The Future of Virtual Currencies

Question: What is the future of virtual currencies?

Jesse Schell: At Schell Games, we're doing a lot of work with virtual currencies and virtual economies right now because so many of the games we do are online and are working on social networks and are working off of micro-transactions.  You end up having to think about these things, and it's a very curious space.  It's a space that we're all kind of finding our way in and kind of learning how it works.  There's some basic things that we certainly know.  A lot of people assume that Oh, I'll create some kind of virtual economy and people will spend money on it, but that's certainly not true.  What you have to do is you have to create a situation where people are going to want to put money in.  So you have to find a way that people are going to feel invested, and if you look at the way a lot of the successful online games are created – particularly the free ones – they create a situation where they work hard to get you psychologically invested, and then they find exactly the appropriate time to kind of say, “You know, this game could be a little better if you would just put five bucks or if you would just put ten dollars in.”  Or maybe they'll even mask it:  “If you would just contribute eight Facebook credits” – that kind of thing – “then you could suddenly make this better.” 

We're not used to this as game designers.  Game designers are used to we're gonna make the best game possible, and we're gonna want people to know about it because they're gonna pay up front, and then we're gonna deliver a game that they think is great; then we don't have to think about that anymore.  Now it's like we're all designing the point-of-purchase display at Wal-Mart, and we're trying to figure out How do we position the racks of gum that's gonna make people buy more than one pack of gum?  That ends up being how you have to think about it.  So very often now one of the big changes is:  we design games around a psychological moment where people are willing to spend money, and we figure Well, how do we make that moment as exciting and as engaging as possible?  We're not used to that.  We're used to kind of having fun be at the core, but now funding is at the core, and we have to kind of build out that way, which is very different.

Question:
  Do you foresee the virtual currency model spreading to other industries, like advertising?

Jesse Schell: What's going to happen with virtual currencies is interesting because the advertising folks, just like everybody else, are really kind of trying to struggle to figure out What does this new digital media mean?  Interactive advertising is problematic because when you say Here's an advertisement.  Now you can interact with it.  Your first interaction is "Make it go away," because you don't want advertising.  That's the whole point of advertising:  you don't want it.

Advertisers are going to realize the incredible power that... the ways they can tap into these virtual economies as we become more and more connected.  People think that these virtual economies... they think that they're isolated, that they're off somewhere, but everyone's going to start to realize that it's just information on the Internet.  If you want to give me 100 gold if I buy a 24-pack of Coca-Cola at the grocery store, you could do that now.  There's no technological barrier to keep you from doing that.  The grocery store already has a unique bar code that you swipe when you exit, they already know your email address, most likely; all you have to do is give them one more piece of information about your World of Warcraft account and BANG – you could start doing that right there.  And the same goes for Farmville or any game that has an online or virtual currency.  The advertisers are going to start to see that Wow.  These currencies mean something to people.  People put in hours and hours of their lives trying to build up this currency.  How can we have them engage with our brand... purchase our products, spread the word about our new products, give reviews to our products, etc. and reward them with these virtual currencies?  We're starting to see it happen already.  On Facebook we've seen quite a bit of this, and I think we're gonna see it kind of branching out into the real world quite a lot.

They're starting to get the idea.  They're trying to figure out how to begin.  There's a kind of a priming the pump problem that they have right now, but all it's gonna take is a couple successes in this space, and you're gonna see just a huge ocean of… experiments.  And some of them are gonna succeed.

Recorded on June 21, 2010
Interviewed by Andrew Dermont

Game designers are having to think more like marketers: "We're used to having fun be at the core, but now funding is at the core," says Schell. "Now we design games around a psychological moment where people are willing to spend money."

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