Virtual Currency Monetization

One of the key revenue drivers within social media - that is already big, and picking up more steam every day - is virtual currency monetization. Wanted to make a quick post about this topic from the Publisher/Application developer standpoint as well as the Advertisers perspective.

How does this work?
Let's illustrate with an example. As an application developer, you have built a facebook application that is a game of world domination. Within this game, your users collect 'gold coins' (your games 'virtual currency') which they can use to buy land, weapons, and various items. Companies such as AdParlor, Super Rewards, and OfferPal will give your users another way to get these gold coins. For example, your users can now purchase gold coins directly using their mobile phone. They can also earn gold coins by completing a quick survey. When your users make this purchase or complete this survey, they get their gold coins as promised and you, as the developer, make REAL money.

PUBLISHERS - What does this offer wall look like? How much can I make?
Here is a sample offer wall from AdParlor on an application where the virtual currency is 'Flair Credits'. Application developers have seen eCPM's that are not even on the same scale as eCPM's seen from banner advertising. If they have created a genuine desire for their users to earn virtual currency within their game, they will complete offers in order to earn. Many of the offers are actually quite useful such as allowing users to register for a book club and receive discounted books. Offers such as a book club can pay out up to $20 / new subscriber! The 'companies / offer providers' above have also invested a significant amount of time developing algorithms to bring the highest paying and most completed offers to the top of the offer wall, while taking into account the users demographic information.




ADVERTISERS - What does this mean for me?
This is interesting to advertisers for many reasons. Let's say you are a market research firm looking to have surveys filled out or an exciting new online game looking to bring on new players. This offer wall allows providers to only award users with their virtual currency upon completion of an action. For example 'Must complete survey and enter valid information to earn your Flair Credits'

Now the question may be 'Aren't these users simply completing my survey to get their virtual currency and not because they are genuinely interested in responding to my survey' The simple answer is - most of the time - YES! For this reason, there are only certain types of advertisers where this method is useful. A user signing up for a book club, would probably have a genuine interest as they are putting in their credit card number. Also, these types of campaigns count on users seeing the value of the subscription and deciding to stick with it (not canceling). Some market research firms simply need to collect a volume of valid e-mail addresses for lead gen purposes - and this method can definitely work.


Market Size
There have been lot's of estimates on the size of the virtual goods market in the US and worldwide. Instead of trying to re-hash everything here, there is a great post by Charles Hudson discussing the social networking virtual goods market versus the external virtual goods market as well as US vs. Global. Have a read here.

As always - I welcome your feedback!

Facebook Thoughts

Guest post by Ali Merali - Social Media Consultant @ AdParlor
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" Until recently, I had a very ‘love-hate’ approach to facebook. Loved how I could connect with all those long lost buddies around the world and share all our stories in any way and form we wanted. The hate portion would resonate every time I discovered those ever intrusive “facebook snoopers” who used the tool as their personal tabloids!

But that all changed a few months back when I began to see what facebook was becoming: the gateway to a new digital marketing era. It’s not something that hits you overnight, but once you step into the space, you begin to realize that social media can be a huge empowerment to brands and organizations (IF done correctly).

It’s tough to know what’s an ‘official’ fan page on facebook as opposed to one simply created by a fan who publishes no new content. But the quest to find a well executed fan page shouldn’t prove too difficult. Those are the pages in which you see a constant stream of ‘two-way’ conversations on the brands wall. That’s right traditional marketers, TWO-WAY conversations (Begin hyperventilating now…) Those are the pages where companies are not commanding and controlling their messages and finally, where brands show personality and magnify their presence by treating the consumer as an influencer rather than a puppet.

Social media is certainly establishing an exciting yet awakening time for marketers and it’s thrilling to be a part of it all. "
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Guest post by Ali Merali - Social Media Consultant @ AdParlor

ad:tech

This past week, I had the opportunity to attend ad:tech in San Francisco along with the rest of the AdParlor team. One thing which was immediately obvious to me is that we are NOT in a recession - OK, maybe we are, but it was not apparent at a show like this.

ad:tech is THE event for digital marketing. Although a lot of the exhibits were taken up by payment platforms and SEO type companies, the majority fell on the actual digital banner advertising side. There was representation there from most of the large banner networks. One thing that was interesting is that there was still not much representation from the social media side. There were a couple of ad networks that monetize social media traffic, but no real presence fom agencies that help brands enter this space.

Marketing in a Social Media Era book released

Just wanted to make a quick blog post to highlight the early release of a book titled 'Marketing in a Social Media Era' This book is truly unique for many reasons. It was written by 100 different authors (including myself) and it is a collaborative, not-for-profit production discussing many different angles or Marketing in a Social Media Era. The way the book itself was written and promoted is social in nature. Check it out - or even better, buy a copy!

ORDER NOW! CONNECT! By The Project 100 Book Preview

AdParlor announces virtual currency platform

Today AdParlor publicly announced the launch of its virtual currency platform. It has been running for the past three months and many of the top facebook application developers have already taken advantage of this revenue generating opportunity. Essentially, AdParlor will take up a small piece of real estate on applications that have a virtual currency. We will then put out 'EZ' offers that users can complete in exchange for virtual currency. Any time a user completes an offer, the application developer earns real money! Learn more about the program here. See the official press release here.

What kind of eCPM can my facebook application generate?

One of the most common questions I hear is "What kind of eCPM can my facebook application generate?" The answer is, it depends!

There are two primary factors that effect the eCPM:

1. The country of origin of your users
2. The Click Through Rate / Conversion Rate
   

The country of origin is simple to explain. The fact is, that there are simply more advertising dollars to go around in certain countries. More advertising dollars competing for inventory means higher eCPM's for you as a publisher. In an interview with Michael Arrington a while back, Chris DeWolfe (CEO of myspace) claimed that 95% of their advertising revenues are coming from 9 countries! Essentially, if you have lot's of eyeballs from these more monetizable countries, this will bode well for your eCPM. What are these countries? I can name a few: U.S, UK, Canada, Australia, Japan, Germany, and France. Any thoughts on the other 2?

The CTR / Conversion Rate is a little bit trickier. This can depend on several factors:

1. Ad Size and Placement - Ideally, you should choose a large ad format (300x250, 728x90...) and place it above the fold.
2. Ad Density -You can expect a higher eCPM if you limit your application to 1 (maybe 2 ads). You don't want to plaster your application with advertisements.
3. APPLICATION/AD ENGAGEMENT- This is the biggest factor by far. If you have a gaming application where users are fully immersed in the game and the advertisement is blindly refreshing (away from where the action is) you can deliver millions of impressions and never get a click. Apps that are more casual, and less engaging in a way, perform much better. Another strategy that pays dividends is to place ads strategically. Maybe your application is a game, but right smack in the middle, after every 5 turns, an ad appears and the user must click skip to continue playing. Although this may be annoying for your users, it can work to drive up your eCPM.
   

I still haven't thrown a number out there yet, but I probably should. At AdParlor, based on hundreds of applications, we have seen eCPM's that range from 1 cent to $5! That goes to illustrate my point - it depends!

Facebook to deliver ads on applications!

Interesting developments in the last 24 hours. Facebook has announced that they are testing their ads on applications. On the developer forum, they posted this: "we are always internally exploring different ways we can directly help you monetize better. Starting today you may notice a few applications occasionally serving Facebook Ads directly in their canvas pages as a part of a small alpha test. We will use the results of this test and other tests that we do to determine the best ways we can help you monetize. For this initial test we picked a few developers that had a variety of different user bases and application types to give us the kind of data we need. We will examine the results to decide whether to open up the program to more developers in the future."

I see no reason why facebook will stop at just 'some apps' and am sure they are planning to roll this out to all app developers! I would write more, but Nick O'Neill already did a good job on allfacebook - might as well read about it there: http://www.allfacebook.com/2009/02/screenshots-of-facebook-application-ads-in-action/