Badgeville's Radical Idea: Tell Customers What You Want Them To Do

12/15/11Follow @wroush

For about six months now, I’ve been trying to get Kris Duggan to change the name of his company. To me, “Badgeville” manages to be both faddish and inaccurate: it tries to snag a little of Zynga’s (fading) Farmville glory, while also suggesting that the Menlo Park startup’s business is all about gamification and virtual badges, à la Foursquare—which it’s not, as the CEO is the first to emphasize.

Alas, it looks like Duggan has dug in about the name. “I’ve gone back and forth, but my current outlook is that we are going to be 100 percent married to it,” he told me this week. “If you were the first person to see the name ‘Batman’ you would think that was a little weird too, but once you hear it, it’s kind of cool.”

So I guess I don’t have a future as a startup name consultant. But I’ve enjoyed getting to know Duggan and the company, which appeared out of nowhere (Duggan co-founded it just 14 months ago, in September 2010) to become one of the leading providers of technology for enhancing Web-based communities with loyalty, ranking, and reputation systems. That includes both customer communities and employee communities: fitness company The Active Network, for example, uses Badgeville’s widgets to let users log workouts and share achievements with their friends, while one large enterprise with 100,000 employees (Duggan can’t say which one) uses Badgeville to recognize workers for completing social media training programs.

Kris Duggan

In that big-company example, the recognition actually does come in the form of a virtual badge, which shows up alongside an employee’s name in the corporation’s online directory. But the badge is just a symbol, Duggan says—the startup’s technology is really all about motivating behavior. “We track the behaviors you want to reward, give users credit, and surface that reputation or status wherever you want,” he says.

Badgeville is one of a group of young companies staking out a new space that goes by names like gamification, behavior modification, and social commerce. Competitors include BigDoor, Bunchball, Gamify, Gigya, and Seriosity (proving that Badgeville isn’t alone in having a silly name). But one of the things that makes Badgeville unusual in this group is that it offers a broad platform of services, including a game engine that supports missions and rewards, customizable widgets, analytics software, and a Facebook-like “social fabric” complete with activity streams and friend notifications. The company’s philosophy is that almost any online operation, be it a big enterprise or a consumer-facing retail, education, publishing, or entertainment site, can benefit by putting known motivational techniques to use.

In Badgeville’s world, that means identifying the behaviors an organization wants to encourage among customers or employees; devising rewards and incentives that play on the basic human need for recognition; analyzing how the rewards are working; and continuously tweaking the program maximize the wanted behaviors. When the test prep site Beat the GMAT added Badgeville badges like “Thought Leader,’ “Strategy Guru,” and “Problem Solver” to its site, for example, it motivated some users to spend up to 8 hours a day on a giant crowdsourced project to tag and organize the site’s 70,000 pages of content. Duggan calls the whole incentivization process “behavior lifecycle management.” “It’s a closed loop,” he explains. “You influence and measure and influence and measure again.”

Another thing that makes Badgeville unusual is the torrid pace of its growth. It’s already got 100 customers, including big names like Samsung, Deloitte, CA, and Rogers Communications, Canada’s largest wireless carrier. It has 50 employees—twice as many as when I first visited the company in May—and has raised $15 million in venture funding, which is probably more than all of its competitors put together (except for Bunchball, which has raised $17.5 million). Duggan says Badgeville will collect “somewhere between $5 million and $10 million” in revenue in 2011, and twice that in 2012.

You can chalk up a lot of that growth to plain old economic pressures: companies are looking for ways to keep their existing customers engaged, because that’s usually a lot cheaper than recruiting new ones. “I asked Kris how he was adding customers so quickly, and he said, ‘We’re good at sales, but we’re not that good—it’s the market,’” recounts Tom Peterson, a partner at El Dorado Ventures, one of the four venture firms backing Badgeville. “Everyone is in search of revenue, and how you make your site grow and how you get users more engaged are topics that, especially in a recessionary period, are pretty critical. That’s why this is a market that’s really on fire.”

Badgeville’s origins, like those of so many other Silicon Valley startups these days, go back to Google—specifically, to Duggan’s dissatisfaction with Google Analytics, the free Web traffic analysis tool. The story goes like this. Duggan was a sales director at WebEx, the online conferencing service, when Cisco bought it in 2007. He left shortly after the acquisition and joined SocialText, Ross Mayfield’s enterprise collaboration startup, as vice president of sales. While he was at SocialText, he absorbed a lot about the power of collaboration and social networking, but also got the founder bug, and decided to strike out on his own.

Doing what, he didn’t know at first. With a friend who is a plastic surgeon, Duggan decided to try an unusual experiment. “We set up a completely fake website to see if we could monetize the audience,” he says. “We wanted to see if we could get people to click ‘Buy Now’ rather than building a product first and spending $50,000 on R&D. If we got enough analytics data [showing that customers were interested], we would have made the product.”

It turned out that the product wasn’t interesting enough to convert a lot of site visitors into prospective customers. But in the process, Duggan realized that there’s a fundamental shortcoming in Google Analytics, or indeed in any tool that’s only about measuring traffic. “You set up all these rules for conversion goals in Google Analytics, but those goals are hidden from the audience,” Duggan observes. “I thought, ‘If you have objectives that you want people to do, why not just be clear about them? So we started looking at how we could build a next-generation analytics platform around A, making it social, B, identifying what behaviors we want to drive, and C, incentivizing actions, based on whatever techniques would be effective.” (“We,” at this point, meant Duggan and his co-founder and chief technology officer Wedge Martin, a veteran of IBM, Epinions, and Shopping.com.)

Facebook, LinkedIn, and other social networks have long grokked the power of peer pressure, social reinforcement, competition, and word-of-mouth to build their audiences. Foursquare, meanwhile, was proving that users would go out of their way to obtain seemingly meaningless status symbols like badges and mayorships. Duggan thought there would be a business in helping more Web-based businesses tap into these techniques. “That doesn’t have to mean turning everything into a game, but they’re concepts a lot of brands can leverage,” he says.

It turned out to be a well-timed bet. By the time Badgeville debuted in September 2010, it already had $500,000 in bookings for its software—twice the amount of its seed funding round. “This wasn’t something like, ‘Let’s build it for a year or two and hope somebody will want to buy it,’” Duggan says. “It turns out that whether you are a mobile site, a website, a community manager, a marketing manager, everybody is trying to figure out how to drive toward this intersection of identity and behavior and game mechanics.”

Speaking of game mechanics, my first conversation with Duggan back in May was a little rancorous—not only did I tell him I thought his company had picked a dumb name, but I questioned the general trend toward the gamification of non-game-related services. It wasn’t clear to me, I told Duggan, that adding points, trophies, badges, or rankings to a Web-based service or community would do much to increase user engagement if the product couldn’t stand on its own.

To my surprise, Duggan agreed with me. “This isn’t a magic wand to turn bad content into great content or bad services into great services,” he said. But then went on to present a new perspective.

He argued that Badgeville’s platform isn’t really about gamification, it’s about loyalty and status. “I would argue that loyalty on the Web is an unexplored frontier,” he said. “Why is it that you have a loyalty card to your carwash or your taqueria but not to your favorite website? If you have a thriving community and people who have expressed loyalty and advocacy, what are you doing to reward those people? If you have a community on your site, are you using modern techniques to make things engaging, fun, and immersive? Are your top contributors being recognized?”

When I spoke with Duggan again this week, his earlier emphasis on loyalty had shifted somewhat; he’s now talking more about reputation and ranking, which are the main elements of the programs Badgeville is selling to its enterprise customers. It turns out that nearly half of Badgeville’s revenue now comes from internal deployments of its software on company intranets. The customers are big companies who want to incentivize certain behaviors among employees or suppliers—eBay, for example, is using Badgeville to power the reputation system for X.com, the e-commerce infrastructure platform that has already attracted a community of 400,000 third-party developers. The more posts developers contribute to X.com forums, and the more their peers like those posts, they more points and badges they’ll receive.

Tom Peterson at El Dorado points to Duggan’s background in enterprise sales as key to Badgeville’s rise in enterprise deployments—meaning not just that Duggan knows how to sell software to big companies, but that it takes a guy like him to build a product that so thoroughly embodies the sales mentality.

Duggan himself explains it this way: “Giving people praise and credit for the thing they have done, those are all sales management techniques. And if you think about it, the department in every company that is the most metrics-driven is sales, since those metrics are very easy to surface and compare. We are just taking those fundamentals of sales management and deploying them to the other departments”—and to customers themselves. Duggan argues, based on his own experience keeping a sales force motivated, that “If you tell people what you want, most of the time you are going to get it.”

I’m not sure that translates perfectly to the Web; I think most people visiting a website have too many agendas of their own to be so easily roped into serving yours. But the converse is surely true: If you don’t tell people what you want, you won’t get it. The simple idea at Badgeville is that you should make it easy for your strongest supporters to express their support, or for your most gung ho employees to be recognized for their team spirit. There are so many organizations that don’t yet do these things that Badgeville may only have begun to tap its potential market.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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