Have you ever wondered why riding your Peloton, learning a language on Duolingo, or trading stocks on Robinhood feels so intuitive and fun? All three (non-gaming) companies use game design principles and mechanics to not only disrupt their respective industries through more appealing value propositions and experiences for their users, but also through creating strong engagement loops. This might sound like the oddly familiar term “gamification”; however, we believe gamification is a thing of the past and has evolved into something more sophisticated – what we call Applied Game Mechanics (or “AGM” for short). What’s the difference? Whereas gamification was primarily about turning existing products into games, Applied Game Mechanics is about building products that subtly incorporate the most effective game design principles and mechanics from the ground up.
According to Prescient & Strategic Intelligence, the AGM market is projected to grow nearly 10x to $76 billion by 2030 — across multiple use cases and industries — which feels plausible given that a third of the world’s population already plays games. Further, the application of game design principles in non-game contexts has a pretty rich history, which we’ll get into below. Let’s dive in.
Applied Game Mechanics – the concept of applying game design and mechanics to non-game contexts to drive engagement, retention, and monetization – arguably dates back to 1896 with the retailers who introduced S&H Green Stamps. But it wasn’t until the early 2000s when the term “gamification” was coined, started gaining popularity, and since has rolled through the Gartner Hype Cycle:
Source: BITKRAFT estimates; Oliver Korn and Albrecht Schmidt, “Gamification of Business Processes: Re-designing Work in Production and Service Industry”
Several forces pushed gamification up the Peak of Inflated Expectations a decade ago. Most notably, social gaming hype peaked around 2010, led by Zynga’s IPO in 2011. Farmville in particular highlighted how simple and addictive games on non-gaming sites could engage the average user, and it’s rise clearly foreran (and probably helped popularize) the term gamification:
At the same time, Jane McGonigal gave her famous TED Talk “Gaming can make a better world” and released the book, Reality is Broken, in which she celebrates the virtues of game design and its potential applications in non-game contexts. Gamification quickly became all the rage, even though best practices remained a mystery. After all, mobile free-to-play (“F2P”) game developers were themselves still figuring out what worked best in the increasingly mobile-first paradigm. In other words, if the game designers themselves were still figuring out best practices, there was no way gamification could immediately take-off and be consistently implemented in non-game settings. Reality set in by 2013-14, which sent the gamification trend into the Trough of Disillusionment.
Examples of failed gamification projects from that time period include:
- Foursquare’s struggle to retain users after it became impossible for them to progress up leaderboards;
- Zappos’ introduction of customer loyalty badges that customers did not understand how to accumulate or value;
- Disneyland hotels’ “electronic whip”, which demotivated most employees by highlighting failure
Gamification mostly failed because service-based products were prematurely implementing boxed-product based game design principles in vain. In addition, gaming was still not taken seriously enough by most leadership teams, which led to a vicious cycle of low adoption. This failure led some experts to conclude that gamification was a “short-term fad.”
Of course, it just took time for multiple F2P best practices to solidify – and we definitely have F2P best practices today. This means wide-ranging teams are far more equipped to apply these lessons to non-gaming use cases today than in years’ past. In other words, what came out of the Trough of Disillusionment wasn’t gamification again, but rather it’s evolution – Applied Game Mechanics. As mentioned earlier, rather than forcing existing products to act more like games, proven game mechanics and design principles are now incorporated more thoughtfully into products’ DNAs from day one. That’s a subtle yet powerful shift. And even if the “hype” is now at the Plateau of Productivity, that doesn’t mean the market itself can’t greatly expand from here.
The amount of time people spend fixated on digital devices every day is large and grew meaningfully during the COVID-19 pandemic. In 2020, Americans are estimated to have spent 11 hours per day consuming media with over a third of that time spent on mobile devices. According to MIDiA Research, overall entertainment consumption time increased 12% with games benefiting most at +30%. Interestingly, younger audiences rate playing video games as their favorite activity, and it is easy to see why Netflix views video games (e.g., Fortnite) as a key competitive threat.
At the same time, there are many options competing for consumers’ attention. Nobel Laureate Herbert Simon coined the phrase “attention economy,” noting that “a wealth of information creates a poverty of attention.” Retaining consumers’ attention could become even more difficult as lockdowns restrictions ease, with many anticipating an “attention recession.” As a result, finding ways to engage and retain customers will become more important than ever.
Fortunately, mobile F2P design best practices are practically off-the-shelf solutions to drive retention and engagement. Rooted in principles of self-determination theory (SDT), mobile FTP’s design features take into account human psychological needs to drive optimal engagement (as highlighted in the graphic below).
SDT gave birth to many of the mobile F2P game mechanics (e.g., goal setting, social loops, progression systems, leaderboards etc.) that optimize player engagement and retention. Of course, this theory applies to humans beyond games, which is why these same AGM can be so effective in other non-game use cases.
More companies across a variety of industries are introducing game elements that stimulate human needs in unique and subtle ways:
Sports / Wellness
Peloton and Nike’s Run Club app integrate progression loops, rewards, and leaderboards to keep customers engaged as they work towards their fitness goals. For example and in the context of SDT, here is how Peloton takes advantage of AGM –
- Autonomy: Peloton users have control over when and for how long they exercise, what classes they attend, and their level of effort.
- Mastery: Through Peloton Challenges, users have clear and concrete goals (e.g., monthly challenges, annual challenges, etc.) to pursue. And Peloton makes sure users recognise self-improvement through positive and regular feedback, such as digital trophies based on engagement levels and achievements.
- Relatedness: During classes, users can see statistics about their performance, including live leaderboards to see how they compare to the rest of class. This facilitates competition and social pressure, contributing to users’ focus and effort.
Source: Peloton
Education
Byju’s (K-12), Coursera (Higher Ed), and Duolingo (Extracurricular) are using game-like engagement loops and rewards systems to retain users. For example, Duolingo monetizes like many mobile games – it’s free to play (with ads) and there’s a robust in-app purchase (IAP) system. Duolingo also offers a paid subscription, similar to established games with large user bases that are beginning to monetize with similar subscription models.
Source: Duolingo
Start-ups in the space, such as Classcraft (behavior intervention through gameplay mechanics) and wethink (cognitive and non-cognitive skill development), are combining game mechanics, curriculum, and data insights to drive better learning outcomes for students.
Social Media
Large social companies like Snapchat (e.g., Snapstreaks) have effectively introduced game mechanics, making it easy and fun to continue engaging. A Snapstreak is when you send direct snaps back and forth with a friend for several consecutive days. Snapchat rewards longer streaks with special emojis, and since the app doesn’t have a follower count, Snapstreaks are one of the few ways to receive feedback and rewards for engagement. The potential ending of a Snapstreak has consequences with certain users taking the streaks very seriously.
Source: Snapchat
Other social start-ups like Koji use game elements to make it easier to engage with content creators’ profiles on any social app.
The life of AGM has spanned three phases:
- Discovery (early 2000s to 2015): Gamification took the world by storm but failed to live up to the hype due to a lack of best practices. Forcing many products into games simply didn’t work.
- Proliferation (2015 to Now): As best practices formed (primarily in F2P games), a new, superior trend emerged: AGM. Applying lessons of game design to new products from day one is helping new projects thrive, adoption rates accelerate, and businesses win.
- Evolution and Scale (the future): Non-game companies will go beyond today’s best practices and implement game design principles in ways that are not fully inspired from games but highly personalized for their context.
At BITKRAFT, we believe that we’re in the early days of an AGM golden age. As the world has come to realise its true upside when implemented thoughtfully, more companies across numerous industries will introduce AGM. This will create abundant value for consumers, companies, and investors alike. We look forward to speaking with founders and teams building the future in this space!