Optimizing Social Game Payments for the Developing World

[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.