multi-level marketing meets monetization

Multi-Level Marketing + Monetization Makes Me Nervous

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We’re replacing a 22-year-old air conditioning system today, and the salesman did a fine job of reassuring us and explaining our options. When he learned I was a game designer, he also told me to check out something new and interesting: a multi-level marketing sports game from an outfit called United Games.

The website is a bit mysterious. United Games seems content to describe itself as an emerging giant, and “giant of what?” has no obvious answer. The color scheme and bristly football player don’t say much more than “Sportsball!” and “Manly Men here!”

Check out the “United Games” team and you get a bit more insight. The CEO is Jeff Henderson, a former executive at Nu Skin. Nu Skin is a multi-level marketing company that sells personal care and nutritional productions around the world. As multi-level marketing companies go, they seem innocuous. They’ve had their share of run-ins with the law over the last twenty years, but they don’t radiate the same level of “scamming the poor and foolish” vibe that outfits like Herbalife reek of.

Henderson’s resume tells you where the wind is blowing. But the link my salesman friend gave me explained a lot more. United Games is very quietly testing out a game that can be played in sports bars with virtual currency. The link didn’t tell me much about the game itself, but it worked hard on selling me to join up as an “affiliate”, paying a $40 signup fee and $10 per month for virtual currency and the right to earn money from the players and affiliates I recruit.

“Yikes,” I thought, as I backed away slowly.  “Mark Pincus would have loved this one.

When Multi-Level Marketing Harry Met Monetization Sally

I find multi-level marketing companies fascinating. On the face of it, they’re good economics stuck in reverse, adding inefficiency and cost by adding layers of middlemen between the producer and the end customer. Why this works only makes sense when you realize that MLM companies, the product sold is a byproduct of the real business, which is to create a guaranteed stream of income from would-be distributors buying product that will mostly sit in their garages. It’s a triumph of hopes and dreams over business sense.

But the biggest thing hobbling multi-level marketing companies has been the legal necessity of delivering some kind of product. The product is the fig leaf that protects the MLM company from the claims that it exists just to fleece its distributors, and fig leaves can be expensive. You have to make them, store them, ship them — even with cheap ingredients and grossly inflated prices, the overhead adds up.

Virtual goods solve that problem. A bag of virtual currency weighs nothing, takes up no space, and has a marginal cost of essentially zero. You get all the free legal figleaf you need.

Combine virtual currency with multi-level marketing and you have a fabulously efficient way to keep your marks / sales partners on the hook. You can give them as much as product as it takes to keep them happy, not suing, and signed up for future purchases.

Best of all, games that sell virtual currency already have a natural target audience for multi-level marketing — the “whales” that are already buying large amounts of currency and in many cases providing the bulk of the game’s support.

Savvy free-to-play game makers always treat their whales well — it’s worth it! — but United Games is taking it a step further. In addition to giving the whales lots of (free to give) product, they’re providing a cash incentive to recruit and encourage more potential whales. It’s a fantastic strategy for both retention and virality.

United Games has weapon-ized the whale player. And I don’t know whether to call the cops or my (entirely fictional and metaphorical) stockbroker.

Should We Cue Up Some Outrage?

On some levels, this is just a paid product demo team. Those have been around for a long time, at least in non-digital entertainment. And social games have been relying on users to spread the word for them since the days of watering crops and lonely animals. There’s probably nothing a United Games affiliate can do that some annoying Farmville player hasn’t done already. And I’ve always subscribed to the belief that the typical entertainment consumer is an adult and can judge whether she’s getting enough value from the dollars she’s spending.

But there’s still some potential for this to blow up in our faces. Throwing away money on virtual coins for entertainment is one thing; throwing it away in the hope of making Big Money On The Internet seems more like problem gambling than play. As a designer, that makes me nervous.

I don’t want to be in the room the day some head of product management tells the design team it’s going to fast follow United Games’ lucrative revenue model. And after seeing companies like Zynga from the inside, I certainly don’t trust them to make ethical decisions on their own. So the cynical side of me suspects that — whether it succeeds or fails — United Games is likely to cause a nasty storm in the game industry.

 

 

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