Online Game-based Marketing can be Big Business

To win new customers online, more companies are turning to games.

Brands whose efforts at interacting with fans online were once limited to listing an e-mail address are now offering customers points, badges and other rewards for sharing experiences with friends.

Game-based marketing efforts have found a home in the Bay Area, where a growing number of startups are helping more established companies experiment with new strategies. And if some of their efforts look like child’s play, companies say gamelike elements are helping them reach millions of new customers.

The latest wave started with virtual badges earned for checking in at various locations. It continued with applications on Facebook that reward you for sharing information about brands with your friends.

Coming months could bring location-based sweepstakes or hotel loyalty programs that encourage competition between customers.

“I think 2011 very much will be the year of gamification,” said Gabe Zichermann, author of “Game-Based Marketing,” using the somewhat clunky moniker that has become an umbrella term for the new incentive programs.

Zichermann organized the first ever Gamification Summit, which took place in San Francisco on Jan. 20 and 21 and drew 300 attendees from Google, Microsoft, Playboy and Hallmark, among others.

Games have come into fashion for several reasons, Zichermann said. People born after 1975 grew up with video games. The success of San Francisco’s Zynga, whose CityVille game on Facebook has more than 98 million active users, has demonstrated the addictive power of game elements. Foursquare and similar services have created ways for advertisers to target customers based on physical location.

And there is a persistent sense among some marketers that other popular techniques, particularly the flash sales popularized by Groupon and its imitators, aren’t effective at building lasting relationships with customers.

“People come to your store, they clean your clock and never come back,” Zichermann said. “We have to wean people off discounts and coupons.”

San Francisco’s Manumatix developed what it calls a “social rewards platform” called Bamboo that lets companies build applications within Facebook that promote their brands. Fans can be granted points, badges and other rewards for interacting with the application.

“People want to be rewarded,” said Johnny Miller, chief marketing officer for Manumatix. “Every company, whether it’s Apple or Nikon or Nike, has a core following. Those people love getting the inside news and tips before everybody else, and they love to share it. All we’re doing is providing a mechanism for companies to reward those people with points and monetize it at the same time.”

Manumatix built a Facebook application for the auto-racing network Speed. When users share a favorite video from the channel, it appears in their friends’ news feeds, helping Speed reach more viewers. Viewers who share frequently with friends can get 20 percent discounts on Speed merchandise, free beanies and other goods.

The danger, some marketers say, is that customers will be turned off by a flood of ads shared by their friends every time they open Facebook or Twitter.

“One of the risks with this big meme now about gamification is that everyone’s going to build in points and badges into their websites, and no one’s going to care,” said Geoff Lewis, CEO of San Francisco’s Topguest, which grants customers air miles and other rewards for checking in at businesses. “And I think we’re already starting to see that happen.”

But Kris Duggan, CEO of Badgeville in Menlo Park, said there’s still plenty of room to grow. The company, which builds social rewards programs, launched in September and will have more than $1 million in revenue this quarter.

Concerns that the market has become saturated with games are overstated, Duggan said.

“Even if everybody did it, that’s not a reason not to do it,” he said. “Consumers are going to demand that they can engage with these brands on a very explicit basis. That just becomes an expectation of the generation that’s growing up using Facebook. That entire environment is about sharing things.”