Selling Points: Optimizing E-Commerce

Online farming is all the rage these days—farming games are easily among the fastest growing applications on the Facebook platform. Take Slashkey’s Farm Town, for example. Legend has it that Slashkey, an independent developer, started the farming game by sending invitations to just twelve friends in February for testing. By April, its user base grew to 3 million with absolutely no advertising. To top it off, the game was invite-only and unsearchable on Facebook. After Farm Town finally became public in June, it debuted as the #4 game on Facebook with nearly 8 million users, and its monthly active user count is now nearing 15 million.

Another farming game that has seen enormous success in terms of growth and user acquisition is Zynga’s FarmVille. Only a month after launching, FarmVille has acquired 16.3 million users and is now one of the top three games on Facebook. FarmVille is arguably the fastest growing Facebook game ever, thanks to targeted performance advertising and heavy cross-promotion throughout the Zynga network. Zynga’s CEO Mark Pincus said in a recent interview, “We do spend a lot of money on advertising when we want to, like when we launched Farmville. We spent a couple million dollars advertising it and we're not shy about that.”

According to Justin Smith of Inside Social Games, Facebook applications can have monthly ARPUs (average revenue per user) ranging from $0.30 to $2. Farm Town and FarmVille, each with over 14 million users, can generate tremendous revenue for Slashkey and Zynga by optimizing their monetization practices.

Because gameplay for these two games is comparable—users spend coins to tend or expand their farms and gain coins by harvesting and selling their crops—the natural touchpoints for monetization are also comparable. In Farm Town, users can click on the “Earn Coins” tab, and they can buy coins using a variety of payment methods (credit card, PayPal, mobile, home phone, etc.) or earn coins by completing an offer.

Similarly, FarmVille users can click on “Get More Farm Coins” to buy or earn farm coins and farm cash (premium currency).

They can also click on the “Add Coins & Cash” button. Placing a call-to-action button directly below the coin count is a great way to monetize users who are not satisfied with the amount of coins they have.

Improving Monetization Practices

Although both games are doing many things right, like offering a handful of alternative payment options, they could improve with regards to integrating monetization opportunities more deeply. For example, if users go to Farm Town’s store or FarmVille’s market and attempt to buy items that they cannot afford, they should immediately be given the option to buy or earn more coins. Barn Buddy, another popular farming game, gives users direct access to the payment page from the shop.

Farm Town and FarmVille could also integrate advertiser offers directly into high-traffic screens—for example, Farm Town could place an offer directly in the marketplace, where users can hire workers or find jobs. With so many users willing to spend time and energy in order to work for more coins, the game developers can capitalize on this monetization opportunity.

Who knew that farming would be the killer app for Facebook? Slashkey and Zynga have achieved great success in this up-and-coming category of games, and it will be interesting to see how they keep their users hooked.

Virtual currencies are governed by the same economic principles of real money. If you don’t closely monitor your virtual economy, inflation can erode the purchasing power of your currency—which can deter new users from playing your online game. Inflation is caused by an excessive growth of the money supply, which can drive up the prices of your virtual goods to the point where new players simply can’t afford to play your game.

Some of the most common causes of inflation of virtual economies include:

• Misaligned payouts, or rewarding users with large amounts of currency for little effort
• Offering too many opportunities to earn currency, and too few ways to spend it
• Players gaming the system to fraudulently earn virtual currency

Here’s a look at ways you can prevent virtual currency inflation:

Managing your offer completions
Offer completions are an effective way to monetize online games. But many game publishers use fixed exchange rates, which encourage users to actively seek out the highest paying offers rather than those they are genuinely interested in. As a result, exposing your exchange rates can significantly inflate your average user wealth. You can avoid this by grouping your offers as shown in the example below:

Monitoring your economy
Analytics can provide insight into the health of your virtual economy and help prevent inflation. Viral analytics platform Kontagent recommends that game publishers should:

• Monitor average net worth
• Track individual virtual good purchases
• Balance sources (ways your users can earn currency) and sinks (ways your users can spend currency)

If your analytics indicate that your currency is inflated, it’s time to reduce the ways your users can earn currency and increase ways for them to spend. Implementing multiple currencies can also combat inflation by making some items available only with premium currency.

Implementing fraud detection
When users game the system and unfairly earn excessive amounts of currency, prices of your virtual goods will rise. With strong fraud detection, online game publishers can deter such behavior by deducting coins or banning the user from the game. Such monitoring can be done in house, or better yet, you can choose a payment platform that manages fraud for you.

When you order a Happy Meal at McDonald’s, you’re getting a package of complementary foods at a discounted price. Not all customers would buy a cheeseburger and french fries individually at full price, so fast food restaurants bundle them into a meal to boost sales. Any retailer—especially online sellers—can use the same bundling tactics to dramatically increase sales and raise brand awareness of their products. Grouping complementary items together at a discounted rate creates an incentive for customers to buy their original item, plus one or more products that they hadn’t initially intended on buying—which increases conversions and boosts average order values. Even though you must discount your products, heavy sales volume will create a net increase in revenue. MacHeist, for example, made millions of dollars and increased awareness of new (or previously little-known) Mac products, by selling hundreds of dollars worth of Mac software for less than $50. In its most recent sale, MacHeist sold 88,000 units, bringing in nearly $4 million. Retailers can also bundle their products with complementary products from other online merchants, which happens quite often in the software industry. The volume potential and brand exposure create a significant revenue opportunity. By bundling your products you can: • Boost sales and revenue by giving the customer more value for his dollar • Create a feeling of loyalty to your brand for the deal you made possible • Save on transaction costs by selling multiple products to individual customers • Increase sales of new or lesser-known products by bundling it with a top seller • Appeal to a wider customer base by promoting several different products

In order to acquire new users, application developers are spending more than ever on advertising. Social network ad spending is expected to reach $1.3 billion by 2010, according to eMarketer.

Developers have been turning away from more traditional advertising models, like cost-per-mille (CPM) and cost-per-click (CPC), in favor of cost-per-install (CPI; a developer only pays for ads that result in a user installing his or her application). Because developers only pay for installs, many of them assume that CPI is more cost-effective and results in better lead quality than other advertising models. According to Netvibes, a leading widget marketing platform, CPI advertising is “purely performance based.”

But what is the relationship between installs and performance? Installing an application is the first step to becoming an active, engaged user, but it does not guarantee active engagement. Developers who run large CPI campaigns consistently show initial spikes in user growth, followed by a quick drop-off in usage, which raises doubts about the claim that CPI advertising is “purely performance based.”

Incentivized CPI advertising, in which a user earns virtual currency in one application by installing another application, has resulted in even poorer lead quality and retention. A top Facebook application recently told us that they ran two separate incentivized CPI campaigns and found that not a single user that they acquired from these two campaigns ended up staying with the service. The “users” that had installed the application were motivated primarily by the offer of free virtual currency and cared very little about engaging with the newly-installed application.

Clearly, it is time to rethink CPI advertising. Rather than treating CPI advertising as a better alternative to other advertising models, developers should instead capitalize on its unique benefits. Installs give developers access to valuable information about their new customers, including age, gender, location, interests, marital status, educational background, friends, and more. Developers also acquire reliable communication channels, which allow them to talk to their customers and engage in relationship marketing so that they may maintain sustained, valuable customer relationships.

Best Placement: Bitberry Software

Welcome to TrialPay’s Best Of Web (BOW) Awards, where we recognize the savvy online merchants that best utilize TrialPay’s e-commerce solutions. This month we’re recognizing Bitberry Software for effectively using the TrialPay payment method alongside traditional payment methods.

In Bitberry's “Buy Now” page pictured above, customers can pay for BitZipper via credit card, TrialPay or Paypal. While a number of recent studies show that online sellers are turning customers away by offering too few payment methods, Bitberry appeals to every customer with a wide range of payment choices.

By including TrialPay as a payment method, Bitberry compels price-sensitive customers to complete their purchases by giving them hundreds of ways to pay. Using TrialPay, customers “pay” for products or service by completing one offer from premier advertisers (such as sending flowers from FTD, signing up for Netflix or buying clothes from the Gap).

You can reduce shopping cart abandonment by placing a TrialPay “Get It Free” button alongside traditional payment methods, just like in the BitZipper example above. Sign up with TrialPay or log in to your merchant account now to get started.