Building a Virtual World from Berlin: Smeet CEO Sebastian Funke (Part 3)

Sramana: What is the Smeet virtual world like?

Sebastian Funke: It is a browser-based virtual world where you can dress your avatar, chat with other people, and have private rooms which you can decorate with virtual items. Virtual items are purchased with virtual currency, and you buy virtual currency with real money that you buy via multiple payment methods. We have always been very focused on real people. Each time you click on an avatar, you have a profile of the user, their picture, and a list of their friends. You can also select an option to chat with them privately. It was not as sophisticated as Second Life, but it was a mass market product for all kinds of different people. We use avatars with a realistic appearance so they appear as real people.

Sramana: There have been a lot of attempts at creating virtual worlds over the past decade. What is different about Smeet?

Sebastian Funke: In 2009, we first entered the virtual world and at the same time we branched out into other countries like France, Italy ,and Spain. At that time our major differentiator is that we appealed to all people; our demographic is ages 14 to 50. We did focus a lot on optimizing the conversion processes. We know how much the user spends and we call that the customer lifetime value, and we ensure we know the applicable customer acquisition cost. The focus is on making a profit with every user. At that time we could not buy a lot of users, but we were able to extend the customer lifetime value, and that is what enabled us to grow.

Sramana: You revamped the company in 2009. What came next?

Sebastian Funke: We saw that people were in our virtual world, but they did not have enough to do. In the beginning of 2010, we decided to give people the possibility to collect points and then use those points to level up. Users were able to collect points primarily by purchasing items. You could also earn points for spending time on the platform, logging into the platform, and playing games in the platform. That really improved the customer lifetime value and subsequently improved our monetization. On the first day after we introduced that concept, our revenues spiked by 500%. We realized that gaming could be powerful in our platform so we started introducing more and more game play.

Sramana: Let’s talk about exactly what you measure. What do you measure, and how have you been able to improve your key performance indicators (KPIs)?

Sebastian Funke: In the beginning our KPIs were very basic. We looked at online marketing metrics. We looked at how many clicks we were able to get on a product. We knew how many people went to our website but we could not even tell you where they were from.

Sramana: Was your primary customer acquisition strategy banner ads?

Sebastian Funke: Yes. It really was just display advertising. The next step was to combine our registration form with a banner ad so we could see how many people would click on the banner, come to a website and register. We spent two years doing a lot of analytics and have now expanded to the point that I can tell you everything about that. I know how much a user spends after one day coming from a specific country, that is in a specific age group, or who reached our site following a specific topic or channel. I can tell you if he went through our Facebook application or our normal website and what payment methods he prefers to use. We know exactly what the user is doing, and we optimize on that. Our high-level metrics now focus on relevancy, monetization, and retention.

This segment is part 3 in the series : Building a Virtual World from Berlin: Smeet CEO Sebastian Funke
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