Social Gaming – The Next Web Economy
An interview with Oliver Lo, Senior Marketing Manager, XPD Media/Vojo World – creators of Medical Mayhem, Vice Central and Pixie Pets.
Oliver is Senior Marketing Manager at Vojo World. In that role he oversees brand positioning, viral marketing and monetization strategy for their social gaming products. Previous to that Oliver worked in advertising in London where he worked on brand campaigns for clients such as Ikea, Lloyds TSB and Virgin.
I recently met Oliver after seeing him on a panel at Social Media World Forum in London a few weeks ago. I was struck by how passionately he spoke about the phenomenal growth in this sector; plus the opportunities for brand marketing that such micro-finance models have opened up. When I saw him in the bar at the post-show networking event, I just had to bag an interview!
Oliver, can we start by introducing a bit about the history of XPD Media and the state of the business?
XPD Media Inc. was founded in 2008 by two Chinese-American guys, Robin Chan, former Social Media Director of Verizon’s mobile platform VCAST; and Andy Tian, an ex-Googler and founding member of Google China. The company raised an initial $2 million in VC funding and are even backed by the same VC as the number one social gaming brand, Zynga.
In terms of business strategy, location and market focus is a critical componant for XPD. Being based out of Bejing we’re in the heart of social gaming. Not only is the virtual goods market in China five times the size of the U.S. market, but there is immense game developer talent in China and Beijing in particular. Culturally, game developers are almost met with the same kind of respect as investment bankers might be in the UK. Zynga, who are the biggest in this space, are based out of Silicon Valley and employ around 800 staff, which has kind of made it difficult for other players to compete. Having said that, Zynga are also expanding out to a site in Bangalore, Playfish are headquartered in the UK, with offices in San Francisco and Beijing. Predominantly though; San-Francisco/the Valley is the number one hub for social gaming talent. China comes in at second, so combined with the size of the market there, we feel being in China puts us in a strong position.
Tell us about your flagship game and how the micro-finance model works?
Our flagship game is Medical Mayhem, which has 4 million players on Facebook and 7 million players on RenRen.com the Chinese Facebook equivalent. We’re also in talks to rollout to Orkut and Mixi. The model is a combination of fun game mechanics, with viral mechanics (such as invites, gifts, streams, competitions like photo tagging or trash-talk competitions on Facebook.)
Many social gaming companies work to what to what they like to call their “playbook”, a solid model of virality channels, social structures, addictive loops and monetization features that are tried and tested. Basically you launch your game with a thousand of your most engaged users. It’s a small-scale beta invite to our core fans and forum moderators. We’re then analysing the K-factor coefficient.
Explain the K-factor.
The K-factor coefficient is the conventional measure of virality. A K-factor of 1, essentially means that for every one registered player, they will recruit one more. That new recruit will in turn recruit one more and so on and so forth. We make sure virality is solid among a small group of users, before aggressively fuelling the game eco-system, with advertising-driven traffic.
Point of launch is when the game is at 20% of what is envisaged by the playbook and there’s a good reason for that. In this industry, it is only a matter of time before your competitiors will launch a similar game on the same platform. Speed to market, competition and risk factors mean that launching at 20% of game vision; monitoring community feedback and iterating on that feedback is essential. Not only does this help with game strategy but it also ensures that early adopters are invested in the game and take ownership.
Once we have the desired K-factor and initial feedback, mass launch would rely heavily on Facebook ads as well as cross promotion with other games. Social gaming is the major driver of Facebook ad revenue, and this method of advertising puts us in touch with hundreds of thousands of targetted users every day. You can target by all the usual demographics, but what is more valuable is the ability to target by interests on a user’s profile towards a certain game, movie, or other entertainment product. So if we’re launching a pet game, we can identify who has a similar game on their profile. Now, this is where the spike occurs, and the exponential growth curve begins.
To give you some real statistics, our Medical Mayhem game grew in this manner to 1 million users in the first two weeks from launch. In those two weeks there were 2.8 million virtual gifts sent which is more than 2 per second. Plus within the first two months, our players sent over 1.4 million (virtual) boxes of Viagra. In fact, at the time it was one of the fastest growing games on Facebook.
So what is next in the playbook once you see the height of the growth curve?
Simple: Engagement, retention and monetization.
Engagement is all about the “new factor”. New items in store, viral content, seasonal gifts, competitions. Because Facebook gamers are essentially ‘non-gamers’, the experience needs to actively engage, almost spoon-feed them. This is where it might differ to say console games which are more challenging and more hardcore. In Medical Mayhem, we’ve done crazy things like giving away game items for every user that likes and tags that item in a picture. Or getting the community to dare our intern Will to travel around Beijing with a blow-up nurse doll. Both posts got several thousands of comments and likes within an hour.
Retention is all about focusing on the user experience and the reason to return to the game. Every incremental improvement is key. To make sure we’re getting this right we have a team of community managers who are interacting with players every day. We get a daily status report from them which takes user feedback from the top level players and we use that to construct more layers and challenges in order to deepen the game. We analyze users in every stage of the game’s levels from tutorial to level 134 and we’re constantly optimizing their experience to make sure they graduate smoothly to the next rung of the ladder. Making the experience social is an increasingly important part of a successful game.
Monetization is pretty much the same as core retail strategy. Limited edition items, sales, time limited sales, new items. We see this working extremely well in the decorative games, where people will spend literally hundreds of dollars a month to decorate a fictional home. Speaking of which that brings me to a key point about social gaming, or a common misconception rather. Social gaming isn’t about teenage boys. The biggest sector and the biggest spenders are women, and predominantly the affluent homemakers. This should really inform developers and advertisers when they look for opportunities and success in social gaming.
So what’s on the horizon for social gaming? The industry is obviously experiencing phenomenal growth, but it sounds to me like we still have a lot of potential for monetization models?
In terms of market trends we only need to look at what is happening in China for market potential of the virtual goods model. As an example Tencent (QQ), China’s instant messaging platform commands virtual good revenues that equal the entire U.S economy in virtual goods. So China and Korea are where we’re looking to in terms of monetization capabilities.
Additionally with the new Facebook credits, we’re confident that there will be an increase in the propensity for people to purchase via Facebook. It signals an attitudinal shift, as Facebook legitimises and gives credibility to users and the virtual economy.
What is most interesting however; is what does this mean for advertisers? We believe the next big development, that we’re already starting to see, is brand integration.
Like product placement?
Almost, but even more effective and sophisticated, as unlike T.V. the game functionality means that brands can be integrated into the core, and you can even drive direct action or interaction straight from the game on Facebook, to the brand fan page. Of course, we have just had the recent Bing/Farmville promotion, where Farmville players would get 3 free farm cash by fanning the Bing page. That promotion drove 400,000 new fans in a day.
Also – bear in mind, we’re only just starting on this model. Happy Farm, which is the Chinese version of Farmville (that predated it) did a great example of brand integration with Lays (the name for the Walkers crisps brand in most other countries). You can grow your potatoes to fruition on your farm, and then sell them to Lays, to be made into crisps, in exchange for the game currency. So that’s not only a great reward association for the brand, but it’s also a key indication of where social gaming is going and that’s away from the aggression and competition elements of gaming; to experiences of nurture and reward, and that’s a powerful association that brands will definitely want to be a part of.