Real-world rewards in mobile games: How developers could win

Virtual currency is one thing, but a number of startups are beginning to help developers offer physical goods as a way to boost engagement

Most people would probably call Playstudios a mobile game developer, but it's telling that CEO Andrew Pascal prefers "game-based loyalty platform" to describe what his firm provides.

Based in Burlingame, Calif., Pascal was among the speakers at a gaming event streamed live last month where he talked about how Playstudios is not only creating fun mobile experiences, but offering up physical prizes for being a part of the action. The company's MyVegas Slots, for example, recently partnered with MGM Resorts International so that if consumers play all the way through its social casino game, they can earn rewards to stay at resorts like MGM's Bellagio Hotel in Las Vegas.

MyVegas Slots offers rewards at hotels like MGM's Bellagio.

As they seek to increase and sustain engagement in an increasingly competitive market, firms like Playstudios are moving far beyond virtual currency or purely in-app perks to incent users. Real-world rewards, as they're called, are quickly becoming a way to keep gamers coming back to an app over and over again.

Particularly for those enjoying mobile gambling apps, Pascal said, "It's not only about playing great games but about advancing your status, where services and benefits are revealed to you."

Matching prizes and prices to the player
That doesn't mean it's easy. Pascal said developers who wade into real-world rewards need to make sure the prizes--whether it's a hotel stay or merely a Starbucks gift card--are appealing to users, priced appropriately, have the necessary restrictions to prevent fraud, and motivate behaviors that will provide value to the partners providing the rewards. "Getting all of that right is really complicated," he said.

This may explain why, rather than build their own tools to manage and monitor real-world rewards, as Playstudios has done, third-party companies are beginning to offer services that provide prizes and offers on a developer's behalf. Among them is P4RC (pronounced "park,"), a Los Angeles-based startup that claims it can increase the frequency and duration of gaming sessions by as much as 1,000 percent through real-world rewards.

Jason Seldon, P4RC's CEO, likens the idea of real-world rewards to the early days of arcade games, when kids could redeem coins or tickets dispensed after a game ended for food, stuffed animals or other merchandise.

"This is a tried and true method that's been used for many, many years," he said. "The difference is that we drive massive uplift in retention."

That's the same philosophy that led to a partnership in July between Zynga and Boston-based SessionM, whereby those playing Scramble With Friends can earn "mPoints" to receive iTunes and Amazon gift cards, as well as enter sweepstakes or contests run by SessionM. 

SessionM offers technology that rewards users with mPoints.

Scott Weller, SessionM's co-founder and CTO, said real-world rewards may be another sign mobile apps and games are becoming a more mature market like airlines and hotels, which have long offered user loyalty programs tied to physical prizes to keep customers happy. That doesn't mean that the same prizes will work for everyone, though. 

"For users of an app like Hotels Tonight or Uber, they're going to have a different complexion of users than Words With Friends. They're going to perceive rewards a certain way," he said. "You have to look at it on a verticalized basis and per-app basis. It has to be aligned with the longevity of the content or the app."

An iTunes gift card might not be as valuable to an Uber user, for instance, as tickets to a concert where they arrive by an Uber cab. Location may also be a factor: If a consumer frequently plays a mobile game at a coffee shop, a scannable bar code to get a latte or a muffin might keep them engaged longer. "Location in that case provides the context," Weller said.

User demographics for real-world prizes
Although it's still early days, demographic trends are emerging. Seldon said P4RC has noticed that among its app partner's users, 80 percent are over the age of 18 and 70 percent are men.

"That was a bit of a surprise, because we were expecting the audience to be skewed more female," he said. "What we found was it ended up skewing a lot more male. It's much better for the game developers in a way, because although we tend to see the more casual gamers being female, the money, on average, is spent by male players." Rewarding such users may mean they are more likely to spend on in-app purchases or respond to advertising.

Both virtual and real-world rewards will continue to have their place when it comes to motivating a user and feeling "awesome" about playing a mobile game, Weller said. In some cases, virtual rewards will be enough to motivate players to move to the next level. In other cases, a gift card or larger prize might make the difference.

"What can you be great at? Focus in on that and decide what the most important metric is for you for survival," he suggested. "Some developers are going to focus on in-app purchases, others on advertising." Once you've made that decision, the right choice of user reward will be clearer.

And don't worry: Experts in this area don't believe developers are going to have to continue upping the ante to get consumers into a mobile game or to play it through.

"I don't think you would need to inflate the value of the prizes themselves," said Seldon. "If you look at real world arcades, it's not like the prizes of arcades have gone up over the last 10 or 20 years. I see the same stuff now."