community behavior

Xiha Life (www.xihalife.com) is a multi-lingual social network enjoying 1M+ monthly unique visitors and expanding rapidly.

XIha has been making revenue by selling casual games from their website (amongst other models). Recently they slashed their game pricing;

http://en.xihalife.com/b/webmaster/blog/new-game-pricing/

..to half or less than half of what it used to be (from 20 EUR to 7-10 EUR)

www.arcticstartup.com wrote about it here:

http://www.arcticstartup.com/2009/02/06/xiha-life-drops-prices-to-attrac...

..saying that "If you look at pricing on a larger scale - it doesn’t make much sense to try and sell casual games at 20-30 dollars"

And Xiha's case would seem to prove this; since making the change the average revenue Xiha gets from this source has gone above the average. Which can only mean that lower prices actually broaden the "market" and more consumers than ever before are buying the products.

It is just about as classical pricing strategy dilemma as anything could be; figuring out your optimal volume versus your optimal price tag is rarely a cakewalk. Questions like; would you business need 10K transactions at 10 EUR each? or 100K transactions at 1.2 EUR each? are really hard to work out in practice.

Consumer Internet services and online communities however offer an ideal experimental ground in this regard; they either love what you are doing, or hate it. Sometimes the response is lukewarm and you can't tell. What ever the case there is usually an immediate reaction to everything you do; the results being instantly visible in your business and key metrics.

Ilja Laurs (http://www.mobileattitudes.org/) the CEO GetJar in our Slush panel (http://tane.li/2008/panel-slush) really stressed the importance of having good metrics and KPI's in place from the beginning when you are building your online business. Very much agree with that; figuring out your KPIs early and building a culture of daily check on them is important and can help you make smarter decisions in situations where the visibility otherwise is near zero (which it almost always is with Startups).

Way to go Xiha Life!

As many of you might know I have played World of Warcraft very actively for the past couple of years. WoW is one of the most popular and most successful online games ever, and is estimated to bring in over half a billion USD of pure profit every year. That's essentially the equivalent to a Hollywood multi billion dollar franchise, or a super blockbuster movie like Titanic or the Spiderman -movies.

I have played in a finnish guild called Sisu with a group of friends some of whom I knew before I joined them in WoW. Many guild members are prominent tech industry veterans, with a few CEOs in there as well. The group has been playing together for something close to 6 years now.

Sisu used to be among the top 200-300 guilds in Europe (out of about 115000 guilds), which is another way of saying that the guild is pretty good and badass ;) (currently due to some slacking the guild has dropped to rank number 662, according to www.WowJutsu.com)

WoW is only the latest in a long list of games I have played pretty intensely over the years. The first online game that started the "serious addiction action" for me was The Royal BatMUD, which has to be one of the oldest still very active games in teh interwebz. I started playing it back in 1993 and never really quit; in fact I'm online there right now.

In many ways playing these games and observing what goes on in them has helped me a lot with understanding the mechanics behind why and how online communities function and how large independent customer masses can be motivated to work towards a satisfying and commercially viable goal. These games often understand player/user psychology and motivational factors far better than many social websites ever do - and this is apparent from their design and mechanics. Unfortunately sometimes the stuff is so complex that in order to make good reflections and analysis on it you will have to actually play the game with high intensity yourself.

Some of the best academic studies about motivation/psychology in gaming are being made in Finland by the University of Tampere's hypermedia lab. Here's their research page. Another excellent source of academic stuff regarding this topic is HIIT, the Helsinki Institute for Information Tech. Their research is here.

One central thing that online games, World of Warcraft included, do particularly well is understanding the motivational factors every step of the way, and designing the end-user experience to really cover everything from first encounter with the game up to super-advanced level of having played everything there is to play of it. Many web 2.0 sites have massive learning experiences to go through if they ever hope to reach a level of "social design" as good as in online games.

Some summarized findings on what online games frequently use and do very well, and what web 2.0 sites should learn about:

1. Consumers have different motivational backgrounds to come and use your stuff. Some are there to just try it out. Some are there because a friend forced them to come and take a look. Some are there from a seemingly negative reason: egoistic perhaps. etc.

2. There cannot be any gaps in the experience of the consumer when he goes through all levels of usage and content in your site: if there are any significant gaps you will start to lose and "leak out" customers.

3. Social online environments are inductive and relativistic by nature: everything in the design/experience affects everything else in the design/experience. You cannot use traditional engineering -type processes to get this stuff right.

Here's one classic 4-field tool that might help you to figure out your web 2.0 service better in terms of consumer motivational factors:

(Original concept by me, visuals by Ego Beta)

Like in online games, also in web 2.0 sites, the consumers are often there with no strong motivation to do anything for you unless you impress them first. However the willingness and readiness of the consumer to spend either time or money on your thing varies.

A person who is there because of social pressure, may be very willing to spend some money on the thing right away, and immediately buy some acceptance of his friends through that. While a student who has little money to spare but plenty of free time might be willing to give up 20 hours / week for your service, but would not buy anything from you, at least not until he's so addicted and "into" the whole thing that the buying comes as a result of the classic thoughtprocess "I spend so much of my time here, so maybe I ought to buy something to make it a better experience for me".

Web 2.0 sites have tons to learn from online games, and one of the biggest learning experiences you can have is: designing your service in such a way that it can get consumers from all variations of motivational backgrounds included and "sucked in" to the system; eventually pushing them towards the "happy corner" of an advanced user who spends both; his time and his money in your service.

There are many more things you can extract from World of Warcraft into web 2.0 commercial systems design. This was meant as an introduction post about the topic, and perhaps IF I get some good comments I might revisit this theme and talk about the other stuff more specifically. Meanwhile I suggest you start playing WoW or some other game, and start learning this stuff out. It's an investment, and it can be quite valuable, if you are being smart about it ;-)

As an anecdote: Why do you think world-famous people like Joi Ito and Vin Diesel play WoW? Joi has his own guild of about 300-400 people (Joi is the Guild Master of a guild by the name of "We Know"), and Vin Diesel apparently plays the same class I'm most familiar with: the Shaman.

Over the years of being involved in the building of multiple Online Communities, Social Media sites and occasionally even online games, I have developed some understanding on how the motivational mechanics behind everything work. Here are 3 things I have found to be well-proven, meaningful and important in building long-lasting communities and active social structures online:

CC Attribution: rustman@Flickr

1) Inequality in Online Communities is a good thing.

Everyone cannot possibly be the same. Any active and long-lasting online community needs to have a structure that automatically creates inequality between its users.

Take World of Warcraft as an example;

* 10+ million people play the game worldwide
* about 4.6 million of them are organized in Raid Guilds
* there are 116682 Raid Guilds
* only 3.57% of them play in the "end game" level
* and only 0.30% of them have "completed the game" and all content in it.

That ends up being a tiny fraction of the original 10+ million players. The further you advance in World of Warcraft, the better gear you get. The more inequality there exists between your character and the newbie who just started playing the game.

Now if you were to give all the excellent end-game stuff to all newbies for free, without any achievement, what do you think that would do to the players motivation to play the game?

Social Networks, Online Communities, Social Media sites etc.. they follow the precise same pattern: there needs to be lots of stuff that sets people apart. Things only great achievement will get you, things that require spending money and time on the service, etc. Do not in any case give everything away for everyone for free = it automatically creates a situation where nothing is perceived as valuable and people don't want it then.

CC Attribution: gwen@Flickr

2) Forget traditional segmenting of customers entirely.

Traditional segmentation methods like putting people into neat little category boxes as in; "male, 25 years old, university education, lives in a big city".. that data means precisely dick and will not in any way correlate to the behavior of your consumer-customer. You will do yourself a favor if you abandon this ancient method of "boxing your customers".

What matters then? Things like: Values and Attitudes, Interests, Media Usage habits, Consumption habits.

The best stuff in a long while (possibly ever) published about this in a form of a study is the "Global Habbo Youth Survey 2008" that's been done by Sulake and sold here in their webstore. That's an excellent example of how to do it right - in a way that is meaningful and has strong correlation to the actual measured and perceived customer behavior.

CC Attribution: CaDs@Flickr

3) Negative motivators play a key role in Online Communities.

In this case "negative" is not actually negative, since it ends up benefiting your business, it's just seemingly negative. What are negative motivators? They are seemingly negative things that motivate people to spend time and money in your service. Things like: ego-stroking, drive to compete strongly, flaming, pissing somebody off, kicking somebody's virtual buttocks, revenge, people trying to be smarter than someone else, people wanting to show off, people gossiping, acting tough, etc.

This behavior is the norm in online games, and I claim that it is an essential part of every online community out there. Why do you think some open source programmers publish beautiful amazing code? There reason may very well be ego-stroking. Why do you think people in www.irc.fi buy their pictures to the front pages for a few minutes at a time with 3 euros per pop? They want to show off and be famous. Why do you think people endlessly edit Wikipedia? they want to win somebody else in competition and be smarter etc. Why do you think people put "Am I HOT?" -typeof apps to their profiles in Facebook? They are motivated by ego-stroking and possibly by trying to be prettier than the next lass.

Seemingly negative motivators are the other side of the "sunny and happy" coin that is more commonly known. Communities do not exists only to help out your fellow community members, or for "crap" like peace and unity. They exists as a part of life, including the negative aspects of it. Only the really strong and active communities can grasp this well and utilize it to their benefit. The result is an intense user experience that feels more like life than some superficial online service, and will get your customers engaged and paying money etc. IRC-Galleria is a prime example of this; activity is at the highest level of any known online social networking / social media site in the world. IG's 502 thousand active users generate up to 4 billion full page loads per month and nearly 90% of them log in every day. The VIP users (who are a very significant % of the userbase) use the service so much that their monthly usage hours start to surpass TV in many cases. All this at least partially comes from encouraging and allowing seemingly negative motivators to fuel the process - it has to be life, all aspects of it, before it can be holistic and truly engaging for users as an experience.