Author: Brett Brewer, President Adknowledge Growth of social applications Market size of virtual currency Monetization of social media This talk was given at Adknowledge social media conference in Sydney

1. Get Real: The Emergence of
Virtual Currency and Cracking
the Monetization Code

2. Brett Brewer: My Background
• President Adknowledge
– Most recent acquisition: Super Rewards – the
leader in virtual currency
• Co-founder at Intermix Media (Parent of
MySpace)

3. MySpace and Monetization challenges
• Founded Intermix Media in 1998
• We launched MySpace in Aug. 2003
• Initial growth was phenomenal
• MySpace initially applied old advertising
models to new media (i.e. banner advertising)
• Sold the business to Newscorp in Oct. 2005
• We always struggled with effective ways of how
to monetize the site

4. Facebook taking share

5. Facebook opens up to application developers
• Facebook opened their
platform to independent
developers in May 2007
to make the platform
more engaging
• Applications have to over
380,000

6. Social Media growth
Engagement is More Than Time Spent
SN Users as % of Total Internet Users*
Phenomenal Growth… Non-effective advertising
• 6 out of 10 U.S. Internet users have • Interrupt-driven CPM banners:
created social network profile <50c CPM
• More than 70% of Facebook users use • Out of context CPC ads: <$1 CPM
apps monthly • Video ads: $1-$2+ CPM
• More than 6 billion minutes are spent
on Facebook each day

7. The rise of applications
• Number of users is
growing dramatically.
Games such as Farmville
generated 11 million
active daily users -- within
2 months of launching –
and now has over 30
million monthly users.
Mafia Wars has over 24
million.
• More than 250
applications have more
than 1 million active users
• More than 15,000
websites, devices and apps
have implemented
Facebook Connect since
Dec 2008

12. What Is Virtual Currency
and What is the Market
for Virtual Goods and
Services ?

13. Virtual Currency – What is it?
• Virtual currency monetizes games and apps on social networks and iPhone,
multi-player game platforms, virtual worlds, and stand-alone sites.
• Direct pay (i.e. PayPal, credit card): Many players pay directly for the virtual
currency to advance in games, buy better gear, or obtain virtual goods
• Indirect (by completing offers such as surveys, lead-generation programs, or
product purchases): Players accept virtual currency from advertising
sponsors in return for signing up for a product or filling out a form
• Multi-platform/device: Facebook, MySpace, iPhone, Twitter

14. How New is Virtual Currency?
• A concept that dates back over 80 years in U.S. market
• Related to loyalty programs, rewards and frequent flyer programs,
payment partners, opt in, permission marketing.
• Evolved from a relationship with consumer based purely on repeat
purchase to one based on reward for time, interactivity and word of
mouth.
• Rewards and conditions various online behaviors:
• Login, invite, purchase, inform, provide research, influence
• Social gaming has driven adoption
• Immediate reward system

15. Size of Virtual Goods Market
In the U.S., Virtual Goods Revenue Expected to Top $600 Million This Year
$2,460
$2,020
$1,550
$1,100
$620
$265
2008 2009 2010 2011 2012 2013

16. Size of Virtual Goods Market
Worldwide, Virtual Goods Revenue Expected to Reach $6 Billion by 2013
$6,000
$5,050
$4,070
$3,110
$2,220
$1,325
2008 2009 2010 2011 2012 2013

17. Virtual Currency
Examples

18. Rewards and Points
• The Mob Wars game
application on
Facebook allows users
to buy more items
(energy, health and
weapons) to enhance
the users gaming
experience
• Users are able to
acquire these points
through game play

19. Users can Purchase or Earn Points

20. Beyond casual games…
• On Crunchyroll.com, users can subscribe
to premium content by completing offers
from a platform such as Super Rewards
• In Be A Tycoon on MySpace, users build
virtual business empires

21. Offer is Targeted
• Offers award game points based
on the value of the CPA offer –
the higher the CPA, the more
points. Higher CPA offers
typically require credit card
payment/deposit
• Offers are ranked on an Effective
Earnings Per Impression (eCPM)
basis within each category (taking
into account CPA pricing, click
through rates and conversion
rates) and optimized on an
application and user level

22. Offer Example – Trial Subscription

23. Platform Extends to Mobile

24. Types of Offers

25. Engagement and Personalization
• Successful engagement optimizes the eco-system of consumer
experience, advertiser ROI, and publisher monetization/eCPM.
• Advertisers benefit deeply from a consumer who interacts.
• It's about the emotional connection. Game worlds are a strong
platform for this because they are environments in which the target
audience is already emotionally invested.

26. Conclusions
• More than 25% of US online users will participate in social gaming by mid
2010, twice the current level of participation. Gaming is the new knitting.
Desktop solitaire will be thought of as an old-fashioned board game.
• Online Rewards platforms will extend beyond gaming and pure points
achievement or purchases. Rewards systems will extend and capture
actions such as friend referrals, posts, and uploads. Influencers will
emerge and a class of Super Fans will be identified and marketed to.
• The virtual Currency model will extend beyond casual gaming and into all
forms of premium digital content (i.e. TV Shows, Newspapers)