So, we all want to monetize our users, but what’s the best way in doing so?

After taking a quick look at several different casual games, I’ve compiled a list of three different methods that companies use, in order to monetize its users.  Let’s take a moment to quickly analyze these various ways, in order to find out which is the best one…

  • Farmville – Farmville uses a dual currency, Farm Coins and Farm Cash with several different payment methods including PayPal, Credit Card and Facebook Credits.  With Farmville, paying users are engaged with Farm Cash, but must work (play) to get Coins…why not let them pay for both if they want?
  • Music Pets – Music Pets uses a dual currency using their own currency and Facebook Credits as the other.  Their payment methods include PayPal, Credit Card and Facebook Credits.
  • Social City – Social City has a dual currency, City Coins and City Bucks with several differentpayment methods including Credit Card and PayPal.  However, their most unique feature, I believe, is their use of a currency exchange…Players can exchange 5 City Bucks for 6 thousand City Coins.

All three of these companies utilize a dual currency model in some way, but which is the most effective?  Without sneaking into these companies and looking at their books…and I am no economist…but, I believe that Social City has the most interesting way of engaging and more importantly, monetizing its users.

We know that the average game monetizes users at around a 1-3% clip.  Developers put in so much time putting together several different game play options for the paying and non-paying crowd that it is important that their methods pays off.  In the end, a high Average Revenue per User (ARPU) is the goal of every developer, so getting those non-paying users to pay is of utmost priority.

I believe, that a currency exchange model has the ability to achieve that because it engages users with all the facets of the game and does not clearly aggregate users into a paying and non-paying group…where most users can tell that a game’s premium currency is obviously meant for users to purchase things with real money (and where they may get turned off…).

Matt McAllister of Offerpal has a couple of other good suggestions for monetizing users including:

1.   Engage first, monetize second

Promote your currencies based on the users’ life-cycle. First engage them in the game through some in-game features and currency before promoting the RMT currency and driving them to the payments page. If you push RMT items before the users are fully hooked, you risk turning them off and losing them for good.

5.  Test, Measure & Optimize

As with everything in your game, you should be testing and re-testing all variables affecting your engagement and monetization. Test your exchange rate. Test your price points. Test anything and everything involving your virtual economy. Keep in mind that small fluctuations can often have a large impact on your overall revenue. At the same time, keep an eye out for inflation, imbalance, fraud and other factors that could be detrimental to your efforts, and quickly squash these before they have a chance to grow.

For reference, please check out a couple of other posts that I have used as reference including…Lightspeed Venture Partners blog and this article from Matt McAllister from Offerpal

Do you believe that having a dual currency with a currency exchange is an effective model? Would it only be valuable for larger companies?  Can this model also help a game developer further engage users or is this not even relevant?

Please post your thoughts in the comments section!

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