'Gamification': A Growing Business to Invigorate Stale Websites

Rajat Paharia is a new breed of business consultant. For a monthly fee he promises to invigorate stale websites by turning them into video games. Visitors become players. If they perform certain tasks, such as commenting on articles or e-mailing links to friends, they earn points or badges. Paharia's company, San Jose-based startup Bunchball, has performed more than 50 online makeovers for NBC (GE), Playboy, and other large websites. "Our customers don't want to be game designers," says Paharia, 40. "They just want more page views."

Video game designers have spent the last few decades perfecting the art of making their products addictive. Now traditional companies are building loyalty for their websites using so-called gamification techniques. Tactics such as leader boards, which encourage users to compete against one another for points, are becoming common across the Web. "We're in the middle of an arms race for fun," says Gabe Zichermann, an entrepreneur who is organizing the first Gamification Summit (scheduled for Jan. 20 and 21 in San Francisco), developing a certification course for gamification experts, and writing a book on the subject.

Bunchball, Badge-ville, and other game consultancies charge clients as much as $10,000 a month to bring game features to their sites. Industry revenues will total $1.6 billion by 2015, up from less than $100 million last year, estimates M2 Research, a gaming and technology researcher based in Encinitas, Calif.

Online Loyalty

The business of engendering online loyalty through gaming techniques is fast becoming as significant as the real-world loyalty industry, which builds rewards programs for airlines, hotels, and credit cards. The difference is that real rewards, like free hotel rooms and airfare, cost businesses real money. Badges and leader boards, excluding fees to consultants like Paharia, cost next to nothing.

It's a neat trick—if it lasts. "People move in herd mentality," says Tim Chang, partner at venture capital firm Norwest Ventures. "The backlash is going to come from people who try to slap [game features on a site] without any understanding of how to bake it into the full experience."

When done right, games exert a strong psychological influence over consumers, says Amy Jo Kim, a game designer who worked on hits such as Rock Band after earning a PhD in behavioral neuroscience. "What games do is help you come up with stories about yourself," she says. Earning points or reaching new levels creates the illusion of progress and is akin to "telling you a story about yourself getting better and stronger and more powerful," she says.

Social status is another motivator. "We have this tendency to care about what image we portray," says Dan Ariely, a professor of behavioral economics at Duke University. In real life, there are mansions and handbags. "In the gaming world," says Ariely, "there are badges."

"Game Mechanics"

The techniques behind gamification are known in the business as "game mechanics," and they're everywhere. Countdown clocks on Gilt Groupe, a discount luxury goods site, impel shoppers to nab deals before time runs out. Colorful virtual badges, such as those on Foursquare, a smartphone app that lets people "check in" to venues, reward frequent use of a site or service. When LinkedIn members log in they're shown a progress bar, subtly urging them to add more details to their profiles.

At Bunchball, 28 employees perfect the fictitious currencies, cutesy avatars, and other elements required to gamify websites. Last April, Paharia met with New York-based food ordering website Campusfood.com, which wanted to increase the likelihood of a first-time user returning to the site. Paharia built a feature that rewards repeat customers with whimsical badges such as Raw Deal (10 sushi orders in a month) and Beta Taster (one of the first 50 people to order from a new menu). Since adding points and badges to Campusfood.com, the number of new users who return two or more times is up 15 percent to 20 percent, says Michael Saunders, the site's founder.

Moxsie, a website that sells clothing from independent fashion designers, uses game mechanics to encourage customer feedback. It awards virtual ranks—such as "senior buyer" or "guru"—to users who help the company's clothing buyers decide which items to stock. Built by consultants at Badgeville, the ranking system helps "leverage our community to make sure we get trend information from the ground level," says Jon Fahrner, the entrepreneur who launched Palo Alto-based Moxsie in 2009.

The practice of gamification is rubbing off on the real-world loyalty industry, too. Barry Kirk, director of strategic consulting for Maritz, manages loyalty programs for Bank of America (BAC), Capital One (COF), and other brands. One of his clients, Hilton's Embassy Suites brand, has been piloting an online game designed to encourage existing customers to try out new hotels. "Game designers have created these amazingly compelling strategies," says Kirk. "Why wouldn't we adopt those approaches?"

The bottom line: "Gamification," a trendy technique for building addictive Web destinations, has raised the number of return visitors at some sites by 20 percent.

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