ISA 2011: Live-Blogging Monetization & Customer Acquisition on the Facebook Platform

In our third panel of the day, Inside Network editor Eric Eldon is moderating a panel on monetization, platform growth and Facebook Credits.

The panelists:

Deb Liu, Commerce Product Marketing, Facebook
Kevin Chou, Co-founder & CEO, Kabam
Rex Ng, Co-founder & CEO, 6waves
Jens Begemann, Founder & CEO, Wooga

EE: What has changed on the Facebook platform from a year ago to today?

RN: I think the notifications changes hit pretty hard, and you can see the results in DAU. We haven’t done as badly because we have a lot of games on the network, and smaller, niche games have also done OK.

KC: When we saw the shift in messaging features, we started to focus on content that appealed to a very specific set of people on Facebook. We really wanted to say, how do we create content for a very specific type of audience for whom there’s very little gaming content they want to engage with? We purposely didn’t design many viral features in, and that served us well. It became a big challenge to find that audience, but once we did it was a nice business.

EE: What were features that Facebook changed that really made a difference in 2010?

KC: We purposely said, if we’re going to make a core game mechanic, let’s not design it around a social channel, because we want that mechanic to be totally a content experience instead of wrapping it around a communication channel that may or may not be useful.

JB: Bookmarks are now more prominent — if you play a game more often, it moves up on the bookmark bar. That’s one of those things, if you don’t spam people, but they want to play, they’ll click on that bookmark.

EE: Rex, your business is a bit different, you distribute games. How has that changed? Do you consider cross-promo bars competitive?

RN: Not really. The difference between us and them is that we drive a lot of users into a game very quickly, where they’re slower. A lot of developers are using them to trickle traffic in for testing.

EE: How are other markets developing?

JB: At Wooga, we’re extremely strong in Europe, and in 2010 Facebook grew a lot in key countries for us. It looks like 50 percent of the population is becoming Facebook users, that is the magic number. In those countries where it’s less, that’s where the growth is coming:

RN: Right now our traffic is pretty balanced in Europe, the USA and Asia. I think there are emerging markets, and the games there have higher virality and retention, so it’s easier to go into those countries, and I’m bullish on there being more and more of those.

EE: Which countries will be big in 2011?

RN: I actually like eastern Europe. A lot of the western European games would actually transfer very well.

KC: We’re interested in international growth, but it can also be distracting to chase new markets. As we think of the core gaming markets and the 18-34 male, we’re most interested in North America as a huge market that we just want to serve better and better. As we look at priorities, we think about, not just how much will it cost us for localization and customer support, but how much does it slow down development? How much do those other versions of the game lag behind? That’s a tradeoff that’s easy to overlook. We do have a significant and growing portion of our revenue overseas, but we see a big opportunity at home too.

EE: Deb, how do you feel about it at Facebook?

DL: We’ve been ramping hugely, we’re working with 150 developers and 70 percent of transactions are through Credits.

EE: I’ve heard some negative things from developers, that they’d go out of business if they had to implement Credits…

DL: Every day, developers get to choose between our platforms and other platforms. We think a platform that includes payments is much more compelling. Having users available, the millions of credentials already there when a developer comes to the platform, can be a big positive.

EE: How will you work with developers to help them make more?

DL: Over the next five months, we’d like to open the doors and hear from our developers, what’s working and not working? Some people have already sent us very detailed data, what works in which country, and that’s what we need. Not every developer has the ability to hire a payments person, build out a system, and collect all the credentials. If someone is playing five games, and have to pay separately in each, that’s a lot of friction.

EE: Can you go into any more detail on your efforts?

DL: We’re definitely expanding our payment footprint. We’re continuing to expand to new countries, new payment options, we have partnerships with PayPal, TrialPay and others. Those things are important, because it’s not something that a developer can do on their own. We have gift cards in stores, etc. Another thing we’re doing is really building up a virtual currency system and building in liquidity. And if you have Credits, you’ll be able to participate in future promotions on the Games Dashboard. We’re actually releasing a new feature for micropayments that developers can have directly in game.

EE: Is there more you can share to let developers know what your plans are?

DL: I did want to mention one more feature we’ll be releasing, Buy With Friends. If a user wants to, they can share a purchase they made in the game with their friends. We found that more than 50 percent of users actually elected to share their purchase, and their friends can elect to buy the same thing — get 40 percent off this special monster food, etc. We’re really innovating on social purchasing, and you’ll see a lot of these features roll out over the next few months.

EE: Kevin, your company actually doesn’t use Credits. How do you feel about this?

KC: What’s emerged for us is that we have a very different payment ecosystem. We have a lot of stored value… as we transition to Credits, how do we recreate the payment flows that are unique to our game, and create a similar experience? The other thing when we’re thinking about the program, is that when Deb says there are things only a platform can do, that’s very correct. So how does Facebook get people to not only think of the platform as a virtual economy, but also get more stored card accounts in? The numbers I hear are that Apple has about 160 million.. Deb will have to speak for Facebook. But that’s a huge amount of value, and the ability to reduce that friction in a payment process is so key to the whole ecosystem, that if Facebook can create that…

Audience question: Will there be a policy about killing off payment processes? Will others be prohibited from using other payment flows?

DL: All payments will go through our process, but we actually have a relationship with PayPal that allows us to go through a really seamless flow with them. But yes, you’ll be prohibited.

Audience question: I’m curious about where Credits is going in terms of Facebook’s plans for ecommerce.

DL: We really built Credits with virtual goods in mind.

Audience question: I’ve heard a lot of horror stories about promotional Credits, where you see a high spend and then find out you only earned 50 percent of what you saw. What’s the plan to make sure people aren’t screwed?

DL: We actually seeded many of our users over summer of last year and giving out promotional Credits. This was an opportunity to educate users, and a lot of them came back to make more purchases. We’re not planning a massive seeding campaign again. We may do targeted campaigns again, but not a massive one.

RN: In the beginning, we took a pretty hard hit. But over time it progressively went to a more sustainable portion, for us it’s around 10 percent. So it’s OK, because it brings more people who hadn’t paid before. I think it’s positive for us.

JB: I’ve been talking to a lot of developers who tell me that 60 to 70 percent of their volume is promotional. At Wooga we’ve been using them for a long time — what I can tell you is that when the promotional Credits rolled out the paid volume stayed the same, and there was a huge spend on top of that. Our revenue never went down. I think probably long-term they had a positive effect.

DL: I do want to say, this is actually a reporting issue, and one of the things we weren’t great at was getting reports to users to help them understand.

EE: Across a lot of games, when people buy a block of game currency, the left over game coins were a big incentive to make impulse buys later. Do you have any plans to structure Credits so that people make similar impulse buys?

DL: One of the good things about Credits is that there are usually some left remaining, and also our gift card systems will do that, and there will be other websites that drive Credits purchases. It’s having a balance and liquidity to spend, and we’re seeing really good conversion.

EE: You’re trying to get people to use Credits as their in-game currency, but some developers think it’s better to have their own. Why are you pushing that?

DL: Developers have a choice today. But we’re offering additional incentives to developers who use Credits as their in-game currency, and we think it’s really good for education.

Audience question: Our game is similar to Kevin’s, and we’re very dependent on our whales. Facebook Credits converts really well for small payments, but it seems to be really poisonous to the whales — overwhelmingly, people will choose PayPal, especially when you get up to $500 or more. We’re really concerned that will erode our audience. If we’re going to prohibit people from making that choice, how will that affect an app that works on multiple platforms? Could a user go to an open web version to buy currency for a better rate than they do on the canvas?

DL: I think you have a couple questions. One, you’re asking about whether our system works well for whales. We’d like to take a look at your data. In the next five months, we want to learn about these kinds of things. In the second part of the question, the ability to make purchases on the web, the policy applies only to the Facebook canvas. One thing that’s important to us is that there be price parity, but in your case, let’s talk about it.