[Editor’s note: This is a guest post by Nicholas Talarico, former social games director at Sibblingz and director of publisher development at Offerpal Media. He is currently working on a stealthy social media & social gaming-focused company. The below article builds on an answer provided by Talarico on Quora.]
Social gaming companies have long been interested in monetizing international markets. While developing nations are part of that picture, they pose additional challenges and should be considered separate from developed markets, in which the quickest way to move the revenue dial is often to simply integrate the most adopted local online payment method.
While lack of adopted payment methods is an issue in the developing world, discretionary spending power is the key concern. To compensate for this, some developers have tried offering more favorable exchange rates for those locales. This exchange rate, based on the game’s existing rate, can be calculated with a simple formula that includes per capita GDP, internet penetration, and some guess work. This method poses significant economic risk, however, for two main reasons.
First, the increased currency source for that set of IPs will cause make economic measurement more difficult, because it becomes tough to separate this planned source from other, mismanaged sources. When game economies become difficult to measure, key revenue decisions are more difficult to make, which is detrimental or devastating in this fast-paced games-as-service environment.
The second – and probably more important – risk with altered exchange rates in developing countries is that some users from developed nations with higher spending power will invariably proxy into the IPs with favorable exchange rates for increased “earning” power. This may tilt the game’s economy out of control.
As a result, very few developers employ the tactic of favorable exchange rates in the developing world.
It is possible, however, to do this if the favorable exchange rate is tied to a method rather than to an IP. For example, if a user needs a Filipino cell phone to successfully complete a transaction for virtual currency, the game developer can more safely bet that said user isn’t proxying into a Filipino IP from Germany for a preferred exchange rate. I’ve begun testing this method with significant success and optimization to follow.
Game Localization, and Culturally-Relevant Content
While I was at Offerpal, a director of monetization for a top-5 social games firm remarked to me that rather than optimizing across payment providers or grinding for higher revshare, he discovered that strategic virtual merchandising and inventory management is more powerful to sustainably increase revenues. I was surprised that this was an epiphany, but many social game companies are still determining best practices when it comes to monetization.
As game developers and content managers, our most fundamental revenue responsibility is to maintain high demand for our virtual currencies. We can do this through diligent measurement of our economies and virtual inventories, as well as simply staying on top of consumer trends in the “real” world and applying them to our game commerce. We’ve seen this time and time again with holiday-themed virtual goods (think jack-o-lanterns in Barn Buddy or Fourth of July-themed items in Mafia Wars).
This should also be applied to developing nations, too, and can be IP-targeted. Christmas-themed goods, for example, play well in the US, but may not in India, where Diwali-themed goods may be better. Know your users, where they come from, what their likely behaviors will be, and what they like to do/buy. It might seem logical to get this information from Wikipedia or a book, but we’re talking about the smallest of cultural nuances; many of the top firms have opted to partner with people or companies from that specific culture.
Along with complete game localization, payments coverage (both direct payment and alternative payment) is essential to monetizing international markets and the developing world. Below, I explore various strategies for both direct pay and altpay.
We all know that there are a number of qualified alternative payment platforms available through quick and free integration: Offerpal, Super Rewards, Gambit, Peanut Labs, TrialPay, Ultrawall, and more. We’re all tempted to test each of these against one another, and my mantra has always been to test everything and leverage competition for better treatment.
I have and probably will continue to test providers against one another. But I recommend doing so only with a UID-based AB test (for example: odd numbers see Ultrawall and even numbers see Gambit), and I always flip the buckets after a few days — a couple of whales can inaccurately tip the test. It has to be pointed out, however, that testing providers can be very bad for the industry.
Let’s say I’m a Lucky Train player and I prefer CPA offers as my means to acquire LuckyBucks. We’ll pretend that A Bit Lucky (Lucky Train’s developer) is ABing Offerpal against Super Rewards. I, as a user, first see Offerpal on Monday. I sign up for Netflix in exchange for 100 LuckyBucks. On Tuesday, I go back to Lucky Train’s ‘Points’ page and Offerpal is still the provider showing. I try to sign up for Netflix again, but Offerpal’s system knows I’ve already signed up for Netflix and won’t allow me to do so. Netflix avoids a bad lead and advertiser payout rates are preserved.
On Wednesday, however, I go to Lucky Train’s ‘Points’ page and, as part of their test, A Bit Lucky is now showing me Super Rewards. I click on Netflix and because Super Rewards doesn’t have the historical data that I’ve already completed this offer, I’m allowed to continue and earn my virtual currency. However, at month’s end, Netflix sees that this is a poor lead and issues chargebacks and scrubs rates. I, the user, got my virtual currency but somebody (Netflix, Super Rewards, or A Bit Lucky) isn’t going to get paid – and that’s usually passed down to the developer. It’s bad for the industry. We’re all part of this insane growth and we should protect it as such.
Here are some of the specific offer types:
CPA, CPI, CPV, etc.
CP_ (cost per: Action/Acquisition, Install, View) has become a proven method of alternative payments over the past 3 years, especially in the developed world where marketing budgets are focused and where online marketing is king. However, some CP_ offers are available for developing markets. CPI, specifically (when the paying action of an offer is the install of another game or app), is often available to all users, regardless of which country they come from. Payouts are typically low (due to poor quality installs), but CPI offers are free and easy for anyone, so the volume can make up for lower payouts.
Surveys, like CP_ campaigns, have their largest budgets in the developed world. However, marketing for many products is growing in the developing world and corresponding market research is needed. Peanut Labs, the market leader in surveys, has increased its international (and developing world) survey reach in the past 6-12 months, which has helped their international monetization significantly. Surveys are free and are available to whoever they’re targeted (based on user demo data).
Micro-tasks in exchange for virtual currency is a near-global monetization option, and I anticipate that as UIs and presentations improve, this method will become a more viable part of the virtual currency ecosystem. Gambit already partners with Crowdflower, and Offerpal has Mechanical Turk Tasks on its platform. That said, there’s a lot of work that needs to be done. Re-engagement and re-targeting by the micro-task companies is weak, and inventory is a big issue.
A new player on the scene, BringIt acts as both a source and a sink in game economies. That means that users can both gain and lose virtual currency within the BringIt environment. The platform allows users to “bet” a game’s virtual currency on themed mini-games within the game frame. The product is yet to be fully localized or translated, but is free for users (it costs them virtual currency, which acts as the sink) and is available to anyone.
Direct Pay — Coverage and Optimization
As it relates to developing markets as well as overall international coverage, having all the right direct payment methods is key. Aside from payment platforms like Playspan, Allopass, and Moneybookers, the two leading altpay and direct pay monetization suites, Offerpal and Super Rewards, have a large number of direct payment methods to complement their altpay focus. Each supports over 100 international payment methods either through direct integration or through “deep links” from an aggregation partner. Many of these methods are promoted in developing countries.
What hasn’t yet been nailed, however, is historic targeting. It’s good to start a user off with all methods available to them for their country (altpay and direct pay). However, as time passes and transaction data accrues, users should be shown payment methods more strategically. Otherwise, clutter and distraction can become overwhelming, negatively impacting conversions.
As an example, consider an Italian user who has come to an app’s ‘Points’ page every three days for 3 months to buy or earn currency. Initially, the user did a few incented CPI offers (installing another app in exchange for the current app’s currency), then they began doing PayPal transactions routinely for the past 10 weeks. The user has clearly adopted their preferred payment mechanism. They no longer need to be shown all the other options. A collapsible UI that holds PayPal in a frame above a few simple offers would likely be the optimal scenario for improved conversions for this user and others in the same bucket.
Overall, users should be bucketed according to past behavior and more granular tests (price points, default package selection, etc.) should be run on each bucket. It’s work, but I’ve seen as much as 50 percent lift if this is done properly.
Mobile Coverage Doesn’t Mean Mobile Conversions
It’s no secret that mobile payments are the preferred, adopted form of payment in many international markets. The extent to which the mobile payment companies (Zong, Allopass, Boku) have gained international coverage in the past couple of years is staggering. It wasn’t long ago that US coverage was “coming soon.” However, coverage doesn’t lead to transactions if the UI isn’t right. Much of the time, users are unaware that they can pay via mobile (in their country). In other cases, users need a nudge that many of the payment companies aren’t successfully giving them. Over the past few months, I’ve experimented with various presentation strategies on this matter with very clear (and in some cases dramatic) increases in conversions and revenue.
Having the method is only part of the battle, and that goes for any method – not just mobile.
Discretionary spending power plus availability of locally-adopted payment methods equal increased transactions and revenue.
In countries where one, the other, or both don’t exist, developers should dig deeper and get creative for solutions. Having looked at the numbers backward, forward, and sideways for the past few years, this is easy for me to say. However, making the right moves often means real improvements in conversions and transaction sizes.
Overall, there’s a ton of opportunity to sustainably monetize international and developing markets, and if educated and committed, it can be a very profitable exercise.