In an era in which online is the new in-person, including virtual economies in your app is a lucrative way to engage and retain users while improving revenue performance. But what are virtual economies? Virtual economies create earning opportunities and allow users to interact with your app in new ways, often with content that is behind the subscription wall, leading to more conversions.
Tailoring a virtual economy is unique to each app and it’s up to you, as the developer, to create an economy that builds off of your app flow and improves engagement, re-engagement and retention. Because many apps in categories like photo editing and lifestyle don’t have a defined user journey and natural placements for a value exchange, there is a strong need for a creative approach when implementing this strategy.
Read on to learn some best practices for implementing a virtual economy into your app:
Define the value generating actions in your app
The best way to ensure you’re setting up your economy for success in the long run, is to start measuring the value of your actions early on by implementing currency as soon as possible.
Before implementing a virtual economy, you should specify every instance of how value is created in your app. This way, you can be proactive about emphasizing the value that users can get from certain actions, making them more inclined to engage with an action behind an economic barrier.
Start by defining the types of users in your app. For example, a photo editing app only has one type of user - those looking to edit their photos. On the other hand, a storytelling app has two types of users - the readers and the writers. Ultimately, different types of users will engage in different actions, creating many forms of value in your app, or in other words, ways for users to engage and improve your revenue.
Next, define the functions that these groups of users can take in your app and get as granular with these actions as possible, keeping in mind that each action has a differing economic value. For example, the functions of a photo editing app are to add filters, adjust lighting, save to camera roll, etc. The economic value of adding one filter may be less than the economic value of adding a different, more complex filter. You could also go deeper into the “save to camera” function by distinguishing between the economic value of allowing users to save the edited photo without your logo vs. with your logo thumbnail.
The functions of a storytelling app for writers, specifically, are to post stories, access resources and gain a fan base. Within these broader functions, writers must decide the length of the piece, the graphics included, or the style of the headers. The economic value is going to be higher for a longer piece or more detailed graphics, for example. Naturally, certain writing resources are also going to be more valuable to users than others, increasing the economic value of those specifically.
The more granular you get when distinguishing the functions of your app, the more accurate you’ll be determining the economic values. With this mindset, you’ll be able to make more data driven and performance based decisions about which features should be free vs. paid.
This doesn’t mean that every value generating action should be a part of the virtual economy - if this were the case, users would have to use currency in every interaction with the app, decreasing engagement. The best way to distinguish between the actions that are best suited for the virtual economy is to gamify your app, which leads us to the next point.
Gamify your mobile app
One of the many reasons mobile gaming is so appealing is because it gives players the feeling of internal accomplishment. Virtual economies make it easier for users to progress through levels and feel that sense of reward, keeping them coming back for more. That’s why the best way to mimic this same sense of achievement and convert more users to subscribers when adding a virtual economy to your app is through gamification.
Since you already have an idea of the value generating actions, your first thought when gamifying should be “how do I measure value?” This means first determining what is going to be behind the economic wall - i.e. what is being sold - and what is the currency. The key is to measure value by the probability that a user will engage with a piece of content. Users are more likely to engage with content that leads to progression through the app’s ecosystem. In fact, apps that can gamify their interactions have higher rates of engagement and user retention, according to Hackernoon.
For example, a well known language-learning app fosters a sense of development and accomplishment by challenging users to reach certain goals. The app offers shortcuts to reach those goals with Gems, their form of digital currency. Gems can be used to purchase ‘lives’, which allow users to progress through levels more quickly.
You can also incorporate direct competition into your app, facilitated through a virtual economy. Let’s look at a top rated online gaming app for photographers. Each app user has a rank and this rank plays a huge role in how much voting power a user holds. While one way to increase rank is to do well in competitions, you can also pay a fee and progress through the hierarchy more quickly.
Ultimately, gamifying your app by either fostering a sense of personal development or competition, and incorporating the virtual economy to make it easier to progress through the app, is a great way to make the most out of this monetization strategy and gets users excited about more premium content, leading to more conversions to subscriptions.
Once you’ve gamified your app successfully, it’s time to start drilling down on assigning the best economic values to boost performance.
Monitor inflation closely
Virtual economies are made up of real people creating exchanges, which means many concepts of real-world economics apply to virtual economies as well, including inflation.
Inflation occurs when the amount of money in the economy rises, leading to an increase in the cost of goods sold and reducing the value of the currency. In contrast to the real-world economy, money in the virtual economy is limitless - you can add as much as you want, meaning app economies are more susceptible to inflation.
In apps, there are more opportunities to acquire currency than lose it. Finding a balance between the faucets (actions that allow users to acquire more currency and add money to the economy) and sinks (actions that filter currency away from the user and out of the economy) is paramount to building a functional virtual economy that increases revenue rather than harm it. Ultimately, apps need to spend time engineering quality sinks that are not necessarily related to progression and accomplishment.
For example, apart from ‘lives,’ the language-learning app allows users to purchase new outfits for their avatars. This is a way for the app to filter currency out of the economy, while instilling a sense of personalization and style for users.
Even social apps can benefit. An app for meeting new people offers credits that allow users to not only buy more views, but view other people’s profiles secretly or get a spotlight for their profile. These sinks can be used any time in the user journey and rely on users’ desire to see and be seen.
Overall, to combat inflation in your virtual economy and improve performance, you need to look beyond actions that allow users to progress through levels to create enough quality sinks. Think about human behavior, and what users splurge on in the real world that could be translatable to a virtual world.
Virtual economies are a great way to boost your app's performance and increase the number of conversions to subscriptions. To get the most out of this strategy, make sure you keep track of the value drivers in your app to encourage engagement, instill a sense of gamification to get users excited about the premium content, and monitor inflation closely to ensure you’re not harming revenue.
