Playfish’s recent acquisition by Electronic Arts is great news for the company itself (it was purchased for up to $400 million in cash, stock and earnouts), but also for the social gaming industry as a whole. Playfish is the most respected social games company — every developer we talked to brings up their user experience as the benchmark. With this acquisition, one can imagine a whole new set of possibilities for both companies.

It “validates the social gaming business model overall,” said Playfish COO Sebastien de Halleux in a PaidContent interview.

What’s important to remember here is why Playfish — a company just two years old — was worth so much to EA. Playfish set the bar high with games like Pet Society, Restaurant City, Country Story and Who Has the Biggest Brain?.

These titles are noteworthy because of their quality. Their popularity alone can attest to that; instead of the standard array of promotional techniques used by many social gaming companies, Playfish relies primarily on word of mouth. Its games are successful because the company pays attention to the qualitative feedback (both solicited and otherwise) it receives from players. It tracks gamers’ tendencies to see what works and what doesn’t.

Most of all, it cares more about delivering an authentic user experience than it does the bottom line, and people flock to that mentality. (Look no farther any of the large number of companies that fail to make such a clear distinction; chances are, they’re not nearly as successful.)

The reason for this is simple: When it comes to social games, people are buying an experience. Whenever they spend real money on virtual goods for games, it’s to enhance their experience with those games. Playfish prioritizes that experience, and it shows.

Eric Ries hit it on the head when he wrote on his blog that everyone — not just social gamers — buys virtual goods. His real-world examples include $200 designer jeans that sell for four times the amount of a comparable pair without the label. It’s the experience of buying and wearing the jeans — the feeling one gets from the process of owning them — behind the bulk of the purchase price.

Successful companies are able to promote that feeling, especially when it comes to social gaming. As Playfish just proved, giving users an authentic, differentiated experience that they feel good about isn’t just integral to the bottom line — it is the bottom line.

Congratulations to the Playfish team for their success!

Once upon a time, this country ran on an agrarian economy – people grew, raised and mined things, then sold them. That gave way to an industrial economy, in which manufactured goods dominated. Over the last half-century we’ve had a service-based economy, hinging on the personalization of products.

Now, though, we’ve shifted again – or so says Joseph Pine in his book, “The Experience Economy.”

As the title suggests, Pine says that what people want now is experiences – moments that surround them and make them feel good. It’s why people go to Disneyland or Las Vegas for staged experiences, or online for experiences of a different type. People are essentially buying time, plus the feeling that a place or a company can give them during that time.

Take coffee, said Pine during his talk at the TED conference in Los Angeles in early 2009. Beans can be purchased for pennies; slightly more if someone goes through the effort of roasting them for you. Places like the corner diner that brew it can raise the price to a dollar or so per cup.

So how can a place like Starbucks get away with $4 lattes?

It’s because they’re giving you an experience every time you walk in the door. You get the decor and the clientele — whatever it is that makes it a uniquely Starbucks experience.

This is the driving force behind social gaming. Outsiders express disbelief when they hear about people spending real money for virtual goods and services (a gun in Mafia Wars, a tractor in Barn Buddy), but they don’t realize is that it’s not the goods themselves that people covet, it’s the experience that those goods will help them have online. The goods – and the virtual currency with which they buy them – merely enable that experience, that entertainment.

These same outsiders call these games escapism, and maybe they are – but they’re still authentic experiences. Gamers sign up for specific reasons; either their conditions are met or they move on to a different game.

And authenticity, Pine told the TED audience, “is becoming the new consumer sensibility – the buying criteria by which consumers are choosing who they are going to buy from, and what they’re going to buy.”

It only makes sense: The more authentic the experience – in the case of social gaming, the more immersion a game can provide – the more likely that people with stick with it, and subsequently spend money there. This experience is foremost the core element to building your virtual economy.

Social Gold helps you convey an authentic social-gaming experience, by keeping players within your game’s parameters to complete transactions (such as purchasing virtual currency for that online gun or tractor) instead of sending them into a new window, which brings them entirely out of the experience they’re seeking, then forcing them to re-load their game upon returning.

It’s a mechanism for users to plug in real money, bringing in revenue for you. And when it comes to real money, you must ensure that you make the user’s transactional experience as smooth and quick as possible. This is where Social Gold can help – enabling you to bring money in, securely, safely and with ease, all within the game experience.

After all, whether it’s developers or gamers, we’re in this business to help people get the kind of experience they’re looking for.

Hot off the press, here is the presentation I gave at the Virtual Goods Summit today.

Have you signed up for Social Gold in-game payments yet? Now you can let your users pay within your flash game — keeping them engaged!

John is playing Barn Buddy on Facebook, but doesn’t have enough currency to buy the guard dog he so desperately wants. To purchase more virtual coins he has to leave the Flash application for an HTML form or Javascript pop-up, and, while away from the game, gets distracted and doesn’t return.

Jenny is playing Uno when she runs out of coins to buy kudos, gifts and gags for her online friends. In order to refresh her account she also has to refresh the game, losing her hand.

So far, these have been unavoidable consequences of doing real business in the middle of Flash-based games; it’s not uncommon to see up to 15 percent abandonment with each additional page in the transaction flow. This translates into less engagement and fewer payments.

Social Gold is changing that with the launch of the first ever secure in-flash payments solution.

For the first time, users of Flash-based games can now update their accounts without leaving the game for a separate payments page; finishing a purchase drops them exactly where they left off, with no reloading necessary.

Even more pertinent is the fact that in the exploding landscape of social-gaming development, Social Gold for Flash allows players to keep their financial information with a single, trustworthy source, rather than handing it over repeatedly, every time they want to try a new platform. Our patent-pending technology ensures that sensitive data is kept securely away from other in-flash code, so that neither the game itself nor any third-party code or servers has access to the keystrokes or data in any form fields. Even the developers’ credentials are protected against malicious use.

Here’s how it works: After setting up a virtual currency account at Jambool, you can download and link-in a small library (SWC) into your application. To register a transaction, you tell the library to open a “buy currency” interface within the game’s Flash application. Social Gold for Flash then securely collects and verifies the user’s credit card credentials and authorizes the transaction, keeping every detail except for the ultimate approval out of your hands, and you can then update the player’s in-game balance. The entire time in this flow, the user stays engaged within your flash game.

“We obsess over user engagement, and traditional monetization solutions kill engagement,“ said Markus Weichselbaum, CEO of TheBroth and creator of Barn Buddy, which boasts 7 million monthly active users. “Social Gold for Flash works great for us, keeping our users engaged while helping to drive increased revenue.”

Social Gold was the first product to provide in-game payment experience for non-flash applications, and with this release we’ve made it possible for users to do secure in-game transactions in flash games too.

Increase your conversion by providing your users with a truly seamless payments experience! The integration is easy; sign up here.

Social Gold will be at the Virtual Goods Summit in San Francisco this week. Those who attended last year — or those who attended last June’s Social Gaming Summit by the same organizers — know that this is one of the more exciting conferences catering to the virtual goods community.

If you haven’t registered yet, you should — and you can use the “SOCIALGOLD” discount code to get 15% off registration.

Come hear us talk about “How to launch your virtual currency” on the first day of the conference, also known as the Virtual Goods Summit University. Drop by and say hello — and we may even have a surprise gift for you.

We are excited to announce a new, self-serve feature that allows developers to create a customized look and feel for their in-game payments experience. Think of it as a way of creating customized skins on the fly that match and blend with the colors of your game. This, in turn, helps to extend your brand and to increase user engagement and conversion rate.

So, how does it work? Simple. All you do is share the hex code of your game’s primary highlight color, and we do the rest. We generate a color palette and gradient that matches and blends with your game’s look and feel, and you are ready to go.

Here is how you instantly customize the payments flow for your in-game payment.

Log into your Social Gold account to configure your in-game payments offer.

Edit your Account Settings

Choose the integration (offer) you want to edit (or create a new one). Next, go down to the advanced settings. Go to the customize highlight section and add the hex code of your game and hit enter. Hint: You can always change the hex color if you are not satisfied with your original choice.

Edit your integration settings

Set up the Primary Highlight Color

Save, and voilà! You have a a new, customized skin that matches and blends with the look and feel of your online game.

Colors to match your game

The new, customized in-game payment window appears in the context of your website/online game and blends in with the flow of the game. As much as we love our color schemes, they can sometimes appear jarring to the user playing your game, especially as they are about to open their wallets and send you money.

Why would you want to customize the in-game payments experience? There are three simple reasons. First, you can now control the look and feel of your website. Second, you can improve your conversion rate. Our initial tests have shown an improvement of around 10% across several applications. Third and most importantly, by deploying a natural, blended looking in-game payments experience, you provide your users with a natural way to pay without interrupting the flow of their game. The payment window appears in the context of the game and blends in with the flow of the game. This ensures that the user stays engaged in the game.

So, go ahead and give it a spin. Take control of your game and effectively increase user engagement, increase conversion rate, increase your revenue, and most importantly extend your brand. Skin your Social Gold in-game payments flow now!

Don’t forget to let us know what you think and ping us. We want to hear from you.

We didn’t intend to take such a long break, but you know how it is sometimes when you get great feedback from your user community and get busy working on those suggestions. That is what happened to us. We listened to you and got a bunch of really, really good suggestions and started working on them and hence the long bout of silence from our end.

Watch this space and in the next few hours we will make the first of our announcements for our developer community. We promise you that you will love this cool, new feature — and many more to follow — that will help increase your user engagement.

Stay tuned.

There are moments at every startup when the vista suddenly expands before you. Today is one of those for Jambool. We’re announcing a $5 million financing round that will accelerate growth of our virtual currency platform, Social Gold.

The timing couldn’t be better, as the virtual goods space has exploded to become the de-facto monetization strategy for social games and applications. So, more developers are going to need to create currencies and accept payments seamlessly within their applications. Social Gold is poised to provide the solutions that these companies need to take advantage of this market opportunity.

Our startup journey: it’s all about the team
It’s been a long and winding road since Reza and I started Jambool more than 2 years ago. Although we were incredibly naïve about life as a bootstrapped startup, we never compromised on assembling a top-notch team or building a superior product, which allowed us to weather more than our share of rough patches. Today’s announcement is a reflection of what you can achieve with a dedicated and incredibly-talented team.

The original idea for a startup is rarely the one that sticks, and Jambool is no different. We started as a destination site for collaborating with friends on travel itineraries. And when Facebook opened its platform in 2007, we shifted our focus to social applications, generally. We had some initial flops before finally gaining traction with a virtual gifting application called Send Good Karma, which still boasts nearly 400,000 monthly active users.

An idea is born: it should be easier to get paid
By early 2008, we had several popular applications, all of which incorporated some form of virtual currency. We started spending more and more time analyzing the “micro economy” within each app. We tinkered a lot with ways to bring money into an app without breaking the flow for users, and we couldn’t find an existing solution that met our needs. The more time we spent on it, the more we realized how critical an in-app payments experience is.

We also realized that building a sustainable virtual economy at scale requires deep analytic insights. But, unlike traditional ecommerce or even online advertising, there were no analytic tools available for virtual goods. So, payments and analytics represented pain points for us as app developers. This realization quickly led us to the next step in the evolution of our company.

Social Gold: building a virtual currency and payments platform
We decided to refocus Jambool on virtual currency, payments and analytics, so we began to assemble a dream team to tackle these issues. During our time at Amazon, Reza and I worked with a handful of dynamic, high-performing engineers, most of whom were successful entrepreneurs in their own right. We wanted to get the band back together, and we found that the opportunity to build the next great platform for social networks made it pretty easy to recruit. In October of last year, Social Gold was born.

Social Gold is a turnkey solution that manages all aspects of a virtual economy and, by extension, frees up developers to focus on the more creative (and fun) aspects of app development. Specifically, Social Gold enables developers to

* create and manage their own white-labeled virtual currency
* provide an unparalleled, in-app payments experience to their users, and
* optimize their virtual economy using robust analytics

Some of the largest social games and applications use Social Gold, but our easy-to-integrate APIs allow even the smallest applications to launch a virtual economy in a matter of hours. We have, by far, the most seamless in-app payments experience, especially for returning users. We also provide the most detailed and insightful analytics to developers for their virtual economies.

Growing through collaboration
We are very proud of what we’ve been able to accomplish over the last 10 months, and we are even more excited about the road ahead. A recent eMarketer study estimates that virtual goods will become a $1 billion business in the US in 2010 (and $2.5B in 2013). We’ll be right there collaborating with any developer, publisher or platform that considers virtual goods as a key component to its go-forward strategy.

-Vikas

The Valley is small, and the Web 2.0 community can feel even smaller.  Sometimes it’s easy to forget that there are people in the Bay Area who don’t work in technology and, as a result, don’t follow emerging trends as closely as I do.

Trends like virtual currency are a growing – and incredibly lucrative – element of social networks like Facebook and MySpace.  But that doesn’t mean that virtual currency is well understood outside the confines of Silicon Valley.

I was reminded of this fact at a picnic over the holiday weekend, where a close friend asked, “Tell me again exactly what your company does.”

It’s a question that I’ve heard time and time again, since joining Social Gold back in March.  I often respond by asking, “Do you have kids?”

Luckily, this particular friend has a young son who is potty training.  Children that age do not understand the value of money, but they understand incentives.  When my son was that age, my wife and I tracked his potty successes – and accidents – with the help of a chart, where successes were marked with a star.  After he earned enough stars, we rewarded him with a small toy or a treat.  In other words, children understand the value of virtual currency long before they understand the more abstract value of a dollar.

My son, Cooper, is almost 5 now, and we still use stars as currency.  Most recently, my wife created a chart in anticipation of the Memorial Day release of the latest Pixar film, “UP.”  Cooper loves Pixar movies and eagerly earned stars by listening well, using good manners, and not running or climbing in the house.  He understood the star as a tangible instrument of value, where 100 stars earned him one ticket to “UP.”  To Cooper, stars just make more sense than dollars.

So much for virtual currency.  But what about virtual goods?  That’s actually pretty easy to explain:  virtual goods = entertainment.  Just as Cooper redeemed his stars for a ticket to “UP,” people redeem virtual currency for enhanced experiences or advanced play in social games and applications, all in the pursuit of entertainment.  It’s really no different than entering a physical arcade and pouring quarters into your favorite video game.

There are basically 3 types of virtual goods:

Gifts. Giving gifts is an inherently social activity, which lends itself well to social applications on Facebook.  I recently celebrated a birthday and received real gifts and snail-mail cards from the usual suspects – mostly older relatives.  My friends on Facebook, however, posted well wishes on my wall with a host of virtual gifts, ranging from beers to baseballs (side note: I am a huge baseball fan).  And these virtual baseballs add up quickly.  Even the lightly-promoted Facebook Gift Shop drives, depending on your source, between $50-150M in annual revenue for the company.

Decorative Goods. Most often found in applications where your virtual persona, avatar, pet, etc. is the focus, decorative goods allow you to express your own personal tastes much as you would in the physical world.  The possibilities are limited only by your imagination, although hairstyles, clothes, accessories and room decorations are among the most popular decorative goods.  In fact, as the U.S. economy has forced many to forego buying that new pair of designer jeans, the virtual world presents a low-cost alternative for self expression.

Sebastien de Halleux, co-founder and COO of social game company Playfish, provided perhaps the best example I’ve heard at last month’s Social Gaming Summit.  De Halleux reported that, within its wildly-popular Pet Society application, Playfish sold 20 million virtual Christmas trees last holiday season at a value of $2 each.  He went on to explain the users’ rationale for investing in a virtual tree: “Previously, Christmas trees, we’d put in our flats and it’d be something to share,” explained de Halleux.  Now, “we’ve become disconnected, and maybe three or four friends would see the real Christmas tree – on Facebook, all of their friends would see it.”

Functional Goods. As the name suggests, functional goods provide enhanced functionality within an application.  If you’ve ever played poker on either Facebook or MySpace, you’ve likely purchased a functional good:  poker chips.  More often, an application offers a base level of play but allows users to “level up” – to advance more quickly – by purchasing functional goods.  So, in one of the many mafia-related role-playing applications, you can try to advance from street thug to mafia don using only a baseball bat, or you can purchase an arsenal of mercenaries and weapons to accelerate your ascent up the ranks.

Once I explain virtual currency and virtual goods in those terms, whether it’s at a Fourth of July picnic or a cocktail party, I can usually sit back and watch the “aha!” moment as people suddenly understand what we do.  Then, it’s just a matter of warding off the investment/ employment requests.

-Mike

P.S. For the uninitiated, Social Gold is a platform that – among other things – enables developers to sell virtual goods to users within social games and applications.  If you’d like to learn more, feel free to contact me directly at mike [at] jambool [dot] com.

We presented our virtual economy analytics as a part of the Facebook garage on Analytics. Here are the slides.

You can also browse them on Slideshare.

In brief: Social Gold platform can help create vibrant virtual economies, in large part due to the detailed, insightful and actionable analytics. Specifically, you can get insights into inflation, determine whether to increase prices (or if the market in your economy is automatically increasing the prices), figure out the right pricing of your virtual goods, and most importantly decipher the items that drive your revenue.

We are always looking for comments, suggestions, feedback — email us at business -at- jambool.com.