Nima Pourshasb: ARPUs in social networks and social games: An acronym that needs scrutiny
How do you monetize social networks and social games? Similar to the online games space, there is a growing consensus that the answer is by complementing advertising with a virtual goods micro-transaction business model. Social networks and start-ups are positioning themselves accordingly. Hi5 has announced its own virtual currency. Facebook is now implementing “credits” and MySpace seems to be working on their own payments platform. Jambool provides virtual currency, while Gambit, Zuora and Spare Change offer a variety of direct payment methods. Users can pay for virtual goods by completing offers or surveys thanks to SuperRewards, OfferPal and Sometrics while Zong and MobillCash let them pay with their cellphones. Live Gamer provides a publisher-supported secondary market for virtual good trading. It is only a matter of time until services emerge that optimize electronic storefronts – layout, inventory, pricing and promotions – and virtual goods marketing campaigns.
The pitch for the micro-transaction business model is simple. There is a higher user monetization relative to advertising revenues because of the type of engagement that occurs in social communities and games. Central to this argument is the metric for user monetization: Average Revenue per User (ARPU). The figure below shows several public estimates of annual ARPUs[1]. The apparent wide discrepancy is misleading because of the different ways of defining ARPU. If analyses based on ARPU segmentation, such as average ARPU levels by game/app type and characteristics, or by social platform and region, will inform key decisions about design and user acquisition marketing budgets, these inconsistencies may result in wrong and costly decisions.
Originally posted by Virtual Economy Research Network
About the author
Nima Pourshasb is director of corporate development at Live Gamer. His background includes Business Development at MTV Networks, where he led M&A deals with social media properties, and a Senior Project Manager role in strategy consulting at Oliver Wyman, specializing in Emerging Markets. He holds an MBA from Harvard Business School, during which he worked part-time at venture capital firm General Catalyst, helping launch an online advertising company.
To learn more about Nima and his work at Live Gamer please visit www.livegamer.com
