Need to build a virtual storefront? Don’t have the resources to develop from the ground up? ItemStarter, the latest toolkit in the TwoFish Elements suite, is your answer.

Just input inventory into a CSV file, upload it with the easy API, and all of the storefront components are ready to use in real-time. For further customization, the out-of-the-box code can be reskinned with any look and feel. Features include:

Customizable Storefronts
• Skinnable and embeddable client-side html and Flash code
• End-user notification panels, such as My Items, My Purchases, Gifts Given, Gifts Received
• Full item and gift stores with integrated currency support (show financial balances and “get more credits”)

Ease
• Built-to-spec for fast-moving Facebook and MySpace application developers
• Set up a store in real-time
• CSV upload of inventory, user and price data

Flexible, Advanced Reporting and Analytics
• Complete sales, currency, catalog and user data
• E-Commerce reports pre-integrated with Google Analytics
• Full access to the comprehensive Elements Analytics framework

And Elements Analytics are provided for free with all Elements and EasyElements integrations.

Sign up here for more info on how to get started: http://www.twofish.com/developers/

This post originally appeared as a guest post on the always informative All Facebook blog.

As the social application space has started to mature, more and more application developers have adopted a “metrics driven” approach to game design. Driven partially by the availability of data gathering and analysis tools, partially by the distributed nature of the internet, and partially by the quick turnaround times that are possible if you analyze customer behaviors in real-time, it seems like almost every aspect of application design has gone under the analytical knife.

Which is why I looked forward to last week’s session on metrics at the Social Gaming Summit. The SGS is at the forefront of social game design, and the speakers, David King and Siqi Chen, are outspoken proponents of using metrics to guide every decision, and of making metrics a “core cultural value.” I was looking forward to learning about the latest and most up-to-date thinking from people who are on the forefront of metrics-driven design.

And make no mistake: Siqi and David gave a great talk.

But, somehow, it felt a little bit like a great talk about last year’s metrics. In a conference where every other talk or panel discussion prominently mentioned virtual currencies and virtual items and virtual gifting, it felt a bit odd that the metrics talk was focused on user acquisition, virality, and page views.

What makes it even odder is that virtual currencies and virtual items are natural candidates for quantitative analysis. At the end of the day, people are spending currency to buy things. As a culture, we’ve had 100 years of MBA’s thinking hard about sales reports: about what to measure, how to report on it, how to do drilldowns and user segmentation, and tactics for increasing sales once user behavior is known.

What I really wanted to see, and what I hope to see at the upcoming Virtual Goods Summit, starts with David King’s last slides. In those slides, he called out “Monetization by Gender” as a key piece of data, and split out age as a key bucketing device. This is a great start.

But to my way of thinking, it’s not even half the question. Once you know that a user group is spending money, the key question is what did those people spend money on? Are there items or types of items that sold well to particular demographics? Can you break down your sales by demographics, spot purchasing trends, and upsell effectively? Using a ‘transactional graph‘ doesn’t just lead to more effective monetization, it leads to a better user experience — or, at least, to a more engaged and invested user.

And for those users who have money but aren’t spending it, can you figure out why? Something as simple as “Once they’ve been using the application for 45 days, women over 30 spend 60% less money than during the first 15 days” is a powerful fact that can guide game design and item catalog revisions.

At Twofish, our recently released analytics framework focuses on exactly these sorts of questions. We think crossing user engagement and demographic data with sales data and information about user spending takes metrics to the next level for social application developers.

Jessica Lee at InsideFacebook posted a fantastic article today on the virtual payments industry, based on a delightful discussion we had last week, focusing on some of my thoughts on virtual goods economies, Facebook’s move into virtual currencies and our latest analytics offering and EasyElements.

And on the topic of Facebook’s coming virtual payments platform, we also spoke with Nicholas Carlson at Business Insider this week. Read today’s article on thoughts for Facebook on their universal currency endeavor.

When Facebook started talking regularly about the social graph two years ago, it was many people’s introduction to graphing theory – used to map and better understand complex interrelationships, in this case, among people in
online communities.

At Twofish, the conversation of late has been around the transactional graph – what we can learn about online communities by mapping and analyzing their economic behavior. While much online social interaction is very personal, online transactional activity connects to broader constituencies. Understanding money flows and commerce patterns tells a deeply layered story about exchange and economy that augments the value of a social graph.

The transactional graph is all about the data. Where is money entering into these virtual economies, who is spending, who is buying what, who do we buy from or gift to, and how does a virtual “dollar” or good move within or out of a specific economy?

Twofish today introduced a new way to dig into the most granular details of a virtual economy with our updated analytics framework, the most extensive set of data reporting and analytics tools available. It offers an in-depth view of complete sales, currency, catalog, and user data, as well as actionable intelligence on item lifecycle, user engagement, macro and microeconomic conditions and much, much more. We’ve also done a pretty cool new integration with Google Analytics for partners who want to see their basic e-commerce data in a familiar format.

In order to get developers up and running, we’ve also launched Twofish EasyElements, a new application toolkit that makes it incredibly easy to set up and run a virtual economy in a matter of hours. You get the security of knowing you’re on our enterprise system, with the simplicity of only working with our most popular features.

The first application tool is the CurrencyStarter, which gives users the ability to turn on, sell and track virtual currencies. As with all of the starter kits, CurrencyStarter comes with skinnable, embeddable client side code, and is cross-platform, so you can extend multiple branded currencies across social networks and websites.



Special thanks to Alicia Ashby at Virtual Worlds News for her article on the new updates! http://www.virtualgoodsnews.com/2009/05/twofish-announces-simplified-easyelements-data-and-payment-platform.html

Our CTO, Bill Grosso, gave an awesome talk at last week’s Virtual Worlds SIG, discussing real metrics for virtual economies. Bill has a hardcore background in math and econ, so he kicks ass at illustrating real-world economic constructs and relating why they do (or don’t) apply in the virtual space. Watch and learn, people!

One of the first challenges that any would-be virtual economy encounters is the currency cardinality question: Should I have one currency or two?

Typically, a paid virtual currency (where the user purchases the currency with real world money) is crucial from a monetization standpoint, but I get a lot of project teams asking me whether or not they should also include a reward currency (where the user earns currency for completing specific actions). It’s an important question and should be answered early in the product development cycle. Here’s how I help teams think through a number of benefits and trade-offs.

The key selling point of having a single virtual currency is to minimize complexity of the experience for the end user (and even the production team). This is the usual ‘less is more’ argument… After all, another currency is more cognitive overhead for the user. First, it’s simply easier for users to learn about and use a single currency than multiple currencies. Second, it’s easier for the developer to represent the catalog, price items, review account balances, et cetera in a single currency. If keeping the experience as simple and straightforward as possible is the key driving force in the determination, then a single-currency system usually wins the day.

However, it’s important for the developer to understand that the simplicity also extends to the breadth of capabilities they can offer–There are simply fewer parameters for motivating your users. Any type of virtual currency, whether paid or non-paid, enables your users to tailor and personalize their experience. But, for the publisher, these currencies function as a barrier to hold back certain aspects of the experience to entice and incentivize users for the ultimate reward of unlocking new experiences. So, to a large degree, user intent winds up being guided by whatever structure is put in place to govern the distribution of the virtual currency. While paid currencies exists to power the bottom line, they don’t provide a strong capability for motivating user behavior. Conversely, while non-paid currencies have no direct financial benefit, they are tremendously useful in helping to train users in a low-stakes environment and to incentivize positive behaviors.

A secondary reward currency can be used extensively to motivate the users to engage in behaviors that benefit themselves, the community or the system itself. This includes things like:

• driving session frequency – get 100 points a day for showing up
• driving engagement – stay on this treadmill for 5 minutes and get 100 points
• driving viral uptake – get 100 points for inviting a friend
• driving user feature awareness – get 100 points for using feature Y
• and many more

Each of these has an evident primary value, but the overall reward scheme also has the macro benefit that it trains users that time spent accrues value. This means that unlike surfing the web, or watching the television, time spent in this world improves your virtual net worth. It’s not empty calories. It’s a valuable activity! This is a key psychological difference in how these experiences function. And one that can be used to great effect when used properly. It’s not unlike the same leveling mechanic that keeps people glued to World of Warcraft — every virtual fiend killed brings you that much closer to virtual greatness.

Another benefit of a reward currency is that it effectively works as training wheels for using paid currencies. Reward currencies help newcomers to the model understand how the system works in a low-stakes fashion. They’re playing with monopoly money, not real money. And they don’t have to pay anything to start trying it out.

For younger demographics, reward currencies are essential. In any kid-focused experience there’s going to be some portion of the audience that simply has no means of putting money into the system. Letting them participate in the commerce activities nonetheless can help close the gap between the have’s and the have-not’s and take the sting out of their sadly unfunded situation. And, before you send these paupers away, remember that community is likely a core part of your appeal. Everyone adds value just by showing up, even if they don’t or can’t pay today.

The challenges with a reward currency are that you have to be smart about the circumstances under which you award value. Make it too loose or frequent, and it loses its perceived value. Make it too easy, and automated bots will be employed to generate your virtual gold ad infinitum, often leading to inflationary situations. You also have to be careful in considering what aspects of the experience to price in the reward versus paid currency; you still want to sell the good stuff for paid currency so you actually make money. Or, in situations where you dual-price (list the same benefit in more than one currency) you need to ensure you’re not cannibalizing sales in one currency by permitting them with the other. Or, giving rise to some arbitrage opportunity by connecting the two economies through those dual-listed items.

At a high-level, those are the key considerations to think through as you decide how to structure your virtual economy. In general, while there is a non-trivial amount of complexity involved in juggling two currencies, leveraging the two types gives you a very powerful set of building blocks to both incentivize gameplay and revenue.

Of course, you can always have more than two currencies as well. I’m not going to get into it today, but there are a number of other currency types that should be considered in certain types of experiences. For example there are temporal currencies which are used to track time-spent, usually for back-end session tracking purposes. Some experiences surface these directly to the user, for example the ‘/played’ time on World of Warcraft. Karma currencies (a.k.a. reputation currencies) are often used to track reputational metrics in an online experience where a measure of social standing is important. Examples include the fame system in Maple Story or, to some degree, reputation in the eBay auction system. Other metrics like creator currencies can be used as measures of achievement in virtual economies where user-generated content features prominently or in marketplaces that surface third-party content creators visibly.

Learning From Monopoly. How Parker Brothers’ Classic Board Game Explains In-Game Currencies (Sort of).
In a previous article, we talked about what virtual currencies are and how to define them, winding up with the following definition:

A virtual currency is a currency, backed by a private company and not by a government or cross-government entity such as the European Union, which is used within a virtual world or online economic application, which meets the three classical criteria for a currency, and which is primarily used for the purchase of virtual goods and services.

Now that we’ve defined virtual currency, however, we get to the much meatier question of how to design one. And that’s a much more complex issue, involving gameplay, interaction with other application elements, and how users feel about, and react to, virtual currencies. (( And if that sounds like Heidegger instead of Aristotle, well yeah.))

In order to explore this better, it helps to take a step back away from “virtual” and look at one of the great examples of in-game currencies in action: the game Monopoly.

If You Haven’t Played Monopoly Recently, Please Go Do So Right Away.
Monopoly is a board game where players attempt to get a “monopoly” on property, and drive the other players out of business. It’s the most popular board game of all time, one of the all-time great games, and has been played by over a billion people since it was first released 74 years ago.

In 1935, Parker Brothers described the game as follows: (( Description taken from Niall Ferguson’s masterful book, The Ascent of Money. ))

“As the name of the game suggests, the players deal in real estate, railroads, and public utilities in an endeavor to obtain a monopoly on a piece of property so as to obtain rent from the other players. Excitement runs high when such familiar problems are encountered as mortgages, taxes, a Community Chest, options, rentals, interest money, undeveloped real estate, hotels, apartment houses, power companies and other transactions, for which scrip money is supplied.”

It’s a great game, well-designed and the archetype of a “scrip” based game. You’ll learn more about integrating a currency into a game from playing it than by reading any 30 blog articles.

Monopoly Does a Lot of Things Right
From the perspective of designing a currency into a game, Monopoly does a lot of things right. Among some of the key features that make Monopoly money so powerful are:

• Players receive currency in the course of ordinary play. When players pass go, or get special cards from either the “chance” or “community chest” decks of cards, they get money. This enables people with little or no money to continue playing, and lets players who would otherwise be hopelessly behind, to have a hope of winning. Many Facebook applications use “logging in” as a metaphorical equivalent of passing go. For example, whenever I go to Friends For Sale, I am greeted by a message like “You earned $250,000 for logging in.” However, this design tactic usually involves a much greater degree of stimulation than passing go in Monopoly, and it can result in significant hyperinflation.
• It is possible to survive (and enjoy the game) without money, at least for a time. Even when a player has all their properties mortgaged, they can still pass go, get some money, unmortgage a property, and attempt to claw their way back into the game.
• Almost every turn involves money in some way. When a player takes a turn, they roll dice and then move along the board. Almost every place they land involves money: either an opportunity to purchase property, or being forced to pay rent. When they pass “Go”, they get $200. Even when a player is waiting to take a turn, they often receive rent.
• There are lots of sinks, and they are important to gameplay. You have to spend your money in Monopoly if you want to win the game. Players buy real estate, finance the construction of houses, and pay rent to other landowners… not to mention the luck of drawing a bad chance card.
• Monetary success is public knowledge. Players know, at least roughly, how much money and property the other players have. The amount of money you start with is public knowledge, and all transactions are publicly known.
• Money is physically represented and highly visible. The presence of actual bank balances, in the form of play money, is a visual reminder of the public knowledge about monetary success.
• Money is an important part of “who’s winning.” When you go up to a monopoly game and ask who’s winning, you’re likely to get an answer like “Well, Bob has a lot of money, but Marsha has more property. They’re leading.”
• Money rebalances between players. In virtual economy terms, Monopoly involves both primary market (bank to player, first time purchases) and secondary market (player-to-player trading of properties), as money moves not just from the bank to players, but also between players.
• Money is social. Not only do players know how much money each has, and not only does it factor into estimates of who is winning, people change their behaviors based on money. Players are often more generous to other players who are “losing”, and will “gang up” on players who are winning. And, as stated above, one of the primary determinants of “winning” is “how much money does the player have”
• Inflation is minimal. This is more of a technical note. But the game is well-balanced. Players acquire property and money. But there is a limited amount of property in the game and, over time, the players don’t accrue vast amounts of money. Players start with $1,500 (( Under the standard rules, that is. )) and rarely have more than $10,000 during the course of the game.

Coming Soon
This article was a discussion of one of the all time great “currency-based” board games.

In the next installment in this series, we’ll examine a typical Facebook Role Playing Game (RPG) and examine how they use virtual currencies. Like Monopoly, most role playing games use currency well, but they also overlook some important aspects.

Sometimes, it feels like we’re in the middle of a virtual currency bubble. Articles about virtual economies, virtual item sales , and the benefits of using virtual currencies to implement “freemium” business models are appearing all around us. It’s clear that the market has caught on and that virtual economies are going to be central to the way the web is monetized from now on.

And yet, for all the current fascination and hype about virtual currencies, it’s almost impossible to find a definition of what a virtual currency is, best practices on incorporating virtual currencies into applications, or even a list of the things a virtual currency platform should provide.

At this writing, the number one hit on google for “Virtual currencies”  is the Wikipedia entry for Virtual Economies . There is no wikipedia entry on virtual currencies.

Over time, the Twofish blog will help to fill this void. For now, I want to talk about how virtual currencies fit into game or application design.

So What is a Virtual Currency Anyway?

What most of us think of as currencies in the “real world” are sovereign or fiat monies that are supported by or tied to national or multinational governments. These government-backed currencies are classically defined as having three core properties:

• They are a unit of account. That is, money provides a standard way to measure of the market value/cost of goods, services, or assets. In short, relative prices accurately reflect relative valuations of items.
• They are a store of value. That is, you can save money and then use it later. Money isn’t perfect at this because of inflation (and the remote possibility that the government that issued the money has been overthrown), but, in the short-term, money is a good way to store value.
• They are a medium of exchange. You trade money for the stuff you want. Other people accept it.

The folks at Offerpal, when they tried to define virtual currencies, more or less took this definition, focused on “medium of exchange” and came up with “Virtual currency, as you might imagine, is what you use to buy virtual goods or virtual services. It is essentially as good as real currency.” (( http://mashable.com/2008/12/18/virtual-currency))

If you were a little more academic, you might take this as a starting point and say:

A virtual currency is a currency, backed by a private company and not by a government or cross-government entity such as the European Union, which is used within a virtual world or online economic application, which meets the three classical criteria for a currency, and which is primarily used for the purchase of virtual goods and services.

But … But … That’s Kind of Useless

Definitions like the above, while they’re very satisfying from an academic point of view, and can help you recognize whether your virtual currency is performing well once you’ve designed your application, are kind of beside the point when it comes to application design.

To see what I mean, consider for a moment how you would define a door. Wiktionary defines one as follows:

A portal of entry into a building or room, consisting of a rigid plane movable on a hinge. Doors are frequently made of wood or metal. May have a handle to help open and close, a latch to hold the door closed, and a lock that ensures the door cannot be opened without the key.

It’s hard to argue with this; it’s approximately true and, if you already know what a door is, it seems correct. On the other hand, it doesn’t seem terribly useful. In short, it’s a lot like our definition of virtual currency.

Here’s a very different definition of door, though:

A door is a device which simultaneously allows friends in, keeps enemies out, makes the house warmer, and makes the occupants feel more secure.

This second sort of definition is more useful when you’re trying to understand what doors are for, and figure out how to add one to your house. More importantly, it can tell you whether a given door is a good door.

The trick is figuring out a similar definition for virtual currency.

Think About How People Feel About Money, and How It is Used Socially

The starting point for thinking about adding virtual currencies to your application is that you should focus on how people feel about money, and how they use it in social interactions, instead of focusing on the role it plays in economic analysis. It might seem obvious, but your virtual currency should be integrated into the rest of your application and feel like money.

The more your virtual currency behaves like money in the real world, and the more people think of it as money, the more compelling the application will become (and the more interested the user will be in acquiring, and spending, currency).

In particular, a large percentage of the user’s actions should have an economic consequence. E.g. they should either generate currency or cost currency.

Thus, when adding a virtual currency to your application, you should be thinking about:

• How do people acquire the currency? Is the acquisition (and loss) of currency firmly embedded in almost all application events and actions?
• How do people feel about the currency? Does it matter to them?
• How does the presence (or absence) of currency change their feelings about themselves, about each other, and about the game. Can people see other people’s currency? Can they see the impact of currency on the application? Do they feel envy, or at least a mild jealousy, when they interact with wealthier participants? How do social interactions change in the presence (or absence) of currency?
• How does the presence (or absence) of currency change what users do? Having more money should change what’s possible, and what’s likely.

Further Reading

Along these lines, I have two recommendations for further reading:

• Juho Hamari over at the virtual economy research network, posted a great article listing many of the ways in which virtual currencies can be used within an application. If you’re designing a game, or trying to add virtual currencies to an existing application, this article is the basis of a great checklist.
• Yang Wang and Scott Manwaring wrote a very interesting paper entitled Human-Currency Interaction: Learning from Virtual Currency Use in China that goes over some lessons they learned by watching how people use virtual currencies.