Using Dual-Currency Systems for Better Revenues and Engagement

[Editor’s Note: This is a guest post by Matt McAllister and Jaini Shah of Offerpal Media. The article addresses issues that developers should consider when implementing virtual currencies. It focuses on the tradeoffs of how to manage two types of currencies within a game.]

Virtual economies are quickly becoming as complex as real ones. As more and more developers monetize their games by selling virtual goods and services, they face many of the same issues and challenges that leaders of real-world economies must deal with every day—inflation and deflation, balance and disparity, supply and demand, security and fraud prevention—plus other challenges that are unique to the online environment.

Some game and virtual world developers, such as Gaia Online, have gone so far as to hire full-time, professional economists to help them navigate the murky waters of creating a virtual economy, so important is it to their monetization numbers and overall revenue.

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One common way many developers have chosen to deal with these issues is to implement a dual-currency system. In these cases, one type of currency is typically earned within the game by completing tasks or missions, and another currency can be purchased directly, either with real money or by completing advertising offers. We refer to the former type of currency as “in-game” currency, and the latter as “Real Money Transfer” (RMT) currency.

Why Two Currencies?

When implemented correctly, there are a number of advantages to creating a dual-currency system: it can help you balance the game economy and manage inflation, track and reduce fraudulent behavior, create a more level playing field for your users, and so on.

But the primary reason to adopt a dual-currency system is to engage and monetize the two distinct sets of users: paying and non-paying. Paying users are willing to fork over a few bucks, cents, or in the case of completing ad offers, a few minutes of their time in order to get premium items within the game. These typically make up between 5 to 15% of your overall user base. The non-paying users, on the other hand, just want to play your game for free. Paying users are valuable for obvious reasons. However, even though non-paying users might not generate direct revenue for your company, they can often be equally valuable, because:

  • their mere participation creates value for paying customers
  • they contribute to your word of mouth growth
  • their visits and page views create advertising opportunities
  • they might eventually turn into paying customers.

RMT currency is for users who are willing to pay real money for virtual currency instead of spending a lot of time in the game trying to earn it, whereas the in-game currency is for non-paying users who are willing to spend time playing the game in order to earn virtual currency but are not willing to spend real money on it. Having multiple currencies in a virtual economy thus helps maximize revenue and engagement across both sets of users.

4 Likely Scenarios

Two important questions that must be asked when first considering a dual currency economy are (1) whether you want to allow your currency to be converted from one type to the other (RMT to in-game currency and vice versa), and (2) whether players should be allowed to trade or transfer currency with one another. Allowing conversions and transfers opens up a slew of challenges that make it more difficult to balance your economy and prevent fraud, so many developers tend to go the safer, easier route of prohibiting both conversions and transfers. Let’s therefore begin by examining this type of economy first.

Scenario 1: Prohibiting Conversions and Transfers