The psychology secret to Zynga’s success (now valued at $10 Billion!)

SCap_ 2011-02-23_42OK, so Facebook game maker Zynga is raising additional money at a $10 BILLION valuation. One would hope that that’s enough to make anyone’s ears prick up…

So how did they get here: By understanding something about human psychology, and then HACKING it for all its worth.

1) Addict people with SIMPLE, low learning-curve games, that 2) are social in the way you might have played certain board games in real life in the past, and that 3) have Irregular Reward Schedules (these are the most addicting forms of behavioral reinforcers, read up on your Behaviorism 101…).

THEN, 4) offer them little ways to essentially cheat in the games (making things go more smoothlyfor you), that 5) can be purchased for amounts that fall within the Impulse Purchase threshold, i.e. below the price level where your conscious mind kicks in fully and begins to wonder whether this is really a good idea, asf.

Read the following quote at least 3 times to yourself: “Zynga makes all its money selling virtual goods…Tiny amounts of money make the games progress faster.” (From Business Insider.) If you get it, you’ll know that tons of companies have been neglecting/violating the lessons therein to their considerable detriment.

I just argued yesterday that Sony is making a huge mistake by not going the $1/month route for complete/unlimited streaming music access with their new offering:

Another example that I saw just yesterday: Clever Twitter service “Buffer” ( @bufferapp ), which allows you to in essence do a bit.ly-like bookmarklet share to Twitter WITH automatic posting throttling/buffering built-in, so that your tweets are dripped out over time even though you can batch collect them all at once over, say, your morning blog reading hour:

All great, except that they are mispricing their premium levels very badly: 10 tweets in buffer, 3 tweets a day is Free. $5/month for 50 tweets in buffer, 10 tweets/day dripped, and $30/month (crazy…!?) for all unlimited is simply not going to work for them IMO. [See: http://www.bufferapp.com/pricing ]

$5/month is outside of impulse purchase range, while $1/month = Bingo! Sold! At $5, your mind is beginning to ask: Do I really need this? Is it worth it? Can I justify it directly via increased ROI? Where/how am I even going to measure this ROI?

All questions that you DON’T WANT your prospective customer asking at the entry point!! Which is exactly what Zynga has realized so brilliantly, and to such obvious success. The proof of the (psych) pudding is still in the eating… Zynga: “Would you like to improve your position in this game you are already playing for 10 cents?” – Unconscious Mind: “You bet I would.”

Which brings me to another of my pet points about successful online advertising/selling: Offer people only things which make sense in the context of what they were ALREADY doing. In this case, don’t try to offer them after shave, bracelets, or cars while they are playing Farmville, offer them something to do with Farmville!

Disclosure: I don’t play Farmville or CityVille, and have never tossed sheep or vampires at my Facebook friends. I do however study these phenomena very closely… :)

UPDATE: Google Changes Game For YouTube Monetization – Opportunities And Pitfalls

As I reported yesterday, Google may have just changed the game re: monetization of its massively used (but so far barely profitable) YouTube video sharing service. Get the details on how it looks here.

But what makes Google’s new "sponsored videos" feature on YouTube even more relevant is today’s news that YouTube searches now represent the second largest search engine in the world according to ComScore, ahead of both Yahoo and Microsoft’s MSN/Live! So there should be ample room for YouTube to generate profits for advertisers and in turn for itself (Silicon Alley Insider estimates that it could add $1B to Google’s bottom line).

However, as I began to lay out yesterday, there are a number of caveats that need to be kept in mind by the internet marketer looking to take advantage of this opportunity:

1) Marketing within Social Media (vs. search ads PPC) is generally tricky due to a deeply rooted differentiation by most people between social and business contexts: People don’t like them mixed, and can react very negatively if they are (read Dan Ariely’s excellent "Predictably Irrational", chapter 4 "The Cost of Social Norms").

2) So if you are going to market in any social context, you need to get the tone and the context just right, else you are not only wasting your ads, you are likely hurting your brand. The backlash may also be much stronger than in other situations, because you will be dealing with a perceived violation of social trust.

Whatever initial offer you make needs to still fit into the "friends" context somehow, or else be so targeted that the prospect truly sees your offer as a form of "friendly service", e.g. if you are offering something that would help with a social task they are about to undertake, like offering flowers at a special price if someone is surmised to be going on a date, etc. (judging from e.g. a Facebook "action" of theirs).

3) While YouTube is overtly the least directly social (compared to say Facebook, etc.) and instead more entertainment oriented, the social aspect of sending/receiving video clip links to/from your friends is still clearly there. So to stay in tune with the viewer/prospect, you still need to get the CONTEXT just right:

If the search keyword (or individual video for that matter) is an entertainment vehicle first-and-foremost, then offer them more (hopefully related) ENTERTAINMENT products, NOT shoes or cars or deodorant. This goes for pre- or post-roll ads as well by the way, which prospects tend to gladly view IF they have something to do with the actual video content requested.

With more educational keywords/videos, there may be more latitude to offer things, though they still need to be related and represent a LOGICAL follow-up, else your sponsored video will get largely ignored/filtered out by the prospect just like most other ads (even though, as I said yesterday, Google appears to be embedding the ads very discretely, so that they don’t scream "ad" vis-a-vis the other video content).

So the formula would be, create videos that are highly relevant to your keywords, while also being disruptive enough to get attention.

Google Changed The Game For YouTube Monetization Today

In my view, Google just changed the game today regarding monetization of its massively used (but so far barely profitable) YouTube video sharing service. Get the details on what it will look like in this CNET article about it here.

In a word, Google is starting a new "sponsored videos" feature on YouTube that will follow their well proven keyword/Pay-per-click (PPC) model, only now with videos instead of the familiar (and mostly ignored) Adsense text ads. This should be a great opportunity for those internet marketers already further along with their video efforts.

It should be pretty cheap to bid on the YouTube keywords at first, due to limited competition on them (the barrier to reasonably well-produced, well-converting video is still high, a lot higher at least than for text/image websites), and the click-through rates should be high because the videos blend right in as just more video content.

Note that the appearance of the still screen shot shown for the video before play will be crucial to attracting extra attention (like a well-done display ad). But in principle, nothing about this form of "ad" will make it so that YouTube viewers will mentally block them out – which usually happens even unconsciously after a short while, because the "ads" are, well, videos, the same thing that the user was looking for in the first place.

But if done right, it can be the equivalent of an advertorial, a marketers dream…

An important caveat applies here: You want to be sure to get the context right, i.e. deliver a video that will be perceived as relevant, or even value-added to the user’s keyword search. Else you will garner exponentially negative brand equity, as users will feel betrayed.

Again, I’d say Google just changed the game today as far as their ability to monetize YouTube is concerned (which was pretty poor so far), but it also should be a great avenue for internet marketers: Instead of wasting time trying to manipulate the YouTube view rankings, or having to "viralize" the videos some other way with a high failure rate (although if you can have that built in, the effect after the initial sponsored promo phase could be multiplied!), you just buy the "in".

Of course, you’ll still have to know what you are doing in terms of direct response marketing to get prospects to convert from the video, and make the numbers work reliably for you.