking and rewarding you for engaging in “good behavior”. Maybe that’s the number of tweets, or your followers. Maybe it’s even the aggregate number of characters in all of your tweets that have been retweeted at least five times. Whatever. So they can reward you. What might they do? …
24. Well, maybe they’d allow you to “unlock” the ability to tweet out Emoji.Emoji are fucking awesome. Japanese schoolgirls love this shit. And you know when shit is big in Japan, it’s gonna end up here eventually. Twitter could be ahead of the curve and encourage you to engage in good behavior so you can tweet out Emoji.Next example…
25. Let’s take something more serious, like Etherpad. Or Google Docs. Or whatever. It’s a real business tool.Pretty simple text editor. But what if you got points for the number of documents you created? Or words you typed? Or what if you earned points for the *lowest* number of revisions? What if you could take those points and use them to earn…
26. Rich text editing privileges!Would you pay extra for these? Would you like to be able to use them just on occasion? Would you pay for the privledge? Could someone make you earn that privledge?How about this – might you start composing all your e-mails in Etherpad first, just to earn the points, just in case someday you’d like to be able to use rich text editing in Etherpad? Or Google Docs? Something to think about….
27. So to get to a place where we start unlocking additional features and functionality based on engagement, we have to first start tracking and recording all of a user’s interactions with the app…
28. If we start tracking and recording every single interaction, we can start assigning points scores. If we start assigning scores, we can…
29. Encourage people to move towards completion of stuff that we want them to do (and, again, hopefully that they should be doing so they see increased utility). But if we have the data to encourage people to get to 100% completion, we can…
30. We can also startrewarding intermediate completion steps. So if we start doing these things…
31. Is that douchey? I don’t know. But I’ll make a prediction – this sort of microrewards for engagement are coming. Why?
32. Because this guy is going to find a way to get you to pay to skip the engagement necessary to earn those points. Is that good for users? Bad for users? I don’t know. On one hand, you might save money buying additional features a la carte. And the heavy users who bitch about paying won’t have to pay because they’re earning those points. On the other hand, maybe we won’t be able to use anything on the internet because we’re all going to have nag screens to pay for every little thing we want to do with a web app.So, we’re almost done, and I’ve got a couple of text-heavy slides to wrap up…
33. I think simple points and scores in web apps are all-but-useless now, just as the high score days of the arcades of yore (before a lot of you were even born) are all but gone. Geometry Wars, for example, is retro purely because it’s about high scores. That very focus on high scores actually decreases the number of potential players because that game mechanic no longer resonates the way it once did.I believe that PVP mechanics in a web app arebaaaaad because they encourage bad behavior and introduce barriers to entry. There isn’t a way to segregate newbies to only play against other newbies in a web app (the way that World of Warcraft has an on-ramping process for new players).Digg, among others, killed their leaderboard because it rewarded “bad” behavior, but also dis-incentivized lower users
34. They should be doing anyway – meaning what they should be doing to get the most out of your app. If you have a dating app, *it’s in the user’s interest* to have a lot of good pictures. If you have a storage app, it’s in their interest to use as much as possible (since the more they have with you, the less they’re screwed when their hard drive goes to shit).On leaderboards, you may or may not want to expose the user point levels via your API. If you expose them, then people can calculate and publish their own leaderboards – but only your hyper-competitive users will find/monitor it anyway, and that may end up being a case of “who’s gaming whom?” If you want to be religious about it, tough luck. An enterprising and motivated hacker is just gonna screen-scrape you anyway. If they do that, then you’re in the proverbial good problems to have – your engaged users are crazy engaged. (Remember, they may not necessarily be your best users – your best users are always – always – the ones who provide you with the most revenue.)If you choose to have viral mechanics, be cognizant that you’re doing it for your company, not for the user