Payment Industry Perspectives: Q&A with Offerpal CEO Anu Shukla

As we continue our in depth look at leaders the Facebook Platform monetization ecosystem, today we turn our attention to Offerpal Media, one of the largest players in the space. After raising $15 million earlier this year from D. E. Shaw Ventures, InterWest Partners, and North Bridge Venture Partners, the company has been expanding its efforts to help developers monetize their social apps and games through the company's offer network and virtual currency platform. Offerpal works with many Facebook app developers, and is led by Anu Shukla, Founder and CEO, Mitch Liu, Co-founder and Vice President, Naghi Prasad, VP Engineering and Operations, and Bill Lonergan, CFO. We recently spoke with Shukla about recent developments in the Facebook payments space and the company's approach to monetization. Inside Facebook: Anu, what is Offerpal’s role in the virtual economy? Anu Shukla: Offerpal is a monetization platform for applications and websites with virtual currencies, digital goods, or subscription-based services. We launched in October of 2007 and entered the space because we initially built an app for Facebook and MySpace and integrated virtual currency, but then focused on building out a monetization platform. How would you compare user behavior between social networks and standalone sites? We focus half of our efforts on social networking based apps and half on standalone games and websites. On social networks, we’ve seen a big influx of new users - whereas on standalone sites, it’s the same user base again and again. On social networks, new apps are being launched all the time, and the old ones die. Apps grow virally, but users also lose interest faster. What trends are you seeing around users and their payment method choices? It depends on what type of app you’re dealing with, whether users are younger or older, female or male, and how much time they have on their hands. Users who don’t have much time tend to use cash payment methods. In Europe, mobile payments are more popular. Incentivized offers are used less, proportionally speaking. For example, 30 percent of revenue may come from cash payments, and 70 percent from other payment methods, such as offers – but this breakdown changes depending on the population at hand. As an optimization platform, how does Offerpal optimize the experience for the different players you work with? We have 3,000 offers in our system and add 100 new ones every day. We optimize our offers based on individual preferences and target the exact type of user, which optimizes revenue for our publishers. The publisher wants to maximize earnings and provide a good customer experience; the consumer wants to do something that s/he is interested in. We have a scalable rule-based optimization engine that's based on the inclusion/exclusion of particular audiences, proprietary algorithms, and collaborative filtering at the individual consumer level. From our perspective, all relationships are really important and make our business model work. The advertiser pays; consumers buy; and publishers attract consumers. The right match between the three ensures that the advertiser is seeing quality results, the publisher is maximizing revenue, and the consumer is finding offers relevant. We work extensively with advertisers, as well as publishers who can then turn their attention to the games themselves while we focus on monetization efforts and customer service. And, what about your transaction model? When a user completes a transaction, the advertiser pays us, and we share that amount with the publisher. Revenue share is negotiated on a case-by-case basis. How is your partnership with IMVU going? IMVU is a premier avatar-based site, and its tight integration with Offerpal has been quite successful. IMVU is one of our premier clients, and we hope to continue the partnership for many years to come. IMVU has done a great integration, as well as Real World and Mobsters. We have a team in house that helps publishers find the right integration. The virtual economy in international markets in Asia, for example, is exploding. Are we seeing signs in the U.S. in that direction? Yes, we’re seeing all the signs of that. Social networks are rushing to add virtual currency; and games and virtual worlds are being developed/created to generate income/revenue from virtual currencies. Virtual currency is here to stay. Now that Facebook has launched its alpha “Pay with Facebook” test, what’s your reaction? I think it’s going to open up the number of people who will participate in transactions. The net effect will be that more people are willing to buy virtual goods, subscription services, and digital goods on Facebook because they are familiar with the brand. This will add more people to the mix. The user base will expand, which is great for publishers and for us. How is Offerpal doing financially? Financially, we’re bucking the trends, which is not surprising. In a recession, the industry that expands the most is entertainment, and we’re seeing the effects of that. Combined with the fact that engagement on and growth of social networks are both increasing, we’re riding on these positive trends, and are on an upswing. Can you share any statistics with us on the percentage breakdown of your revenues across certain regions? Sure - here is what we're seeing: 70% North America 17% Europe 7% Asia 2% Middle East 2% South America 1% Africa1% Central America Thanks Anu! Do you have any last comments you’d like to share with our readers? There’s no reason why micro-transactions won’t be as pervasive as evidenced in Korea and China. China’s Tencent QQ almost got regulated by the Bank of China because its virtual currency was so liquid! And also, we've seen the positive benefits of businesses that are initiating loyalty points programs such as frequent flier miles. Virtual currency is the equivalent of that for gaming and social networking worlds.

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Payment Industry Perspectives: Q&A with Offerpal CEO Anu Shukla

Jessica Lee

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Jessica Lee