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!