Saturday, December 04, 2021

Basics of virtual economy to create demand

A lot of apps nowadays are testing out gamification mechanics hoping to improve and diversify their monetization channels. Implementing virtual currency is a common technique. An app or a game without virtual currency basically have to either charge people upfront or everywhere would be blocked by pay-walls. Virtual currency consolidated microtransactions to be a lot more manageable to the developer and a lot less intimidating to the users. 

The key for a virtual economy to work is demand. 

To understand demand in a particular ecosystem, one has to understand the user motivation. What is it that the users want in your app? For example, in a game, people want to have fun. There are many different ways your product can entertain a user. Understanding those motivation means you can identify the points of demand in which virtual currency can be placed. The more your user base uses those virtual currency, the probability of them purchasing more of those currencies would be higher; hence, increasing revenue. That is one high level perspective on how to tune for demand / sink of virtual currency.

To keep a level of good retention and engagement, the app or game would need to "source" the economy a bit - to provide some currency channel for the user to earn some currency as rewards for actions done. The amount rewarded would depend on the intrinsic motivations for users to engage with a particular feature in your product. High intrinsic value, you can source less or none; low intrinsic value should be sourced more. 

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