Payment Industry Perspectives: Q&A with Jambool CEO Vikas Gupta

As we continue our in depth look at leaders the Facebook Platform payments ecosystem, today we turn our attention to Social Gold, a virtual currency monetization, payment, and analytics service for social apps and games from Jambool.

We recently spoke with Jambool co-founder Vikas Gupta (formerly of the core Amazon Payments team, along with several Jambool colleagues) about the opportunities he sees inside Facebook apps and games, and the approach Jambool is taking to help developers monetize.

Inside Facebook: Vikas, what does Social Gold do in a sentence or two?

Vikas Gupta: Social Gold is a virtual economy platform that provides developers with an API to create their own virtual currency, and monetize it with our in-game payments platform. The virtual currency that developers create runs on our back end infrastructure that provides detailed virtual economy analytics for free. We also recently released our Subscriptions API to a few partners and will be opening it up to others shortly. It enables developers to sign up users for recurring billing through the same Social Gold in-app payments experience.

In terms of analytics and helping developers manage their virtual economies, what are signs of a healthy virtual economy?

As with all economies, we measure transaction volume to understand the health of an economy. To that end, we balance sources (creating money) and sinks (spending money). When sources are greater than sinks, inflation happens. In this situation, this means that users aren’t given enough ways to spend virtual currency, so the game must inject ways of spending into the system via free currency, offers, etc.

The virtual economy is most popular in the gaming context, but to what extent can it be applied elsewhere?

It’s not just games that are looking at virtual currency: organizations have had loyalty programs for a while now – frequent flier miles for example – and many are seeing virtual currency as an extension of that and introducing game mechanics into their programs. In the case of frequent flier miles, a source occurs when passengers take fights and thus earn miles; a sink occurs when they then redeem those miles. And when sinks happen, the cost the airline incurs is much lower than the perceived value of those miles for the user. Switching back to gaming, the gap between the real cost of virtual goods and the perceived value is even wider.

How are your revenues currently breaking down across platform and geographies?

By platform, we do more than 95% of our business on Facebook and MySpace, and more than 75% on Facebook alone. By country, our top countries with paying users are the US, UK, Canada, France, Germany, and Australia. The US accounts for about 70% of revenues, followed by about 10% from the UK.

How do your ARPUs break down across countries?

We can’t break it down by country right now, but at a high level our average user monthly spend tends to be about $30, with some users spending over $1000 a month. This average is across paying users, not all users. Almost all of the users with large payments come from US or western Europe.

Some people still find it hard to believe that so many people are willing to spend real money on virtual goods. How would you respond to them?

Two points: 1) If you take a step back, when you step inside an arcade, you must first buy tokens. It’s the same concept in a virtual world where users pay $10 dollars for 10 points. They are really getting five hours, let’s say, of playtime. It’s basic entertainment. If consumers are willing to watch a movie, why should I not be willing to pay for an online game? Virtual currency isn’t a new way to pay for stuff – it’s a way to entertain yourself. 2) In the real world, why do we collect postcards? Younger generations may not understand why we do so. When I add virtual books to my virtual bookshelf, the emotion that goes into them are the same that I put into real books. Ten years ago, we listened to CDs; now we buy songs online. People have always wanted to share, but up until recently, the technology wasn’t there to enable it.

Would you like to share any thoughts or impressions on Facebook’s early payment system tests?

We see Facebook Credits as a virtual currency/prepaid value system. It’s a good development because it will familiarize a large user base with the concept of virtual currency and cause users to feel more in tune with the virtual economy.

As the economy is lagging, companies based on gaming and virtual transactions are seeing promising growth. How about Social Gold?

Social Gold launched in September 2007, and monthly volume is up more than 10 times since October 2008. Month-to-month growth has been around 20 to 30 percent, with both the number of paying users and repeat users growing.

What are some inefficiencies that you’re seeing in the virtual goods economy? Where will we go from here?

A) There are a lot of players in the virtual goods space, but also a lot of noise in the market. What will happen over the next year is that some noise will get sorted out. B) By default, gaming draws a diverse audience – both in terms of international reach and age (from teenagers to 60 year olds) – and right now, players in the space aren’t necessarily focused on any specific segment. C) How users pay for games will also change. Subscriptions are another form of payment that could become more prevalent; and in general, more payment tools need to become available.

Thanks for your time Vikas!

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