Why Social Games Are Missing Out on the Dual Currency Subscription
A few years ago, Jeremy Liew asked Iron Realms CEO Matt Mihaly to guest post on his blog. The article, titled "Using dual currency systems is the best way to sell virtual goods", gives an incredible look at how the gold / credit economy is balanced behind the scenes. Since that time, a third currency has been introduced to IRE text games and other markets have taken up virtual currencies. There are even virtual currency consultants!
Popular Facebook game 'Farmville' has two currencies - Farm Cash and coins. You can earn coins through sales of various products, but aside from small amounts of Farm Cash you 'earn' by clicking their sponsors, you have to buy Farm Cash from Zynga with real cash. It seems they haven’t yet learned what Matt Mihaly discovered nearly 12 years ago, namely the importance of monetizing all factions of the user base. Or, they see the possibility and would rather force people to spend money on their game and not worrying the risk of disenchanting some users.
In their article, "Using Dual-Currency Systems for Better Revenues and Engagement", Matt McAllister and Jaini Shah of Offerpal Media offer four scenarios for using virtual currency. They also talk about the value added by non-paying customers, through word of mouth, participation and the possibility of becoming paying customers if they care about the game or site.
At Iron Realms, using McAllister and Shah’s descriptions, scenario four is used. It is the most liberal, least controlled scenario. In every IRE text game, two currencies (credits and gold coins) are used which people can buy and sell freely, publically and on a faceless credit market. You can use real life cash to buy credits if you wish, but you can also work in game to earn gold to buy credits. They also advise checking in on the systems and balancing as necessary, which IRE did when it offered ships for sale for gold only.
To me, it seems like Farmville is suffering from the two tier system that Achaea experienced in 1998, which is permanent second-class citizens. Imagine if they unlocked the latent pent-up demand that exists among their non-paying users as Achaea did in 1999!
Iron Realms is consistently far ahead in virtual currency innovation. Each Iron Realms game recently had a third currency added; depending on which you play, they're called crowns, dingbats, tokens, or black iron coins. The market of this premium currency has been fun to track. The first 'crown' sold for around 10 credits; now, one is hard pressed to find one for 40 credits. During this introduction, the price of credits has increased as well. True to the lessons learned, IRE has provided items that can only be bought for these premium virtual currencies, and they are in true demand. Premium virtual currencies can only be gained through a credit sale promotion, prizes for in-game contests, bought from another player, or as part of a monthly elite membership in some IRE games.
The brilliance shown here is amazing. What is your slowest financial month? Offer a premium currency promotion with increasing numbers of amounts awarded for increasing amounts of real money spent. Spike it even higher with new offerings of virtual goods that can only be purchased with premium currency.
It seems to this writer like Farmville could learn a thing or two from IRE, the seasoned experts in virtual currency. 1) Set up a market for buying cash with coins. 2) Don’t regulate it, allow users to interact and sell to each other. 3) Allow for conversion between currencies. 4) Introduce a premium currency, with its own fabulous items that are only accessible with that currency.
So can a niche MUD teach a mega-hit social game a thing or two? Perhaps they can.
Beth E. is a virtual currency economist who enjoys the best role playing games from Iron Realms!