Pocket Change Brings Virtual Currency Revenues to Games That Lack In-App Economies

Why let social gaming-style zoo, farm and mafia games have all of the fun on iOS’ top grossing charts?

Developers behind games like Tiny Wings, Doodle Jump and Cut The Rope generally pursue two approaches (often in combination). They usually go with a paid version of their app and then offer a free, advertising-based one. Creating a virtually currency-based model can be difficult because it means the developer may need to design a complex in-app economy with sources and sinks.

Now a San Francisco-based company called Pocket Change is trying to make it easier for developers to go the virtual currency route. It’s mimicking one of the oldest revenue models in the book for games — the arcade model where players have to top-up with virtual tokens if they want to play more.

Basically if you play a game in Pocket Change’s network, it’s free at first. You get a few dozen tokens, which allows you to try out the game at first to see if you like it (sort of like the trial mode that many developers use). Once the tokens are up, it’s up to the player to pay more if they want to continue.

Pocket Change’s chief executive Ari Mir says this makes for a better user experience than trial mode or advertising-supported apps.

“It’s rare that you build a monetization platform that not only make the publisher revenue, but also improves the overall user experience,” he said. “We think of this as the perfect hybrid between premium and full ad-supported.”

Pocket Change takes a 10 percent revenue share after the split between the platform and the developer. It’s available on Android right now, where the company faces an increasingly expensive and competitive landscape with mobile-social gaming networks from DeNA, GREE, PapayaMobile and more.

Mir says he’s not too worried though because Pocket Change is just focusing on payments. It’s not trying to own the social graph and incorporates Facebook instead.

“They’re trying to solve the social problem as well as the payments one,” he said. “We as a company don’t believe in trying to create a secondary social graph. We know Facebook is the dominant social graph and it will be for some time.”

There are also plans to bring Pocket Change to iOS. Of course, Apple has restrictions around offering cross-game virtual currencies. So if players buy Pocket Change tokens, they’ll only be able to use them in the game that they bought them from.

Mir says Pocket Change’s approach is ten times more profitable per 1,000 impressions than ads in mobile games. He says revenue per 1,000 impressions is around $5 with Pocket Change, instead of 40 to 50 cents. (He benchmarks it against advertising revenue rather than other virtual currency models, because he says the developers in his target market are going to be comparing it against ads.)

Pocket Change has seven employees, and recently closed a $1 million seed round with participation from Google Ventures, First Round Capital and former Paypal chief operating officer David Sacks.