Monetization in the Early Days of Social and Mobile Gaming: Learnings and Insights

A Framework for Building a Virtual Economy Part 1

I apologize it’s been a while since I’ve written anything. Blame the epic ski season in Tahoe and also the joys of home re-modeling. I’m going to make an effort for more regular posts in the coming weeks and months!

In 2009 through 2011, monetization was a very different situation than what exists now. These were the prime days of Zynga and the early Facebook games, where a focus on ongoing engagement with the game created a number of ways to monetize users. This was also when many of the most common forms of monetization were created for social and mobile gaming.

While it would be easy to criticize some of the monetization tactics we pursued, I think it’s important to discuss them because there are learnings related to how we were able to build a profitable company to continue sustaining growth. It was also a strategic monetization focus that many companies are still employing today. This was also a time when many elements of the virtual goods and credit model were being thought through for the first time.

Core monetization loop:

Virtual Goods

Our primary method of monetization around which everything else centered was virtual goods. IMVU at the time had the largest catalog of User Generated Content and created a model that is leveraged by a number of other products now. Due to the millions of pieces of content you needed to customize your avatar or create a virtual space, the primary need for most users was the ability to get credits to purchase goods to improve their avatar and their virtual space.

The most interesting element of IMVU that differentiated it from others at the time was that we didn’t employ a large production staff to build the goods sold in the game. Due to the nature of the platform, IMVU creators built and then were paid for 90% of the content available in the virtual world. This was a very different model from Zynga and other mobile games at the time. Roblox is probably the best current example of taking this model and then applying it in a new and unique way as they leveraged it to create a game-centric world for younger users that gave them the ability to build and create custom games with friends.

Therefore, most forms of monetization circled around this core of virtual goods. However, we needed to provide a number of different methods for users to gain credits to support the different types of customers we had.

Sales of credits

Straight up credit sales was our primary method of monetization. For many users, the path of least resistance is just to spend a set amount of money to buy credits, enabling them to buy whatever UGC goods they are in need of. We also ran regular sales on credits as a way to encourage people to spend more money or to get started with improving their avatar. Zynga and others like us made it clear that a monetization method like this could work. This accounted for about 60-70% of total revenue at the time.

We also gave each user promotional credits to get started. The goal of this was to give the user just enough credit to do some customization of their avatar so they wouldn’t be perceived as a “noob” by others in IMVU, but also to entice them to want to buy more credits for further customization moving forward. Having multiple looksets was common for IMVU power users, meaning they would have multiple avatar outfits that they could switch between, and it became a status symbol inside of the game.

One of the biggest challenges we faced was balancing promotional credits with paid credits. We spent a lot of time figuring out the right amount of promotional credits to give out to users, including experiments where we gave outsized amounts to see if it would encourage people to build better looksets for themselves to get started. The challenge was that while we would often see higher engagement, we had to balance this with the need for our creators to also be able to get paid out for their creations and promotional credits didn’t offer the financial upside of standard credit purchases. We had a very delicate and interesting balancing act of keeping our UGC creator community engaged while also giving enough opportunity for new users to onboard properly.

Alternative means of getting credits.

For many people, they were willing to put in work or monetize through means other than direct purchase. For these users, we had offer walls where they could sign up or do simple tasks in order to earn credits. While this form of monetization isn’t as common now, it was a key source of credit earning and revenue in the early days. Zynga was a massive user of offer walls as well. Most of the offers ended up feeling like scams and were largely proof of work ways to earn credits. If you remember the do 5 offers for a free iPod offers of the early 2000s, this felt very similar. That said, these tactics are still available for many mobile games and continue to be an alternative monetization source - here’s an example: https://revu.co/. The combination of offers and surveys was always a form of monetization that felt like a scam on one hand but that also had high amounts of user engagement, so we used it for the entire time I worked there.

We also offered toolbars and other installable elements that would earn you a set number of credits each month. We were earning money for the number of active users with the toolbar. While toolbars are assumed to be scammy nowadays, the truth was that most users liked the one we provided. It gave a heads up view of what was happening in IMVU and it really only asked the user to use it for search as a way to create monetization. The fact that the user could have a toolbar installed as a way to earn free credits was actually something most users were completely ok with, despite what many assume about toolbars of that sort.

Additionally, we had prepaid cards, SMS billing, multiple forms of international payment, and many other ways where we tried to enable our users to get credits. The biggest learning was that users actually wanted these and were interested in the ability to do micro-purchases of credits just to be able to customize their avatar and build a better presence in the virtual world. It also was a way for less banked or unbanked users to be able to engage with the game. For many, IMVU was an escape from their real life, so being able to spend a few dollars on their IMVU avatar was a welcome relief.

These incremental means of getting credits accounted for another 20-25% of total revenue and were a significant contributing factor to the profitability and revenue of the company.

VIP Program

We also had a VIP program and an adult tier. The VIP tier offered a few monthly subscription benefits like the ability to change your name multiple times, free monthly credits, and other supports and benefits for power users. It was not entirely dissimilar from what we are seeing with the recent announcements from Snapchat, Meta, and Twitter around premium subscriptions for top users. We had a small but incredibly loyal base of VIP customers who had high retention. We also made it possible to subscribe for VIP through many of the means we listed above, making it an option across a multitude of payment tiers. We found that for many, the VIP subscription was a status symbol within the community and something that they valued to show that they were a power user. While the VIP was a small contributor at 5-10% of total revenue, it had incredible stickiness and showed strong growth as we continued to invest in it.

While these monetization strategies don’t seem entirely groundbreaking by current standards, many of these were brand new at the time. Building an economy entirely focused on UGC and then finding the right ways to enable our users to get credits and balance the right price and opportunity for those credits was a delicate balance. I’ll talk in the future about how the economy of IMVU worked and how we had to balance credit inflows and outflows in order to make sure we kept the economy in a good state and made sure our creators were properly rewarded for all of the content they contributed to the virtual world.

The other unique element we had at IMVU that’s important to mention is lack of dependence on a social platform. This was a good thing in that we never had to pay a mobile or social tax on our revenue (Facebook tried the same 30% tax in the early days as Apple does now on virtual currency). The bad part of this is that it limited us from doing the rapid viral growth that many other platforms were able to execute at the same time. We couldn’t spam the feed in the same way that Farmville and many others did to create their rapid growth and ascension.

I wanted to lay this framework out first before I dive into the challenges as a product team of managing across monetization in a follow up post and also how managing a virtual economy can be challenging.