Beyond Facebook Gifts: Virtual Currencies 101

Reposted from Mashable

Anu Shukla is the Founder and CEO of Offerpal Media, the leading monetization solution for social applications and online communities.

The word on the street is that social networks, as popular as they are, can't make any real money. After all, who's going to click on an ad while they're in the midst of socializing with their friends?

While there's a grain of truth to this rumor, it's fast becoming an out-of-date perception. What's changed? A new economy based on social web properties that use virtual currency to capture users' imaginations.

By creating a demand for premium content such as virtual gifts or upgraded features, savvy social publishers are finding that at least a portion of their users will gladly fork over real cash in order to pay for, say, a pretend peony on (Lil) Green Patch or to buy the latest toys for their virtual babies on Make A Baby. Even better, plenty are willing to wade into the world of online surveys and advertising offers in exchange for these "must have" items in their games.

Though no one knows yet the exact size or potential of the market for virtual goods and services, conservative estimates put it at over $2 billion for this year alone. Not bad for a marketplace that barely existed a couple years ago. Even better, all signs indicate that the growth is just beginning.

As more and more social web publishers catch on to virtual currency as an incredibly effective way to not only monetize their traffic but also engage and motivate their users, the trend will only pick up steam. And as advertisers understand the channel better and realize that it is ideal for both performance-based campaigns as well as branding efforts, don't be surprised if virtual currency becomes the most sought-after ad channel on the web.

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What is virtual currency?
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Virtual currency, as you might imagine, is what you use to buy virtual goods or virtual services. It is essentially as good as real currency. The only difference is that it only applies within the realm in which it was issued. This currency has all kinds of names in the online world: it may be called "bucks," "coins," "points," "dollars," "tokens," "jewels," "rewards," "chips," "treats," "vouchers," "boosts," or "credits" (all of which we've seen), but whatever their name, virtual currencies have a definite value and can be redeemed in a number of ways.

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What are virtual goods and services?
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Ever noticed the little gift icons on Facebook lately that urge you to send a present to a friend? Virtual gifting is a reportedly $50 - $60 million a year business for the company, and that doesn't include any of the gifting that takes place on third party applications. But beyond Facebook's own virtual gifting, it's also built into a number of applications, offering revenue opportunities for the developers of these games.

Virtual worlds and avatar-based communities have been charging people for decorative types of goods like fancy upgrades for their avatars or special backgrounds for their profile pages for some time now. At WeeWorld, for example, where you can create your own personalized WeeMee and take it with you around the web, you can spend WeePoints to pimp out your avatar with just the right hair, right clothes and right accessories.

Virtual goods can also be more functional than decorative, such as the case when virtual currency is redeemed to unlock hidden features or advance within a gaming scenario. This type of virtual good is especially prevalent in MMOGs or other types of social games. For example, at Mobsters, the number one app on MySpace, users can redeem virtual currency to help them grow their mob and level up faster towards the top of this underground world.

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How is virtual currency earned?
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We've already mentioned that virtual currency can be earned by either buying it with real currency or by taking part in ads, but there are several other ways that publishers can allow their users to earn virtual currency. One is by inviting other people to the property, a tactic that also encourages viral success and growth. Another way is by simply coming back and logging in every day, which helps increase stickiness and loyalty. And yet another way is by rewarding them for completing certain tasks or quests, thereby helping build engagement and activity.

But the most monetizable way to let users earn virtual currency, by far, is for completing ad offers.

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How can advertisers tap into virtual economies?
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As advertisers know only too well, so-called "banner blindness" has become an increasing fact of life, but especially so on social networks. Wise application developers know to integrate advertising offers into their app in a way that contributes to, rather than distracts from, the overall user experience.

For example, participants in the (Lil) Green Patch application need what are called "GreenBucks" in order to choose the types of plants they want to send to friends. By signing up for Blockbuster, for example, or by participating in any number of advertising offers such as completing surveys, requesting insurance quotes, downloading ringtones, etc., they can get a hold of that foxglove they planned to give to their aunt Agatha, or a lily they hoped would brighten the day of a friend.

By tapping into the user's social activities and motivations—in this case, sending a virtual gift—advertisers' offers essentially provide the fuel that enables consumers to interact with each other within an application. The key to success, from the advertiser's point of view, is using all of the juicy demographic and behavioral data on hand in order to target their audience strategically. Do that, and they will generate new customers far more effectively than through any other channel.

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Anu Shukla is the Founder and CEO of Offerpal Media, the leading monetization solution for social applications and online communities. A serial entrepreneur, Anu is also the founder of Mybuys Inc., a venture-backed company in the eCommerce personalization market. Prior to Mybuys, Anu pioneered the category of Internet Marketing Automation as founder and CEO of Rubric, Inc. Rubric was acquired in 2000 for $366 million. Prior to Rubric, Anu held a variety of executive roles including Vice President of Worldwide Marketing and Product Management at Compuware/Uniface Corporation (CPWR).

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MMORPG Gamers and Social Media Junkies More Alike Than You’d Think

[reposted from Mashable]

There are two major pursuits that lead people to plant their butts in front of computer screens and pound on keyboards for hours without pay. One group of people loves social media in all forms, shapes, and sizes: Facebook, MySpace, Twitter, FriendFeed, blogging, etc. The other group loves to play around in massively multiplayer fantasy worlds based in magic and technology. These two groups are more alike than unlike, with one key difference. The second group usually realizes that they are playing a game; the first group usually doesn't.

Massively Multiplayer Online Role Playing Games (MMORPGs) are a popular pastime where people immerse themselves in fantasy worlds. Players spend many hours in games like World of Warcraft (WoW), amassing gold, experience, and property while making an uber-powerful character. Other online games like Everquest, Entropia Universe, and EVE Online project the same allure as WoW, while simpler brethren like Kingdom of Loathing, Gothador, and Adventure Quest have their own loyal players. This isn't a new phenomenon either: MUDs (Multi-User Dimensions) and MOOs (MUD Object Oriented), earlier forms of online games with a heavy reliance on text have been around since the late 1970's.

It's pretty clear that you're in a different world when you're playing a MMORPG. You can explore that world on your own, but it's often profitable to partner with other players to help beat down your foes and become stronger. Sometimes your foes are just products of the game. In other cases you battle other players like yourself in order earn wealth, fame, and bragging rights.

Do you see some parallels with social media?

Social media sites are normally grounded in reality (The Sims and Second Life straddle both pursuits), but everyone's playing a character when they join these communities. Most of the time people try to be themselves, but they may use an alias or avatar to represent themselves. Goal attainment can be a big part of social media as it is part of MMORPGs. Socialization and communities flourish, in different forms, in games and social media.

Let's compare these two pursuits:

Friends/Contacts vs. Allies – some social media users have army-size followings. A number of social media users have attracted thousands of followers, particularly on sites like Twitter, Facebook, and FriendFeed. Similarly, MMORPG players try to build alliances with some of their fellow players. The more famous players may gain followings similar in size to Twitter followings. They're fan clubs by other names. The likelihood of direct interaction with someone with that many followers: minute, unless you already have some kind of connection to them.

Stats and Skills/Experience; – MMORPG players want to make their characters stronger, smarter, tougher, and faster, so they play often to gain skills, while using equipment and performance enhancing stuff to make themselves even stronger. The social media user works on increasing comparable stats. If they are a blogger, they want to increase page views, subscribers, comments, and inbound links. They want to get recommendations and endorsements, get added to blogrolls, or otherwise gain social proof. Followers in social networking is another statistic that seems to show one's strength.

Quests/Deeds vs. Accomplishments - games often require characters to complete a series of tasks in order to win some prize, e.g. go kill fifty goblins to get a pouch of gold, a potion, and a new sword. Similarly, social media users may participate in contests to win social credibility by doing things like:

* Hitting the front page of social news and bookmarking sites
* Winning awards from peers or authority figures
* Compete against other social media users for recognition

Property/Territory vs. Publications – some people like to personalize their stomping grounds in MMORPGs to show ownership. They buy land, put dwellings up, and add distinctive furnishings. Similarly, websites, books, eBooks, articles, online courses, consulting gigs, and more are the ways that social media users can make a more lasting mark on the Web.

Entrepreneurism - both MMORPG players and social media experts can sell their skills to help other users with their goals. They often bend the rules while doing this, but there's as much a market for getting uber-skilled characters and MMORPG wealth as there is to getting Digg front pages and high exposure in other social news and bookmarking sites. Gamers sometimes sell their characters and equipment at a profit while some people sell blogs, websites, and applications to make money.

You might think that these are superficial comparisons that cast both pursuits in negative lights. That's quite understandable, because I've focused on the selfish and materialistic aspects of these games. Both MMORPGs and social media sites do have a number of positive characteristics that they share.

Both pursuits have a social component. They allow people from different cities, countries, ethnic backgrounds, and other demographic categories to interact. You learn a lot by interacting with people, even if it's over the Web. Good friendships have been made through both pursuits, sometimes culminating in real-life friendships and romantic relationships whether it's via Facebook, Twitter, or a Ning group – the same can happen in games. Both games and social media sites also allow us to maintain existing relationships when friends move away. Social media sites have a professional networking and career building component. I can't say for certain that MMORPGs have the same, but who knows? You can also use both types of applications to explore worlds, real or imagined, as a way to satisfy creative, recreational, and social needs.

The bottom line is that MMORPGs and social media site are far more alike than unalike. They can both be used for serious pursuits, but they have a huge recreational component. When taken to competitive extremes, the pursuit of social media goals and MMORPG character power can have damaging effects on the user’s personal life. Moderation is a key survival skill. In both pursuits, if things get too intense or obsessive, it's best to remember that they are mostly recreational pursuits.

In other words, don't forget that they are just games.

Mark Dykeman is a former Everquest, Entropia Universe, Kingdom of Loathing, and Gothador player who (mostly) switched his addictions to social media. You can find him building up his social media character at Broadcasting Brain, on Twitter, and at FriendFeed,

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