Ada on Startup Marketing (@adachen)

The entire company has been playing Zynga’s Frontierville for the last few weeks as a group observation on social games. I’m amused (and a little embarrassed?) to admit that I’m one of the few people I know in the games industry that actually enjoys playing these games. However, as penance for an excessive amount of time wasted, I’ve decided to blog about some of the interesting things that they are doing to make the game effective.

1. An !Explosion! of Rewards (Achievement)

After harvesting crops or feeding hungry animals, Frontierville really emphasizes the reward. Huge piles of coins, food and collectible items visually spew across your screen. These rewards also urgently need to be collected, as they fade away within a few seconds. The more rewards you can collect in one uninterrupted session, the greater your multiplier of collecting money and experience. This results in some frantic clicking and heightens the sense of productivity and reward, especially compared to standard Farmville harvesting which looks like a progress bar above your character’s head.

2. Frontier Jack, always one step ahead. (Competition)

Frontier Jack is the fictional character who is your sole neighbor at the start at the game. Visiting his decorated homestead makes your starting land full of weeds, thorns and snakes look positively pathetic. Not only is Frontier Jack the model of what your homestead could look like for those of us that love decorating, but he’s a clever way to inspire the need for competition and to “keep up with the Joneses” even if you don’t have an active friend playing the game with you. Beating him always seems to be within reach, since his level is always just one level higher than wherever you currently are.

3. “Ghost” friends helping you out (Reciprocity)

Frontierville has the same mechanic as other social games in that you can visit your friends’ homes and help out, so they help you out in return. They’ve taken this one step further, however, in replacing the standard dialog box alert that “your friend came to visit” with an actual ghost of your friend’s avatar the next time you log in. Clicking on them activates a re-play of all the actions they took earlier on your farm earlier that day.

Conclusion

There wasn’t a lot of innovation as gameplay mechanics in Frontierville, but I was struck several times by their clever enhancements to make well-known game mechanics even more effective through execution. While the game isn’t differentiated as far as discovering some clever new game mechanic or recombination of several of them together, the heavy improvement on feedback, reward, and experiencing social gameplay is a substantial improvement from Farmville.

Also, related reading is a recent TechCrunch post on SCVNGR’s list of nearly 50 social game mechanics.

Session Title: The Evolution of Habbo Hotel’s Virtual Economy by Sulka Haro (Lead Designer, Sulake)

Overview of Habbo Hotel

• Age range is 12-17, with $74 million in revenue
• Offices in 13 countries
• They maintain 16 instances = 16 separate virtual economies
• 10 years old this year

Sulka describes the 6 phases of change that the Habbo Hotel’s Virtual Economy has gone through

1. No currencies
2. Emergent currencies
3. Paid currency
4. Tradable paid currencies
5. Dual currencies
6. “Official” secondary market

Phase 1: No Currencies

When the game started, there wasn’t an in-game currency and players would just text-message to buy a chair. This made sense because their audience had high mobile penetration.

They began to encounter problems with social engineering attacks. For example, if you had to buy a chair by texting a message to a number saying “Habbo Chair Sulka” to buy a chair for your username Sulka, people would spam the room saying text “Habbo Chair 100X Sulka for one hundred chairs!” but ultimately the user 100x would get the chairs. They also encountered problems with just having 2 in-game price points, cheap and expensive. The expensive one wasn’t a good fit for most of the cheap virtual goods in the game, and the cheap one wasn’t particularly profitable for them due to the commission rate associated with SMS transactions.

Phase 2: Emergent Currencies

Players had always been able to trade items with one another, and created an emergent currency amongst themselves which was essentially a really cheap chair.

Phase 3: Paid Currency

With their 2001 UK launch, cellphone penetration wasn’t high enough so they created Habbo Credits, their first paid currency, and introduced additional payment mechanisms.

1 Habbo Credit = $0.15

They chose this ratio based onthe $0.79 SMS price. Super cheap items were 1 credit, medium items were 2-3, expensive items were 4-15 credits. The issue with the credit pool is that it makes it hard to predict value.

Increasing credit consumption doesn’t necessarily mean increase in revenue. Haro warns us to look out for an accumulation of goods in the economy, and this is part of the danger of having persistent goods – although there’s a lot of trading it doesn’t map to real life where things break. It’s important to have sinks to pull credits out of the pool.

So to help with persistent revenue, they launched the Habbo subscription club, subscriptions and virtual goods are very different models. In subscriptions, the revenue model is linear, and the virtual goods model is not.

Trading is great content for the game – it’s a way for players to spend more time in the game, and engaging because there’s a lot of item value speculation. Hence since it drives time, trading drives sales. Their highest value traders were also the highest ARPU users. Haro warns that “average” metrics lie – always expect the power law to be in effect.

Phase 4: Tradable Paid Currencies

The most liquid currency is the most desirable currency. It’s important to remember that the smallest currency value defines the smallest value. If one credit is $0.15, then that’s your lowest item value. So keep that in mind when setting a currency price.

Prior to making currency tradable, same number of buyers as sellers, and more traders than buyers.

After the change, more spenders than buyers, more traders than buyers, leading to more buyers.

Then they tackled the item inflation problem. How can we solve the persistent goods problem? No matter what you think, inflation is a problem. Secondary market prices go up, and that alienates new players. Items purchased in the primary market start becoming a bad deal in inflationary situations. And if your item catalog is the primary sink, then inflation is even worse.

It’s hard to measure information though, since the number of players grow and so does the amount of currency. Good rule of thumb is that the average amount of currency per player should be constant. One way to measure this is to set up your own consumer price index – pick a set of items (especially emergent currency items) and track their value in the after market.

One of the worst causes of inflation is to give free currency – this works in the short term for engagement, but doesn’t work out long-term in the economy.

But how do you reward users if you aren’t using paid currency?

Phase 5: Dual Currencies

Habbo introduced a currency called pixels, which you get for performing in-game actions. Pixels are used to buy expendable items, and for discounts. Primarily geared toward engagement. Credits, the paid currency, are used to buy persistent goods and services.

Some people say that having one currency keeps things simple, and dual currencies makes it more difficult. But one currency, one size fits all, that’s bound to be complicated. Two currencies is easier since each is simple and can be optimized independently.

Phase 6: Official Secondary Market

The market was designed to remove friction in trading. Prior to this, people had a very difficult time trading – you’d go from room to room and get booted from rooms for spamming, shouting what you were selling and hoping you’d intersect with a buyer. Often didn’t even get what you wanted in exchange for a trade or purchase.

They created an anonymous marketplace for players. It’s anonymous to keep people from circumventing it. Part of the marketplace shows trade value and historical price values. Users like it because it feels safer (even if it’s no different) but interesting that there’s still a huge amount of arbitrage in the market.

The marketplace has the following rules:

• 0.2 credits to post, and the posting is value for 48 hours
• Sale price is the offer price + 1% commission (minimum 1 credit)

Due to the minimum, their actual commission could be as high as 50%.

Final Notes

Make sure you’re in control of your own currency and maks sure you remember the smallest unit of currency = smallest item price.

Payment methods – Habbo has over 100 payment methods, due to huge variations depending on the market. System viability changes from market to market, and credit cards, SMS and prepaid cards are not universally viable globally

Payment method optimization is a true art and part of Sulake’s secret sace

The Big Balancing Act – primary and secondary markets follow different rules.  Economics is necessary, not just for price and revenue optimization, but also to keep the world safe

Friday morning’s keynote was from none other than Sid Meier himself, co-founder of Firaxis and the creator of the Civ series.

Session Title: The Psychology of Game Design (Everything You Know Is Wrong) from Sid Meier

Meier began his talk with the assertion that gameplay is primarily a psychological experience and player psychology is primarily based on egomania, paranoia, delusion and self-destructive behavior. If you like playing the Civ games, it’s because you love being a god-king and controlling everything, therefore you are an egomanic.

However, game play doesn’t map to real life. He described the Winner Paradox, in the real world you never really win, but in games you almost always win. In the real world, the Super Bowl has only one winner, sports leagues have only one winner, you almost never win. In the games world, you almost always win.

Reward vs Punishment – players are inclined to accept rewards.

Meier talked about “the first 50 minutes rule”: the first 50 minutes must be very compelling and fun, and show the player a preview of all of the fun they’ll have for the rest of the game. In trying to engage them during this time, you almost can’t reward the player enough (though this doesn’t negate the difficulty level).

He used to believe that players only needed 4 difficulty levels, but in Civilization Revolutions he discovered they actually need 9 difficulty levels. The difficulty levels give a player a feeling that they’ve mastered a level. The psychological conclusion for gamers is that everyone is above average.

Meier then talked about his “Unholy Alliance,” which is the connection between the player and the game designer. All of these things must match in order to create a compelling game experience.

• The player is the star of the game
• Players must be willing to suspend their disbelief, and fall into the story of the game
• Moral clarity – don’t put users in dilemmas, it’s more satisfying to win against a cranky ruler in Civilization than a pitiful begging one telling you about the women and children you are killing
• Mutually Assured Destruction
• Humor / Style / Music / Atmosphere must match

Meier warns, be careful to be true to the vision of the game and value the players time. You have to be consistent with the style and the vision of the game, to keep the player engaged in the game.

Meier described then what I will paraphrase as: game players aren’t rational and don’t understand probability.

In playtesting, a player always expects to win a 1.5 to 0.5 battle, even when probability dictates that sometimes they will lose. He had to make the odds even odder in many cases to adjust for players’ expectation of how “fair” a game feels. With his mathematics background, he learned this his brain is too logical and scientific, and he didn’t take psychology into account.

My Bad – Meier recaps mistakes, or his “my bad” moments

• Real-time civilization – the first version of Civ was a real time game where the player is just an observer, similar to the style of sim city. This didn’t create the feeling of control and egomania that the current turn-based civ does, where you are the god-king
• Rise and fall – first version fo Civ had an idea of civilization where you have a setback and recover and rise to an even greater prominence. Players want a game about progress, and the rise and rise of civilization, not the downfall. Lots of players reloaded from a save file at the first setback
• Tech tree – he used tot hink a tech tree is about a rise through darkness, and you wouldn’t know what’s at the end of the path. It’s incongruous to learn writing and know that in the future that will lead to a jet fighter. But players want predictability and want to be in control. Randomness must be treated very carefully, because random acts create paranoia
• The Dinos Game – the game which was never made
• Civilization Network

In playing a singleplayer game, feedback and validation is really important

Protecting the player from themselves – keep them from reloading their save files to win every fight, don’t give them too many options/settings, cheat codes are questionable and mods are good.

What’s the point of all the game design? Meier describes game design as trying to create the epic journey.  The epic journey is full of interesting decisions, learning and progress, the feeling of just “one more turn” (players are riveted and always leaning forward to ask for one more term) and replayability.

Last week I sat through a couple sessions at GDC10 – excellent talks all around. Here’s a quick write-up of my notes part 1, but more detailed coverage also available here.

Session Title: Achievements Considered Harmful – Chris Hecker

Hecker classifies achievements as

• tangible – cash, gold star, trophy
• verbal – praise
• symbolic – achievements like on Xbox

And also breaks them down on a variety of criteria

• expected vs unexpected
• informational (objective feedback) vs controlling (opinionated feedback)
• task contingent vs engagement contingent vs performance contingent
• free choice vs self-reported
• dull vs interesting
• transitory vs long-lasting
• endogenous vs exogenous

tangible, expected, contingent reward situations reduce free choice intrinsic motivations

verbal, unexpected, informational feedback increases free choice intrinsic motivations

The data Hecker quotes shows that if you pay for grades, grades actually go down. Extrinsic motivators actually do damage to what they are supposed to do. In order to minimize the potential damage, Hecker advocates:

• don’t make a big fuss about achievements
• use unexpected rewards (this is difficult to do, but try)
• use absolute scale not relative
• use endogenous rewards (rewards that are related to the context in which they earned it)

Hecker’s call to action is for the games industry to better consider the impact of achievements on players. While he doesn’t specifically condemn achievements, the point he makes is that it’s questionable whether or not the long-term effects of achievements are driving the right player behavior. He described what he calls the doomsday scenario, where intrinsically interesting games have the intrinsic motivation to play them destroyed by the design of many extrinsic motivators. Hecker talks about “metrics fetishism” leading to short-term optimization, and dull tasks designed around extrinsic motivators.

Overall, Hecker was really interesting and thought-provoking and raised good questions about the psychological impact of games which are over-focus on achievements and player reward. Reward is a great way to drive player engagement and activity, but what are the long-term impact?

Last night my company Mochi Media announced our acquisition by Shanda Games for $80 million. I am THRILLED about the deal and am really honored to be part of this experience.

It’s been nearly 3 years since I joined Mochi Media, and it was one of the easiest decisions for me to make. I practically begged Jameson to sign me up and move out there. At the time, I was leaving Microsoft and headed to SF with my now-fiance Sachin Rekhi. Throughout my search, I ended up speaking with over 20 companies including Jameson thanks to my brother Andrew Chen. Mochi was a stand-out company even as only a handful of people on a couple of IKEA desks

As founders, Jameson and Bob are both genuine, passionate people who are truly building their business because they believe in the opportunity and love the games space. It’s rare to find people as authentic and committed as they are, and it really shows in the quality of team and company they have put together.

Congrats to the whole team and thank you to everyone who has helped us get to where we are today!

An MMOs and Virtual Worlds Panel at PlaySpan’s Monetization 2.0 Forum had some great data points. I did some scribbling and typed up my notes below so forgive any inaccuracies.

The panel was moderated by EA’s Nanea Reeves with panelists:

• Jim Crowley l CEO, Turbine
• Cary Rosenzweig l CEO, IMVU
• Johny Mang l EA- Dice
• Tom Hale | Chief Product Officer, Linden Labs/ Second Life
• John Bates | Entropia
• Joshua Hong | K2 Network

Linden

• Second Life makes close to $100 million and not less than $80 million. They make money in three ways: 1) sale of currency, 2) premium subscription and 3) a hosting model where users pay them to allow their 3D objects to persist
• Linden tracks engagement (user hours), transaction value, % paying, repeat usage, $50 MM user value is exchanged each month.
• More focused on retention instead of acquisition, looking at users over 2 year lifetimes.
• Fraud is definitely an issue especially when $$ can come out of the system. Just a cost of doing business.
• Top merchant at Second Life is making $1 million/year selling sweaters/skirts

IMVU

• 80% of revenues are from consumers (micro-transactions and user-generated content) and 20% from advertising
• The essence of monetization is building a service that customers will pay for. You have to be massive to be viable with an advertising model.
• In Asia (in general, not IMVU) 5-10% range of free to paid conversion % is the common stat
• Free users add value to the paid users, larger and engaging community
• IMVU is like Ebay, with 2.5 million items and 20,000 developers creating them. Entrepreneurs creating and selling for others and IMVU is the neutral party since they aren’t creating the goods directly
• Top 10 creators on IMVU each made over $100k annual revenue
• Paid items are long tail, top 10 items are only = 0.2% of sales. Users want to be different.

Turbine

• Turbine recently transferred from subscription to a hybrid subscription & micro-transactions model. Hybrid model offers greater flexibility and choice.
• Subscription only models leave out the audience that are willing to pay less and don’t capture those that are willing to pay more, so they’ve moved to optional subscription.
• Since announcing their service they’ve actually seen subscriptions go up and concurrency rates rise too.

K2

• 100% of K2 revenues are from item sales
• MMOs: “ARPU is high, relationships is long and persistence is everything”
• K2′s focus is being very involved with community management
• Item sales mean that countries such as Turkey, Brazil, the Eastern bloc are full of opportunities for free to play.
• Free to play is nothing but a pricing option
• K2 uses traditional resellers of prepaid card codes to reach emerging markets like Turkey, China, Eastern Europe

EA

• Battlefield: Heroes sells mostly decorative items but launched Boost packs and this item immediately went to the top of the list
• They also have a RTS with boost items and found conversion rates are much higher
• Items that have usefulness in the game tend to convert better
• EA is targeting a 7-8% conversion rate for free to play games, but expects that to lower to 5% with social network traffic

9/18 EDIT: Added photo and Joshua Hong of K2 to the speakers list (thanks Clay!)

I’ve cleaned up a quick version of a transcript at the ‘What is an “Indie Game” Panel’ at PAX over the weekend. As these things go, it’s probably only about 80% complete so please excuse any omissions in the content. Enjoy!

PAX 2009: What is an ‘Indie Game’? Panel

Panel Description:

The rise in game platforms and distribution mechanisms has elevated the cultural profile of indie games. But along with this increased attention is an increasing debate about how to break through in the market. What really makes an indie title? Is it the game’s budget, art style, community outreach, or their distribution mechanism that really makes indies soar? This panel will examine the success stories within the indie gaming community to begin to expand and educate developers and gamers about this in-demand space.

Panelists include:

• N’Gai Croal [Moderator] – (Consultant, Writer, Columnist, Hit Detection LLC)
• Boyd Multerer (XNA General Manager, Microsoft)
• Simon Carless (Chairman, Independent Games Festival)
• Derek Yu (Editor-In-Chief, The Independent Gaming Source)
• James Silva (President, Ska Studios)
• Mitzi McGilvray (Executive Producer, TikGames)

NC (Moderator): What defines an indie game?

SC: Have an indie, execute on it, and that’s indie.

JS: Indie games are defined by no budget. have to figure out how to do stuff without a budget.

DY: When the idea of indie game became real, the main concept is that anyone can and should make a game. Now it’s distilled to intent & priority. What is your intent when you’re making a game and what are your priorities? That changes depending on a number of factors including budget. When your budget goes up the intent and priority of your game design changes. When team size gets bigger, the intent and priority changes. It’s not necessarily how much money and how big your team is but something changes when those things increase. I would love to see indie developers that have budgets as long as it’s tied to them and not a company.

BM: When you put money into creating a great experience, you start thinking about things like risk management. Independent games are about innovation and fun. Lower budgets free you to take risks that you wouldn’t find in other places and would otherwise not exist.

MG: Independent means that you’re not beholden to shareholders and purely profit driven

NC (Moderator): When you talk about engineers loving games and games responding to the market, should indie developers be responding to the market?

MG: Not necessarily, it’s important that developers pay attention to it. Primarily you do it because you love it, and you have to look at what it takes to be successful in the market. If you see that there’s a lot of competition in a game genre, don’t focus on being independent, build what people want.

JS: I just make games that I like to play. No budget forces you to be more creative. Bigger companies just invest more to make bigger, better more bad-ass games. To make a sequel to my game without a budget, you have to be more creative and think laterally.

NC (Moderator): Is independence defined by walking away from other people’s desires and do something for yourself. There’s a service aspect to it where you’re creating what people want. How do you separate what your fans want to do and what you want to do?

JS: I just do what I want to do. I’m not going to change, sorry.

SC: As far as being more or less indie, intention and attitude are different. Are you making a game in a pure, apart way? Are you making a game because you really care about games? The best indie games from the last few years like Katamari come from this.

NC (Moderator): Derek, can you expand on the idea of intention and priorities?

DY: The intention and priorities change when you get bigger and you get more mainstream. One of the big changes is making the kind of game you want versus making a game which satisfies a certain number of people. Accessibility is a concept which gets more priority once you get bigger and leave the “indie core”. A great example is a game Dwarf Fortress, which is one of the most inaccessible games I’ve ever played. Probably one of the most complex simulations out there. One half of a game you control a dwarf fortress. Very text based ascii graphics. His priorities and intentions are different from any mainstream company that has to make a living and a ton of money out of a huge investment.

NC (Moderator): Boyd, why rename Microsoft community games to indie games?

BM: The intentions are the same, we want to enable people to come in and make games. What you have to get are really good games and fun games. Focus on the fun part. There are people who are going to make a living off of it, and you need to make a fair representation to them that you’re going to get some good quality stuff and some more experimental games that won’t appeal to people. This will speak better to the type of games that we’ll see in the system.

NC (Moderator): While anyone could make a game that would go up on the indie games channel, it’s unlikely that everyone would.

BM: It’s not the easiest thing to do, there’s a lot of room in the industry to make it more approachable and allow people to write their own games. Even if you know how to write the code, the artwork is not super easy either.

NC (Moderator): In reference to kodu, do you think there’s a distinction between amateur side and commercial side? is there a further difference in pro and amateur indie games?

JS: You can’t really tell how much resources have been put into it. The one thing that would help with division is a difference between apps and games section.

BM: I see a division, but as long as it’s clearly defined it’s fine, the pro and the amateur division. I don’t care who makes it. I just want to help people find the better content. the user rating system is really important.

NC (Moderator): Simon, how do you choose what to cover?

SC: It’s interesting, it’s been running for a while. Most of the content is free and it’s mainly flash and freeware stuff. There’s quite a few flavors of indie developers out there. The word indie is being overused right now. Anyone who is not a major publisher is calling themselves indie. They have good methods for filtering the good stuff. It’s so easy to make games nowadays and there’s millions of them. How do you know what to play? TIGsource, user ratings, indiegames highlight the good stuff. The selection for them is a bigger problem than making games for games. the problem is how to make sure people see them.

NC (Moderator): Do you think micro-transactions will help indie games?

MM: Hopefully one of those days that will a feature

NC (Moderator): Derek, what do you think of add-in sales?

DY: If an independent developer finds an interesting way to sell their game and keep on going, I’m not one way or another. As long as the motives are pure.

NC (Moderator): Do you believe indie games is overused?

DY: It runs the risk. People are going to latch on to it and run with it. It’s not necessarily a bad thing. The people for that the label is genuinely important and whom it means something to and to whom the recognition is important, those people should work hard to define it for themselves by the kind of work that they do.

SC: We’ll step in if someone is egregiously not indie. But otherwise it’s a label that people associate themselves with. For example, Pixel Junk Eden was a bit of a controversy. They are based in japan and 30 people. In terms of intentionality, it was self-funded, completely on the side, and it was published on the side. Some people had a problem with the fact that the guy worked on the original starfox and have been in the industry for quite a long time.

NC (Moderator): What would you want to see more of to see indie games thrive?

MM: It would be awesome if there were more ways to help fund and find ways for more people to get started on indie games. Micro-financing for games to help encourage people to publish their games.

BM: For independent games and to raise the overall awareness, I want to see a couple more hits come out of it. I’m still waiting for the game that comes through and everyone wants to play it. When everyone knows about the space, there’s money there, there’s audience there, it’s a virtuous cycle and you’ll see more games.

DY: More hits would be fine but I’d like to see more people making games and getting involved in communities. The big surprise for me out of the whole indie scene is that the people who are involved are so tightly knit. Everyone loves what they do. I would like to see more indie games. Games are a great way to deliver educational topics and to get people to learn things without them getting to know it.

This is a re-post of an article I wrote last week on MochiLand. Original post linked here.