How to Introduce Virtual Currency into your Community the Right Way

Introducing a virtual economy to a social network or multiplayer game can completely change a community. Money has a major influence on behavior, and when added to any situation, people can behave in completely different ways — some for better and some for worse. A virtual currency can be used to not only make money, but to increase content quality, shape user behavior, and increase use retention and engagement.

Money allows you to put price tags on actions and virtual goods. It allows users to compare themselves to each other as well as make exchanges for services or goods.

In many cases, a virtual currency has no relationship to real world currencies, which means that the virtual currency has no intrinsic value on its own. The base value is defined by the people running the community, and as the community grows, a social and psychological value adds to the currency.

Be Careful and Start Subtle
Virtual currencies can be rolled out slowly as you watch behavior change. Some services choose to start with a subtle integration and slowly hook their currency into more aspects of their product.

In 2011, Q&A site Quora launched Credits, their own virtual currency, which was carefully crafted to improve the quality of content and the user experience. Quora Credits (note: link goes to a Quora search for “Quora Credits”) are awarded each time someone upvotes or follows your content and can be used to pay someone to answer a question.

The success of Quora’s virtual currency was due to the fact that Quora doesn’t push the Credits feature into users’ faces. You can actually use the core functions of Quora just fine without paying much attention to Credits, but they are sprinkled throughout the product in a way that acquaints users with the feature and their own balance. As people continue to use Quora, they begin to recognize the value of Credits and how they can be used to their advantage.

If users are constantly reminded about a currency, the perceived purpose of the community can change. Is a user’s balance always displayed on the interface or is it tucked away and only available when the user really needs it? Are users notified each time they receive more money? Determine how users feel about their balance and decide if the integration needs to be played down.

It’s important to consider the audience and how they will receive the idea of a currency being integrated into a product that they probably already enjoy as is. Especially when you’re dealing with a professional or mature audience, sometimes gamification elements can be seen as immature or irrelevant if not done right.

Impact on User Behavior and Content Quality
Reward positive actions with money — or even better — allow users to reward each other for positive actions. The desire for wealth can be used to sculpt user behavior by encouraging users to act in ways that are best for the community and the company. An interesting example of this is Reddit’s Karma points. Though Karma is more of a reputation system than a currency, it shares similar uses. Each time your comment or post is upvoted, you get a point. Each time they are down-voted, you lose a point. Karma has absolutely no value other than having the ability to compare your Karma with others. Even though Karma has no real value, it still has an impact in the community. It’s displayed on the top of every page while you’re logged in, and the community has given some importance to it in some social contexts. Because of this, there’s a subtle message in the community that users should try to gain more Karma and avoid losing it by leaving lame comments, harassing others, or spamming.

Submitting quality content that is well received by the community will give a user a lot of Karma — a small added bonus to the ego boost users get. If Reddit shifted the focus onto Karma a bit more, it might encourage more users to frequently share or create higher quality content, in an effort to acquire more Karma. However, in a vocal community like Reddit, the company would be walking a fine line. Putting too much emphasis on Karma might encourage users to behave in the exact opposite way, by creating fake content just for Karma, recycling content that was popular before, spamming content just to get upvotes, etc. This type of activity does already happen on Reddit, and users criticize others for doing it “just for the Karma.”

Always put yourself in the shoes of the user and consider how a currency will change their behavior. In many cases, such as the Reddit example, content quality can drop. Users will find the easiest ways to earn money, and abuse them to get rich. Consider what currently motivates users to create content, and then consider how it will change once there’s a price tag attached to those actions.

Relationship to Real World Currency
A user’s desire for wealth in a virtual community is contingent upon another important factor; are users able cash out for real world currency or goods?

Quora’s Credits are a closed currency, meaning there’s no way to purchase more of them and there’s no way to redeem them for real money or items. Opening the currency up and allowing people to withdraw their Credits for real money would have an adverse effect. It would encourage users to use Quora for the Credits rather than for the content. Users might begin to disregard the quality of the content they produce and just aim for getting Credits quickly.

Second Life, a virtual world where its currency plays an important role, allow users to cash out. This open loop currency drives content creation in the virtual world — some have even made livings off of Second Life. Content (avatars, clothing, furniture, buildings, landscapes, etc.) is an important aspect of the game, and it’s the ability to cash out your virtual earnings that really motivates people to create them.

Increasing User Retention and Engagement
When done right, gamification keeps users coming back. When money is involved — real or virtual — people can become hooked. Addicted users means increased engagement and activity, which can make the community really feel alive.

A virtual currency can be an added factor that keeps users coming back. When looking at user retention, consider how disposable a user’s account may feel. If a user has put little effort into the community, it’s much easier to leave. Users who feel as though they earned and accumulated value (such as currency) in a community can make it harder for them to leave.

Gamification is Powerful, but Dangerous
When gamification first became trendy a few years ago, companies started jumping on the bandwagon, and many of them were careless and didn’t fully understanding how to properly integrate gamification elements. “Let’s just throw in a few leaderboards, badges, and a virtual currency” some product designers said, not realizing that it could soon destroy their community. Are you clamoring to gain Google + badges or spending time collecting one of the many Zappos Badges? My guess is probably not.

They key to introducing virtual currencies and gamification is to proceed with caution. Like any online community, users get attached to the way things work and hate to see change. Adding in half-baked game elements can be a turnoff to users who are already happy with what they have.

Virtual currencies are a powerful tool, but can radically change a community. It’s all about implementation and the social and psychological value of the money. Some companies have done this really well, and because of it, the user experience, user engagement, and content quality have improved.