Harvesting Virtual Acorns in East Asia: A Study of Virtual Goods Internationalization

Q Coins

Many app developers have been focusing their efforts on reaching the global community by translating their apps, and this move is certainly appropriate considering that 70% of Facebook’s recent growth has been occurring internationally. But it’s not just that users around the world are joining social networks. It’s that they’re becoming active members of social network ecosystems by purchasing virtual goods and virtual currency. Users in East Asia are particularly keen on participating in virtual economies—South Korea’s Cyworld first created the virtual currency model by allowing users to purchase virtual “acorns” which are used to buy wall decorations, gifts, and other virtual items. As of 2006, Cyworld reported a daily revenue of $300K solely through the sale of acorns.

After looking at the following facts, it is clear why East Asia is a natural target for app developers.

So what should developers do to penetrate the East Asian market?

The first step is to localize applications as fully as possible. Sure, language translation needs to happen before anything else can follow. Even this seemingly simple task proves problematic because of various linguistic conventions that only native speakers understand. But as Playfish COO Sebastien de Halleux stated in a recent interview, “Localization goes beyond language; there are also cultural aspects to respect and adapt to.” For instance, East Asia is very status-conscious, which means that users in East Asia will be more likely to buy virtual goods that display status.

Next, developers should gauge and respond to user preferences. This element is absolutely crucial to an application’s success in unfamiliar territory, as shown by the example of Cyworld US. Cyworld recently attributed the disappointing results of its 2006 US launch to a failure to gauge the unique needs and preferences of the American audience.

If there is anything we can be sure about, it’s that East Asian users care about aesthetics. According to Dyne Lee, Assistant Manager of Cyworld, “Western sites are often perceived to be too function-orientated and somewhat crass to Korean users who are accustomed to a ‘cute’ and ‘decorative’ user interface.” Developers have a lot of control in this arena, and they must use this control to their advantage. Alan Hshieh, human-computer interaction expert from Harvard University, agrees. “Developers are versatile; Facebook moves slowly as it is a huge platform, but developers have applications that they can create according to exactly what users want.”

Finally, developers must create an appropriate monetization strategy. The good news here is that East users are very familiar with virtual goods/virtual currency sales and micro-transactions. Revenue from East Asian social networks usually comes from these streams instead of from advertising. Therefore, applications must accept a variety of convenient global payment methods, including mobile payments. Creating a user-friendly and frictionless payment experience is key. Furthermore, in offering alternative payment methods, developers must provide relevant, localized offers. This makes it all the more important to choose alternative payment platforms that have direct relationships with international advertisers who will provide offers with clear value to relevant communities.

Users are always looking for novelty and innovation—this is particularly true for online populations in tech savvy countries like South Korea and Japan. It is the job of the developer to keep up with such demands and to create clear and meaningful value for their users.

After looking at the following facts, it is clear why East Asia is a natural target for app developers.