It’s no longer a secret that the most effective way to monetize a social application is to create within it a virtual economy, in which virtual goods and services can be turned into real-world revenues for the app developer. It may seem obvious, then, that one of the most important things to keep in mind when creating a virtual economy is to give your users something of value on which to spend their virtual currency.
That’s the “how.” Less obvious is the “what” of providing virtual goods and services –- as in, what is most valuable to them, what will get them to part with their hard-earned currency, and what will make them want to go back and earn more?
Posting on TechCrunch late last year, strategist Dave McClure noted that there are essentially three major types of virtual currency: decorative, functional and behavorial:
Decorative goods are those primarily geared towards self expression. Functional goods are those that meaningfully alter your user experience. For example, a suit of armor in World of Warcraft that confers a special advantage to you would be a functional virtual good. Behavioral virtual goods are graphical icons that capture some sort of social interaction. This is the type that is most prevalent on Facebook today. Virtual gifts are the best known example of this category of virtual good.
Indeed, virtual gifts have only become more popular since McClure made that comment. Facebook itself is selling digital gifts at a reported $35 million run rate. And apps like (Lil) Green Patch and Hatching Eggs rely on virtual gifts as their main engagement vehicle, allowing users to purchase virtual flowers or eggs to send as a token of their friendship.
Perhaps just as popular is spending virtual currency on virtual goods for oneself. These are the decorative currencies that McClure refers to. For instance, users of Pokey! can purchase a premium-edition puppy such as a Yorkshire Terrier for 300 bones or a German Sheppard for 250 Bones. Pokey! limits the quantities of such pets, but many users find their playfulness and 3D reality hard to resist. Similarly, at Make a Baby, many users just can’t help shelling out virtual bucks to buy the latest toys, clothing or accessories for their virtual babies.
Other times, such as at Friends For Sale! or Hotties For Sale!, the commodities available for sale are the user’s friends themselves, creatively blending virtual goods with social interactions. Yet Hotties For Sale! offers another type of good, however, by allowing users to spend money to unlock hidden content, such as finding out who has recently viewed their “hottie” profile.
Another application that uses virtual currency in interesting ways is Honesty Box, which enables users to give anonymous feedback on what they really think about their friends. Aside from allowing users to spend money on virtual goods such as an upgraded background or “rented” avatars, they also allow users to offer HB Points in the hopes of bribing their friends into revealing who made a certain comment about them.
So far we’ve mostly looked at how virtual currency can be spent within social utility apps. Once we start looking at gaming apps, there opens up a whole new set of virtual goods – mostly what McClure would call the “functional” type of goods. These are the types that allow you to move up the leaderboard faster on Vampires, or gain more energy on Mobsters or My Heroes Ability. Other gaming examples include buying more weapons, leveling up faster, improving your avatar, etc.
These are just a few examples of how social networking users are spending their virtual currency. The more ways your users have of spending their currency, the more they’ll need to go back and earn more, which of course they can do by completing targeted, relevant advertising offers in the Offerpal Media I-frame. In a future post, we’ll look at other ways that users can earn virtual currency.
Filed under: virtual economies | Tagged: offerpal, social applications, virtual currency, virtual economy, virtual goods
