Virtual dollars used to buy Internet game points generating real cash for online currency company

Every week Techvibes will be republishing an article from Business in Vancouver newspaper.

This article was originally published in issue #1023 – June 2 – 8, 2009.

A Vancouver company thinks it has struck virtual gold with an online currency monetization platform that’s gaining traction among online game and application developers.

Super Rewards has found a niche facilitating the growing number of micro-transactions in which online game players buy or earn points that are used to collect health, weapons and other game accessories.

Less than two years old, Super Rewards has been profitable since Day 1 and is facilitating tens of millions of dollars in online transactions, according to Jason Bailey, the company’s CEO and co-founder.

Many video game developers are experimenting with the micro-transaction business model – offering their titles for free and then selling added features and premium access.

“Instead of charging $2.99 for people to buy that game … give your game away for free, get 20 times as many people downloading it and then make money through micro-transactions,” said Bailey.

The company’s platform is used on various game platforms and in more than 1,000 games, some of which are generating more than a $1 million in revenue monthly.

Micro-transactions involve little more than pocket change, but can add up when consumers are provided with the right incentives to continually hand over cash or credit card.

Super Rewards has tweaked micro-transaction a bit by introducing advertisers.

Players can fill out surveys, sign up for clubs and complete other small tasks from advertisers to earn game points.

Through relationships with various ad agencies and ad networks, Super Rewards has roughly 3,000 advertisers on its platform.

Among the popular games that use Super Rewards’ platform is Mob Wars, which is reportedly one of the most profitable applications on Facebook.

The game’s players can visit a godfather who provides favour points, which are used to boost health and stamina, in exchange for accepting advertising offers like a new membership to Blockbuster. Bailey compares micro-transactions to gateway drugs.

“Once you’ve gotten a quarter out of somebody’s pocket or they’ve taken some sort of action to get those points, then they want more and more and ultimately end up migrating toward these direct-payment options,” said Bailey.

In 2006, he left the role of director of online development at Vancouver’s Communicate.com (now known as Live Current Media) to found KITN Media, a performance marketing agency that evolved to become Super Rewards.

Bailey said developers generate anywhere from 100% to 300% more revenue from a game by introducing the incentives from Super Rewards’ platform. Roughly 75% of Super Rewards’ revenue is commission from advertisers, in a cost-per-action pricing model.

Super Rewards employs 22 people in Vancouver, two in New York and 15 in San Francisco, where it expanded last December following the acquisition of application developer Frozenbear.

Redwood City, California-based FooMojo Inc. uses Super Rewards’ platform to monetize its FooPets, a game in which players earn points by feeding and playing with their adopted virtual pet.

More than 1.3 million virtual pets have been adopted on FooPets.

FooMojo CRO Scott Sorochak said the company uses Super Rewards because of the numerous transaction methods it allows.

“If we only offered PayPal or credit card we wouldn’t be generating as much revenue, because Europeans and Asians don’t use credit cards for the most part. They use their mobile payment options.”

Sorochak added that Super Rewards is one of three companies leading in the virtual monetization space.

The others are Offerpal Media and Kickflip Inc., whose monetization platform is called Gambit.

“The goal of any company using these virtualization monetization firms is to get as many of their users into the funnel, get them excited about the offers they’re seeing and then get them to convert [ads or payments],” said Sorochak.

Super Rewards has had to address some complaints to the Better Business Bureau.

A simple online search finds numerous message boards, Facebook groups and even a blog where players vent about not receiving points after completing transactions through Super Rewards.

Bailey said that, as the company deals with third-party advertisers and third-party publishers, transactions occasionally “fall through the cracks.

“And people are so engaged in these games they will start bitching to literally anyone that will listen,” he added, noting that the company manages millions of transactions a day. “We’re trying our best to deal with all the customer service issues.”