By collecting troves of data on how users play their games, developers have mastered the science of applied addiction. And with the rise of “freemium” games that rely on micro-transactions, they have good reason to deploy the tools of behavioral psychology to inspire purchases.
To maximize the efficacy of a coercive monetization model, you must use a premium currency, ideally with the ability to purchase said currency in-app. Making the consumer exit the game to make a purchase gives the target’s brain more time to figure out what you are up to, lowering your chances of a sale. If you can set up your game to allow “one button conversion”, such as in many iOS games, then obviously this is ideal. The same effect is seen in real world retail stores where people buying goods with cash tend to spend less than those buying with credit cards, due to the layering effect.
Purchasing in-app premium currency also allows the use of discounting, such that premium currency can be sold for less per unit if it is purchased in bulk. Thus a user that is capable of doing basic math (handled in a different part of the brain that develops earlier) can feel the urge to “save money” by buying more. The younger the consumer, the more effective this technique is, assuming they are able to do the math. Thus you want to make the numbers on the purchase options very simple, and you can also put banners on bigger purchases telling the user how much more they will “save” on big purchases to assist very young or otherwise math-impaired customers.
Having the user see their amount of premium currency in the interface is also much less anxiety generating, compared to seeing a real money balance. If real money was used (no successful game developer does this) then the consumer would see their money going down as they play and become apprehensive. This gives the consumer more opportunities to think and will reduce revenues.
On the topic of in-app purchases, Griffiths says, “The introduction of in-game virtual goods and accessories (that people pay real money for) was a psychological masterstroke.”
“It becomes more akin to gambling, as social gamers know that they are spending money as they play with little or no financial return,” he continues. “The one question I am constantly asked is why people pay real money for virtual items in games like FarmVille. As someone who has studied slot machine players for over 25 years, the similarities are striking.”
Griffiths argues that the real difference between pure gambling games and some free-to-play games is the fact that gambling games allow you to win your money back, adding an extra dimension that can potentially drive revenues even further.
Candy Crush Saga was actually designed by an economist to demonstrate how people don’t understand the concept of sunk cost.
Update: In 2009, Chris Anderson wrote a book called Free: The Future of a Radical Price in which he argued that freemium was going to be an important business model.
The online economy offers challenges to traditional businesses as well as incredible opportunities. Chris Anderson makes the compelling case that in many instances businesses can succeed best by giving away more than they charge for. Known as “Freemium,” this combination of free and paid is emerging as one of the most powerful digital business models. In Free, Chris Anderson explores this radical idea for the new global economy and demonstrates how it can be harnessed for the benefit of consumers and businesses alike. In the twenty-first century, Free is more than just a promotional gimmick: It’s a business strategy that is essential to a company’s successful future.
These instances were identified after a cursory investigation, after I checked by hand several dozen suspect passages in the whole of the 274-page book. This was not an exhaustive search, since I don’t have access to an electronic version of the book. Most of the passages, but not all, come from Wikipedia.
In response to a query by Jaquith — bloggers take note — sent *before* the publication of the piece, Anderson took responsibility for the copied passages, saying that they were “notes” that were originally footnoted:
This all came about once we collapsed the notes into the copy. I had the original sources footnoted, but once we lost the footnotes at the 11th hour, I went through the document and redid all the attributions […] Obviously in my rush at the end I missed a few of that last category, which is bad. As you’ll note, these are mostly on the margins of the book’s focus, mostly on historical asides, but that’s no excuse. I should have had a better process to make sure the write-through covered all the text that we not directly sourced.
Anderson’s publisher, Hyperion, considers his response to be satisfactory and will correct the errors in future editions.
Chris Anderson talked about, ba ba baba!, not the long tail. Well, not explicitly. Chris charted how the availability of a surplus in transistors (processors are cheap), storage (hard drives are cheap), and surplus in bandwidth (DSL is cheap) has resulted in so much opportunity for innovation and new technology. His thoughts reminded me of how surplus space in Silicon Valley (in the form of garages) allowed startup entrepreneurs to pursue new ideas without having to procure expensive commercial office space.
Roger Brent crammed a 60 minute talk into 20 minutes. It was about genetic engineering and completely baffling…almost a series of non sequiturs. “Centripital glue engine” was my favorite phrase of the talk, but I’ve got no idea what Brent meant by it.
Homaro Cantu gave a puzzling presentation of a typical meal at his Chicago restaurant, Moto. I’ve seen this presentation twice before and eaten at Moto; all three experiences were clear and focused on the food. This time around, Cantu didn’t explain the food as well or why some of the inventions were so cool. His polymer box that cooks on the table is a genuinely fantastic idea, but I got the feeling that the rest of the audience didn’t understand what it was. Cantu also reiterated his position on copyrighting and patenting his food and inventions. Meg caught him saying that he was trying to solve the famine problem with his edible paper, which statement revealed two problems: a) famines are generally caused by political issues and therefore not solvable by new kinds of food, printed or otherwise, and b) he could do more good if he open sourced his inventions and let anyone produce food or improve the techniques in those famine cases where food would be useful.
Richard Dawkins gave part of his PopTech talk (the “queerer than we can suppose” part of it) at TED in 2005 (video).
Bob Metcalfe’s wrap-up of the conference was a lot less contentious than in past years; hardly any shouting and only one person stormed angrily out of the room. In reference to Hasan Elahi’s situation, Bob said that there’s a tension present in our privacy desires: “I want my privacy, but I need you to be transparent.” Not a bad way of putting it.
Serena Koenig spoke about her work in Haiti with Partners in Health. Koening spoke of a guideline that PIH follows in providing healthcare: act as though each patient is a member of your own family. That sentiment was echoed by Zinhle Thabethe, who talked about her experience as an HIV+ woman living in South Africa, an area with substandard HIV/AIDS-related healthcare. Thabethe’s powerful message: we need to treat everyone with HIV/AIDS the same, with great care. Sounds like the beginning of a new Golden Rule of Healthcare.
Update:Wired editor-in-chief Chris Anderson on the acquisition. “The result was an agreement between the two, by which Wired News (wired.com) would host our content on their site (under wired.com/wired) next to their own content, but we, the magazine, were prohibited from doing anything in the digital realm. Aside from being somewhat ironic that Wired Magazine wasn’t really wired, it was frustrating for us to be unable to walk the talk, since we didn’t control the site.”
New Yorker review of Chris Anderson’s new book, The Long Tail. Oddly, there’s no disclaimer that Anderson works for the same company that publishes The New Yorker. Not that the review is all synergistic sunshine; the last half pokes a couple of holes in Anderson’s arguments.
The Economist on the Long Tail, the current buzzphrase du jour. It’ll be interesting to see if the Long Tail idea will be “over” by the time the book comes out or if it’s got legs. Either way, it’s still an interesting way to think about your business.
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