Mining “Happiness Moments” at Mobile-Rewards Startup Kiip

5/16/12Follow @wroush

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the player has achieved a new high score—an offer appears in a pop-up window. Kiip’s clients include names like 1-800-Flowers, Best Buy, Disney, Kodak, Pepsi, Sephora, Starbucks, and ticket agency ScoreBig; offers range from a free coffee to a free Xbox 360 game console. To redeem offers, players just enter their e-mail addresses.

Engagement rates are vastly higher for Kiip rewards than for traditional banner ads, Wong says. Some 10 to 13 percent of offers get redeemed, compared to banner-ad click-through rates far below 1 percent. The difference, Wong says, is that the offer is arriving at the right time, when the player feels good about finishing something. “I am not taking a piece of the screen. I am not ruining the experience. I am not changing the user interface or the user experience. I am using a particular moment and reciprocating,” Wong says.

Developers—and more importantly, gamers—seem to be responding to the model. About 300 developers have joined the startup’s network, and the number of monthly active users seeing reward offers doubled every month between November and March. Kiip earns $0.25 to $3.00 per reward redemption, and shares an undisclosed fraction of that revenue with the game developer, according to Wong. Some developers earn “five figures or more on a monthly basis,” he says.

Because it has actual revenue, Kiip has been able to expand to 27 staffers on just $4 million in Series A money (collected in early 2011). “Funding, to so many companies, is like a ticking time bomb,” Wong says. “To us it’s not even close. We started generating revenue from the day we launched.” And Kiip is building a brand that game developers are going out of their way to promote: some companies actually boast on their iTunes App Store pages that their games are Kiip-enabled. “People won’t say ‘I love AdMob,’ but they will say that they love Kiip,” Wong boasts.

Transmedia Capital general partner Chris Redlitz, a mentor to Wong and one of Kiip’s earliest investors, calls Wong’s idea an “everybody wins” scenario. “For game developers it’s incremental revenue. For game players, it’s an added bonus—beyond the good feeling of achieving something you are getting a reward. And for advertisers, it’s one of the best new opportunities for them to engage with their audience.” Redlitz says it took someone as young as Wong to “understand the demographic” and predict how mobile gamers would respond to new types of brand messages.

If achievement moments are so powerful, could they be exploited outside the realm of mobile games? And if so, is there a concomitant danger of overcommercialization—of bombarding consumers with reward offers until they’re numb?

Wong has thought about both questions. On the one hand, he’s bullish on the idea of the happiness moment. Fitness apps such as MapMyRun are already using Kiip to reward users for logging exercise sessions. And from listening to Wong talk about the company’s larger vision, it sounds like it’s only a matter of time before offers mediated by Kiip pop up in new contexts such as Web or console games or even live sports events. “We want to own every single achievement moment on the planet,” Wong says. “That will be a billion-dollar business.”

But at the same time, Wong says he views the happiness moment as a “natural resource” that has to be “mined responsibly and sustainably.”

“You don’t want to hit the bottom of the well early on,” He says. “That would just be greed.” To make sure game players don’t tire from over-exposure to offers, Kiip limits the frequency of its pop-ups, Wong says, and it employs a tracking system called a preference graph to make sure that it doesn’t show offers to people who don’t want them. “We are very good at policing ourselves,” he says.

Kiip isn’t approaching the saturation point yet, in Wong’s view. In fact, the startup set aside $100,000 in March for a “Build Fund” to encourage independent developers to come up with games that have Kiip-mediated happiness moments built in from the beginning. The startup plans to hand out the money to 20 developers in $5,000 chunks.

If you’re trying to replace traditional advertising with reward-based messages, after all, every little seed helps. “I try to drill it into everyone’s head that the minute you describe something as an ad, there are connotations and the market responds differently,” Wong tells me at the close of our interview. “You can definitely say in your piece that ‘The founder of Kiip seems very obsessed with describing this as a moment and a reward.’”

Wade Roush is Chief Correspondent and Editor At Large at Xconomy. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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