Avoid ‘Shit’ Deals to Make Games’ ‘Offer Walls’ Profitable, Developers Say

SEATTLE -- The Senate Commerce Committee spent the last year pursuing subscription clubs whose free-trial deals appeared in the e-commerce checkout process. Game developers have the opposite worry, that players are taking advantage of deals on “offer walls” to get in-game currency and then quickly canceling what they sign up for. They told the Casual Connect conference Thursday the onus is on game makers and advertisers to make their deals more relevant to gameplay and build trust with their audiences by providing real value.

Jonathan Claydon, RealNetworks senior manager of affiliate and partner marketing, acknowledged a common pitch in its SuperPass games program is “kind of a shitty offer, to be honest.” Offer walls have paid off for several game companies, with some doubling their revenue by moving the deals “much further up the flow” and tailoring them for the audience, said CEO Alex Rampell of TrialPay, a deal provider that uses Facebook Credits and has worked with RealNetworks and others. Providing game points in return for using a coupon at the Domino’s website around dinnertime has worked well, for example, he said. Marc Dugas, a producer at Backstage, said the company has done well with offers in its popular Family Feud game for Facebook.

Users have to get “some bonus for participating” in an in-game offer, such as a Blockbuster deal integrated into a wall in Pet Society, Dugas said. A bonus should fit the “actual narrative” of the game, perhaps giving users access to a new feature: “You really have to be careful with hitting users over the head” too often with ads. Though Backstage still brings in more through direct “pay to play,” many players will never pay, and even paid players will respond to pitches with “real benefit,” he said.

The SuperPass program gets three to four times more customers through partner acquisition channels such as TrialPay than through paid search, Claydon said. The quality of such customers can be dubious, because some will “burn out immediately,” canceling a trial right after getting their virtual currency, he said. “We're still dabbling our toe in the water here,” said Sean Smyth, vice president of business development for deal-a-day coupon provider Groupon. Signing up e-mail subscribers through search engine marketing has worked well for the company, but getting users to buy a coupon in-game is a good predictor of repeat customers, he said: “We love to find all kinds of crazy ways” to work with developers, since “you don’t know which [pitches] are going to pay off.”

Offer walls generally aren’t the place to boost brand awareness, as Microsoft’s Massive pioneered with in-game billboards, Dugas said. “What really matters is the hunger in the game to get the currency,” whether through an offer or direct purchase. “I've got to go where the fish are” to get the massive volume that Groupon depends on, and branding doesn’t fit with that, Smyth said: The company has “general disdainment toward the banner ad,” where a 0.2 percent clickthrough rate is good. “We want to do some crazy” things such as setting up an affiliate program, to show users “new ways to be a tourist in your own city."

Gamers have a natural disdain for offer walls, having been “gamed by the system” with bad offers, Dugas said: “The re-education is a challenge.” Promotions such as “learn your IQ,” which asks users a series of questions, collects their cellphone numbers and then covertly signs them up for a monthly ringtone subscription, have given the whole industry a bad name, he said. Though the FTC cracked down on hidden-subscription offers, gamers learned to shield themselves, for example, by purchasing prepaid cards that can’t be billed a second time, Dugas said.

Consequently, advertisers typically pay less for offer-wall users, who are considered more likely to cancel, than for those through paid search, Dugas said. They're also worried that offer walls will cannibalize sales from customers who would otherwise visit their sites directly, Rampell said, pointing to RetailMeNot as a popular destination for users looking to save at Gap.com among other retailers. Gap pays a bottom-rate commission of 1 percent for such traffic as a result, he said.

In one deal by beauty company Lancome with social games maker Playdom, 9 in 10 users who clicked the offer had never visited Lancome before, making offer walls potentially lucrative for new customers, Rampell said. Claydon said commissions for new customers typically are much higher, around 10 percent. Groupon’s first priority is getting good customers, something it can usually tell within a few weeks of signup, and if they're coming in regularly through games, the company will keep using that channel and paying accordingly, Smyth said. It can probably give developers a better revenue share for giving them long-term customers, though Groupon won’t necessarily pay more for giving users contextually-relevant deals, he said.

Running offers for a “faceless company” encourages churn, Smyth said: Groupon’s focus on local deals has made its users “less likely to shaft that business” they've seen in their community. RealNetworks has cracked down on customers who take some fraudulent action in a game to get points, but some of the worst offenders are actually paying customers, which makes the company’s response tricky, Claydon said. Groupon goes through possible cheating scenarios with social game maker Zynga before signing deals, Smyth said: “People write scripts and you have to defend yourself,” but “you can’t let it paralyze you.”

Simplifying the purchase process will also guard against fraud, Smyth said, suggesting that iPhone game makers give users the premium version of a game -- something they're often asked to purchase -- if they buy a Groupon coupon in the game. Claydon admitted that his company’s pitch for RealPlayer in SuperPass didn’t come with any benefit for users who download the software. Backstage has another way to avoid wrath, Dugas said: If staff aren’t impressed with the offers, they'll give users the reward currency anyway.

Games and advertisers can cash in most effectively on deals that revolve around occasions that involve spending on gifts, especially holidays, speakers said. Backstage’s most profitable offer has been flowers on Mother’s Day, closely followed by a Netflix promotion for Father’s Day, in its Family Feud game, a rare occasion when an offer beat direct-pay, Dugas said: “They're not going to rescind sending flowers to Mom.” Holiday-related, time-limited offers work well in smaller games, he said. Groupon is formalizing new programs around holidays too, Smyth said, theorizing it would advertise in a game where “Santa Claus is going around giving out shit, and it’s Groupon shit.” The model for inventive promotions should be farm games, which are bizarrely a “cultural phenomenon,” Claydon said.

Casual Connect Notebook

Selling virtual goods has proven more profitable than pay-to-play or subscription charges for many games, making free games the most lucrative, executives told the conference. Finding the right monetization strategy is especially important since Facebook’s “big May squeeze,” where the company changed its notification policy for games and subsequently wiped out 40 percent of referrals in the process, said CEO Eric Gonzalez of virtual-economy provider Doubloon. Game makers should experiment with relative pricing, such as listing virtual goods for $1, $2 and $8 so users will choose the middle good as the best value, he said. “Stealthy” changes, such as reducing the number of virtual arrows in a quiver but making them “sharper” in the game, can squeeze more revenue per user, too. Users respond well to make-a-donation charity offers for virtual goods; making their own goods from cheaper broken-down game elements, known as “crafting”; and even price spikes for limited-availability virtual goods as supply runs out and they become “collectibles” -- unless kids are buying, because “parents will get ticked.” Nearly half of free-to-play users buy virtual goods, mostly in social networks and massively multiplayer games, and most purchase virtual currency, said Lee Bayer, general manager of Playspan’s payments division, citing its new annual survey. “Free-to-play is the new black,” he said: When the maker of Dungeons & Dragons introduced the option, revenue jumped 500 percent, and even paid subscriptions that come with virtual currency increased. Purchase options should always be available in gameplay to drive impulse buys, and payment options must reflect the country, Bayer said. He pointed to data from a popular Facebook game showing that 63 percent of its revenue came from several countries outside the U.S. Women actually spend more in-game now ($80 a year) than men ($60), though men are still the dominant audience, he said. Three in 10 Apple users don’t have credit card information stored in iTunes, making free-to-play crucial to reach them, said Lee Linden, co-founder of virtual-currency platform Tapjoy. The company has increased revenue per user for its clients by an average of 50 percent, he said. Advertising is crucial to get on the all-powerful iPhone chart, he said: One client spent $75,000 through Tapjoy and in short order made $510,000 from a million-plus downloads. Use the power of shame to boost expensive purchases, said Sometrics CEO Ian Swanson: HotOrNot.com, a pioneer in virtual goods, gave top placement in female users’ inboxes to men who sent them $10 virtual roses, the most expensive flower available. Playdom did a one-day sale for a $15 virtual dress that resembled one worn by actress Jennifer Love Hewitt and sold 70,000, appealing to users that wanted something unique, Swanson said. After a bumpy start with game makers, virtual-goods trading platform Bodega Bid has secured direct plugins to many games, so users can easily re-sell their purchases to others at a lower price, said CEO Mark Sendo. It charges a transaction fee per resale that’s split with the developer. The result is sellers have more money to buy new goods, and new users are drawn in by the prospect of reselling, he said. Hard-to-find items can sometimes command higher prices on the secondary market, Sendo said.