Revenue Share Model
Zero to One product that offers customers an alternative virtual economy solution that better fits business needs
Year
2023
Company
Tilia
Role
Co-Lead Product Manager
Stakeholders
Compliance, Finance, General Counsel, Engineering
Background
Per-user variable costs, including KYC, continued to be too high for Tilia to generate revenue. Further, Tilia was having difficulty with adoption and new customers were not realizing their anticipated impact of monetization.
Skills Employed
Competitive Research, Product Definition & Requirements Gathering, Flow Charting, Money Movement, QA, Feature Flagging
Problem Definition
Tilia’s flagship “Stored Value” product is a highly regulated virtual economy solution that greatly benefits end users, by backing all earnings with real USD. This means that:
Users must register as merchants (complete KYC) with Tilia in order to earn stored value in their digital wallet
For some publishers, unit economics were not favorable for Tilia. Specifically, KYC costs were greater than Tilia’s earnings from fees on cashouts
All money in the virtual economy must be stored and held in a bank account, until cashed out
Game publishers don’t have access to funds in the economy, except for any items sold directly to users or through any fees assessed, delaying and minimizing anticipated monetization
Users must be aware they are interfacing with Tilia (i.e. white labeling not allowed)
Ideation
With my boss, the Director of Product, I co-led ideation discussions with the stakeholders to identify areas of opportunity. We agreed the solution must include:
Helping businesses realize earnings from monetization efforts
Reducing % of users completing KYC
Using infrastructure that existed
In order to land on a path forward, we wanted to conduct some competitive research on the big players in the industry, design and present a technical solution, and then get sign off from General Counsel.
Competitive Research
We identified Roblox and Fortnite as games which had succeeded in offering earnings potential to both the business and in-game “creators”. In digging into their public documentation, we identified portions of their models that could resolve some of the problems with our own model. Some key learnings were:
These platforms kept track of earnings performance for each seller or “creator”
A portion of total business revenue was appropriated for creators
Creators received regular disbursements that corresponded to their performance during that period
Tech Design
With these learnings, it was time to revisit our own solution, minimize changes required to provide a new offering, and to subsequently get General Counsel sign off. Some key trademarks of this solution included:
The game publisher would always act as the merchant in all virtual transactions
Virtual earnings would continue to be ledgered for each user
All cashouts would be sourced from a publisher-funded digital wallet
KYC would only be required in “risk-based” cases. Similar information would still be collected for tax purposes
Creators would appear to be interacting directly with the game publisher, instead of Tilia
Results
This feature was rolled our with an existing customer and both parties quickly saw the impact:
Most users no longer needed to complete KYC, reducing friction
KYC volume dropped by 98%. Only 2% of users required “risk-based” KYC
Tilia’s unit economics instantly became profitable
Tilia’s liability was greatly reduced, as USD backing was no longer required
The game publisher received revenue from all in-game purchases instantaneously
Publishers had control of the budget allocated for creator earnings