According to published research, revenues from virtual goods are growing as much as 40 percent per year and U.S. sales could reach $2.1 billion1 in 2011 and $2.4 billion2 during 2012, with an even stronger global market (over $7 billion3), due to strong growth in Asia. Thus, every virtual goods and services provider -- from games to smartphone apps, dating sites to social networks -- should be scrambling for new ways to increase conversion rates and average revenue per user.
In the online gaming market, 31 percent of the general gamer population is now using real world money to purchase virtual content, according to a study by research firm VGMarket Database published in August 2011.4 Of those gamers who use real money, 57 percent told VGMarket that they purchase virtual items using real-world money at least once a month, and 72 percent plan to spend more in the coming year.
The VG Market study is consistent with a recent report from market research firm Frank N. Magid Associates which shows that one-in-four U.S. consumers age 13-54 purchased digital goods in 2011, which represents a 100 percent increase over 20095.
Previously, online purchases of digital goods by gamers in the U.S. were often paid for with credits earned from advertising offers, but now these enthusiastic consumers are migrating to real world payment for digital goods using debit, credit and prepaid cards. It's important to note that these fundamental conversion tactics apply to all types of digital content, not just to games.
So, how do developers increase conversions and average revenue per user? And how do they know how their numbers stack up against their competition?
There's also a fundamental question for every virtual goods business: What should I be doing proactively every day to increase my sales and conversions?
With your focus rightfully on your core business, there isn't time or manpower to address the complexities of monetization and payment on a global scale. Lack of dedicated resources shouldn't slow you down when there's a world of business to be won.
Just as critical, developing and deploying a secure, effective and efficient monetization and payment solution is a significant challenge that would take an overwhelming amount of in-house time and effort, well beyond the means of most content developers.
This article describes several best practices for increasing conversions, compiled from the real-world experiences of some of the world's leading purveyors of online virtual goods.
Online customers have come to know and trust their local payment methods, you should make it easy for them to pay, from anywhere in the world, with personalized, localized payment methods.5
Here's a critical point to consider as you expand your business into new countries and new markets: Pricing your products or services in dollars or another non-local currency and introducing new and unfamiliar payment options may slow customer acceptance of your offering. This means you should always make local currency an option.
Most payment and monetization solutions offer only a few payment options, limiting global reach and reducing conversion rates. Using settlement providers scattered around the world is inefficient at best, and creates its own logistical and cultural challenges.
An invaluable best practice is to align yourself with a global payments strategic partner to localize currencies and payment methods and thereby increase your conversions by ensuring that customers are buying in a familiar, trusted environment.
1 Inside Virtual Goods Report, quoted in Venture Beat, September 28, 2010
2 Virtual Currency and Social Network Payments, Javelin Strategy & Research, June 2011
3 Virtual Goods in Social Networking and Online Gaming, In-Stat, November 2010
4 Games and Virtual Goods, Consumer Spending Report, VGMarket, August 2011
5 Virtual Goods and Currency, Emerging Consumer Trends, Frank N. Magid Associates March 2012