In Digital Payments, Digital Freebies Matter

Virtual Piggy and American Express are trying to win the attention of gamers by offering them prizes in their favorite online games — but players only get the prizes if they change the way they pay.

Virtual Piggy is a youth e-commerce company that adds parental controls to online payments. After partnering with Sulake, which makes the popular Habbo Hotel online game, Virtual Piggy started offering digital rewards to gamers who sign up to use its system. The move resembles a promotion Amex tied to Zynga's popular Facebook game, Farmville, which rewarded players for signing up for Amex's digital Serve account.

When Habbo Hotel players open a Virtual Piggy account, they receive a “Golden Pig" item to display within the game. When gamers use a Virtual Piggy account to purchase the Captain’s Bundle, a $4.99 collection of in-game items, they’ll receive an exclusive “Piggy Flag.”

Though the campaign has run for less than a week in only two of the 150 countries that can access Habbo Hotel, Virtual Piggy has already received several thousand conversions, the company says.

These sort of digital freebies are common lures that video game sellers use to steer shoppers to their stores, but such offers are less common for payments companies, which typically provide discounts or cash incentives instead.

Habbo Hotel and Farmville are good test grounds for such digital perks because their emphasis on multiplayer interaction guarantees that the prize's owner will get to show off the exclusive item to other players.

“Habbo tends to be light on the game play and heavy on the communications; it’s a more social kind of game, not for hardcore gamers," says Billy Pidgeon, an independent market research analyst covering the international gaming sector.

Habbo Hotel’s user base is massive, Pidgeon says.

Its user base is also in need of more flexible spending options, says Jo Webber, founder and CEO of Virtual Piggy. More than 90% of Habbo Hotel users are between 13 and 18-years-old, she says.

“The teenagers are the most challenged group when it comes to online spending,” Webber says. “They don’t have credit cards and other payment methods have a lot of friction and can be very expensive for the game’s publisher.”

In addition to Virtual Piggy, Habbo supports a variety of payment methods including Visa and MasterCard payments, PayPal, placing charges on cell phone bills using Zong's technology, and the Ultimate Game Card sold by Visa Inc.'s PlaySpan. It also sells in-game currency loaded on plastic cards sold at Walmart, CVS and Rite Aid.

“Certainly nobody would want kids playing with a credit card hooked up to an online game,” Pidgeon says.

Amex, in addition to its Serve promotion with Zynga, is trying several other promotions to appeal to gamers. It recently launched rewards programs for the Xbox game Halo 4 and the online PC game League of Legends.

Amex provided statement credits to Halo 4 players  that linked a credit card to their account. Completing the game was a requirement for receiving the full amount, and this competitive approach to rewards wouldn’t necessarily work in Habbo Hotel, Pidgeon says.

Amex’s League of Legends promotion is instead tied to a prepaid product. Players who obtain and use the new prepaid card receive an in-game currency called Riot points, which is used to purchase in-game characters and costumes for the characters to wear.

Amex is using targeted campaigns to reach specific audiences that it expects will spend more money, whereas Virtual Piggy is targeting a global demographic with diverse spending behaviors, says Pidgeon.

Shortly after integrating with Habbo Hotel, Virtual Piggy began supporting payments for game vendor Marvelous USA. The company also handles payments for JumpStart, an educational game developer.

While convenience is the pitch behind most payment systems today, Apple Inc. received some bad publicity for making it too easy for kids to spend their parents' money in downloaded iPhone games. Apple has since changed its policy. It also has an allowance system to limit spending on iTunes accounts.

 Because parents must sign up for an online wallet account with Virtual Piggy before children can start purchasing, the company mitigates this risk. If a parent and child have set up an account, the child's purchases will be approved only if they meet criteria set by the parent.