“De-virtualize” the Virtual world: Effective monetization of mobile apps and games

If you’ve ever played a mobile game or “checked-in” at a location using a mobile app, the chances are that you are well aware of virtual currencies and incentives; if you are an avid mobile games/apps user then you probably hold honorary virtual “mayorship” on foursquare for one or more locations and/or have accumulated a hefty bank balance by renting your virtual properties on mytown. Given the upward trending usage of mobile apps such as foursquare (100MM checkins) and mytown (3.1MM users), it shouldn’t come as a surprise that virtual incentives have been quite successful in driving heavy consumption behavior, mainly, because they appeal to the basic human desire to be rich (virtually own several real world properties) and famous (virtual mayorship of several locations). But whether such virtual incentives and currencies will continue to be successful in driving consumption and stickiness is very much a topic worthy of discussion. The evidence is apparent from the fact that more and more mobile apps are incentivizing their users not only by virtual world currencies but also by real world offers, deals, and coupons. Not to mention, the real world offers and deals not only reward the users in the real world but also allows the app developers to monetize their application. I call this phenomenon – “de-virtualization of the virtual world”.

Several mobile ad platform startups are currently competing for marketers’ dollars and app developers’ attention by pitching their mobile ad platform as the best in class to drive customer acquisition for marketers while providing high eCPM (effective Cost Per Million Impressions), CPC (Cost Per Click), or CPA (Cost per Action/Acquisition) rates to app developers. In my own 1-on-1 interviews with the business development and sales VPs/Director, I found that the CPC and CPA are dominant among the pricing models and could range from $0.15 to $40. Not unlike few, I believe that the key constituent in this model is the relevancy of the offers. Relevant offers help consumer find great deals, marketers target prospective customers effectively, and mobile ad platform startups drive higher click-through and higher action rates through their app developers’ network – it’s a win-win-win-win proposition.

So, the question is how to make offers relevant? MobiQpons, a location specific mobile ad network, claims that their ad platform ensures relevancy using –

  1. Geo-Location: By knowing the location of its app users and its mobile app partners’ app users, the company’s offer engine is able to deliver offers within the geographical vicinity of these users.
  2. Offer usage history: The offer engine is aware of a particular user’s views history, click-through history, and offer usage history with respect to time of a day and day of the week. Using this information, the engine is able to filter through and serve offers with higher likelihood of click-through and/or action by the user.
  3. Context: The offer engine allows the app developers to specify a category and a keyword in its offers request to match the context of a user’s activity at this time. For example, if you user is playing “mytown” virtual monopoly game and buys a Mexican restaurant, the app developer may send a “category=restaurant and keyword=Mexican” offer request to the offer engine and receive offers and deals for Mexican restaurants in the geographical vicinity of the user.
  4. Favorites / Ratings: The offers or deals API user interface allows the users to mark a particular merchant as favorite and/or rate a particular offer or deal. This furthers the knowledge about the type of offers or stores that are more likely to prompt a click-through or an action from a particular user.

I believe that the factors stated above are bound to increase relevancy of offers for consumers and produce higher customer acquisition rates for the merchants (Disclaimer: I am currently consulting as the Marketing and Business Development Lead for MobiQpons). With great relevant offers and deals that are linked closely to users’ mobile interaction and flow of the day, app developers are more likely to retain/increase user base and monetize their apps while rewarding their users. Irrelevant banner ads prompting users, for instance, to join a “spiritual following” when the user is trying to locate a burger joint in a neighborhood only act as irritating distractions that are less likely to increase users’ app stickiness or any action on user’s part. Even better proposition would be to create a virtual currency that crosses over to different types of apps and games, and allows its holder, the user, a certain varying percentage off of transactions across various brick and mortar retailer and merchants.

Scenario: I as a mobile apps and games user have SCVNGR mobile game, Booyah’s mytown mobile game, and foursquare check-in app on my mobile phone. I play scavenger hunt and buy virtual goods on SCVNGR, rent my virtual properties on mytown, and check-in frequently using foursquare. I also enjoy Mexican food and buy electronic gadgets. My virtual currency that is valid across all these games and across virtual and the real world allows me to do the following:

Rent property on mytown :                               +10000

Buy virtual goods on SCVNGR:                            -1000

25% off at a local Mexican restaurant:                 -2500

25% off of $50 purchase at a local Best Buy:      -5000

Remaining virtual currency balance:                     2500

Such currency may truly “de-virtualize” the virtual world.

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