Gondola is taking the guesswork out of pricing virtual goods and in-app purchases in free-to-play games. In doing so, it hopes to help game developers make a lot more money.

The New York startup is launching its Dynamic Pricing Engine, which automates the pricing of virtual goods and services. By setting prices in a market-driven, more intelligent way, Gondola said it can reduce drop-out rates among users, significantly improve the percentage of players that pay, and boost revenues by 12 percent on average.

A study by the Harvard Business School said that a 2 percent change in prices can lead to 10 percent more revenue. By predicting how specific changes can affect pricing and conversion of non-payers into payers, Gondola helps developers fine-tune a virtual economy to find ideal price points.

Gondola aims to lift a player's lifetime value.

Above: Gondola aims to lift a player’s lifetime value.

Image Credit: Gondola

Gondola’s dynamic pricing technology takes advantage of historical and real-time data to gain insights on user behavior. Its Dynamic Pricing Engine simultaneously runs millions of tests to determine the prices of virtual goods and in-app purchases. Optimizing what developers already have, Gondola automatically generates unique prices for every player, thereby increasing engagement and ultimately boosting revenue. It’s a lot like how airlines price every seat differently for each passenger.

“The prices of virtual goods and in-app purchases in freemium games have a direct impact on the overall experience and lifetime value of each player,” said Niklas Herriger, the cofounder and CEO of Gondola. “Unlike physical goods with inventory constraints, developers have an unlimited supply of virtual goods and in-app purchases at their disposal at no marginal cost. Our Dynamic Pricing Engine can help developers improve engagement and revenue without additional investment in new content.”

Gondola said that its engine focuses on analyzing user behavior, dynamically computing prices, and setting tailored prices for individuals. Once it is live, Gondola starts running tests. Pricing can be adjusted based on an individual player’s progress in the game, the level of engagement, the virtual currency account balance, and the predicted remaining lifetime of the player.

Scientific Revenue is an established competitor that we’ve written about in a VB Insight report. Gondola believes that its rival provides content based solutions through push notifications and pop-ups. These solutions require a lot of developer involvement, but Gondola’s algorithm sets prices automatically, without the developer having to do anything beyond dropping the Dynamic Pricing Engine software development kit into the game.

If you set your prices wrong, mobile users will revolt.

Above: If you set your prices wrong, mobile users will revolt.

Image Credit: Gondola

With Gondola, each and every player has a unique set of prices. Scientific Revenue determines prices much more broadly, by general player segments. Gondola’s prices adapt to content changes. With Scientific Revenue, developers have to reprice goods after each update.

“In addition to the benefits delivered to game developers, Gondola’s robust pricing model tailors a personalized experience for each player,” said André Cohen, the cofounder and chief technology officer of Gondola. “If a player finds himself struggling through a level, our Dynamic Pricing Engine can identify that player to temporarily reduce the prices of specific virtual goods or in-app purchases so that he can move forward in the game. By utilizing prices to craft a better game experience, we’re creating a win-win situation for players and developers alike.”

Gondola has eight employees and is self-financed. Its advisors include John Spinale, Robert PhillipsRaghu Iyengar, Eva Ascarza, and Ben Medler. The company was founded in 2013.

Gondola helps developers figure out how many free coins to give out.

Above: Gondola helps developers figure out how many free coins to give out.

Image Credit: Gondola