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Virtual Goods Summit: A Web Perspective on Advertising

This article summarizes the insights from the Virtual Goods Summit, a conference focused on virtual economies and the intersection of games, advertising, and the web. The author, an expert in consumer internet, shares his observations on how the games industry can inform web development and monetization strategies, particularly in the realm of advertising.

Key Takeaways on Advertising and Monetization

• The conference revealed that a relatively small percentage of users (5-15%) actually purchase virtual goods, a finding that mirrors the dynamic within advertising where a small percentage engage in brand advertising, while the majority are driven by direct response and remnant advertising.
• The article emphasizes that virtual goods can act as a complement to advertising, not a competitive model. It proposes that virtual goods are essentially micro-subscriptions, offering various levels of engagement and value to users.
• A bundled strategy is suggested, utilizing virtual goods for a segment of highly engaged users, while leveraging advertising to monetize the remaining user base.

Leveraging the Power of Virtual Goods in Advertising

The article dives into the concept of "artificial scarcity" as a key driver of value and social signaling in virtual worlds. This scarcity is achieved by creating a ladder of progression, where users earn new features or virtual items as they advance through the game.

• Web developers are encouraged to rethink their user experiences, shifting from a focus on functionality and utility to a more gradual, "Russian Doll-like" approach that unfolds new capabilities over time.
• This approach aims to create scarcity, thereby increasing the value and social signaling of virtual goods, similar to the dynamics observed in games.

The Role of Game Design in User Acquisition

The article explores the potential for leveraging virtual goods in user acquisition strategies, particularly in the web context.

• The author observes that the games industry, with its traditional reliance on retail channels, hasn't fully embraced the potential of virtual goods for user acquisition.
• However, the article proposes using virtual goods to incentivize specific user actions, such as inviting friends or sharing content on social media platforms.

Virtual Goods: A New Frontier in Advertising

• The article highlights the unique engagement factor of games, with users often dedicating hours to their experiences. This contrasts with the typical, shorter engagement times on web platforms.
• The author advocates for web developers to adopt the principles of game design, particularly the concept of "leveling up" and the creation of "artificial scarcity" within their products.
• This approach can lead to increased user engagement, greater social signaling, and new avenues for advertising.

Lessons from the Games Industry for Web Development

• The article encourages web developers to experiment with virtual goods and their impact on user engagement, monetization, and user acquisition.
• The author emphasizes the need for experimentation in determining the optimal frequency of rewards, pricing strategies, and incentive structures for virtual goods.

Conclusion: Bridging the Gap Between Games and Web

The author concludes that the web world can significantly benefit from the innovative incentive systems developed within the virtual worlds industry. The article serves as a call to action, urging web developers to embrace these lessons and integrate virtual goods into their products, creating more engaging, valuable, and monetizable experiences for users.