The 2010s were the golden era of gaming. Apple gave us the iPhone 3G and the App store launched. It might be the nostalgia talking but I felt like developers genuinely cared about the apps they were making. We even had a virtual beer app that you could “drink” by tilting your phone! Angry Birds, Fruit Ninja, and Temple Run defined bus rides. How did Rovio (the company behind Angry Birds and Pop Cap who made PVZ destroy the mobile market so completely? Cue microtransactions and virtual currencies.
The digital entertainment industry realized the limits of the traditional “pay once” model. With an app priced at .99 cents, there’s only so much revenue to be derived from every user. Even though hundreds of thousands of users may have purchased an app, there is still a cap. Users can only download an app once. After a user downloads an app, the revenue associated with that app stops.
How micro transactions came to be
Enter micro-transactions; enter virtual currencies. Virtual currencies became the ideal solution to micro-transaction’s problems. If you think about it, the coins used in any online sweepstakes casino are a form of virtual coins too.
Initially, the concept seemed harmless. Rather than paying cash each time you desire something within an application, you purchase a bundle of virtual coins or gems. On paper, it appears better. Cleaner. Simpler. Less annoying. To a degree, it is. However, this creates a shift in how we the app users perceive spending.
Virtual and real money
As soon as cash is converted to points, it begins to feel less like cash. This is what makes the transition important. When a product is priced at $2.99 dollars, you are aware of the cost immediately. The dollar amount is tied to real world expenses such as rent, food, data plans etc. However, when a product is priced at 300 gems, your brain has to go through additional processing before converting that number back into real terms. By that point, your purchase is perceived to be less expensive than it is.
One reason for its effectiveness is how well virtual currencies integrate with the way people normally view rewards. Video games have always taught users to collect, save and use items (for example coins in Mario, gold in RPG’s and points in an arcade machine) so using virtual currency extends what people are accustomed to doing in a way that has value both within and outside the gaming environment.
Players do not need to stop playing their game and “buy” what they want; instead they can continue playing and use a new type of item as part of their game.
Virtual currency provides another element of flexibility in video games. It allows players to choose how fast they will progress in the game (i.e. earn rewards at a slow rate by grinding like we normally do or earn rewards quickly).
There is a beautiful and unique quality to virtual currency. Because of the way it works, buying digital products does not feel like losing money; it feels like moving money. In most stores, you give money and you get something. In games, you pay for virtual currency, then you spend that currency. These two acts make the emotional connection less immediate. The first act is preparation for the next act. The second act is fun. Once this process is established, companies can charge whatever amount they choose without having to relate each charge to a fixed value of real world money. Companies can charge 80 gems for one product and 450 for another, and 1200 for yet another product. Furthermore, companies can create packages that represent better value the more you spend.
A win win for both parties
In addition to solving a business challenge, developers were able to solve a design challenge through this virtual currency. Developers needed a way to get money while also eliminating the one time purchase from the App store. Players wanted games that had no barriers to entry .
Virtual currency provided both parties with solutions they could accept. Players could download and play the game for little to no money (lowering barriers to entry), and developers could monetize their experiences quietly throughout the game.
Obviously, “quietly” is doing the heavy lifting here.
As time progressed, these systems evolved and became increasingly aggressive. Initially, virtual currencies allowed players to purchase cosmetic items or minor conveniences in-game. Over time, they evolved into full-fledged economies featuring timers/boosters, battle passes/loot boxes/premium tracks/ltd. Editions/etc. In essence, games began selling users a rhythm. We would spend money on coins to get certain items to only buy more coins later on. It was a cycle/habit.
These systems are not about convincing players that money doesn’t exist… They’re simply designed to make money seem sufficiently indirect so that users will be willing to part with theirs more readily.
