Remember the good ol’ days of the arcade, with the filthy floors, the tickets to win prizes, and the dimly lit interior? Remember the handful of tokens you’d carry around from machine to machine, deciding which one was worth two tokens, and if playing an Alien Shooter game was really worth four whole tokens? These were the big decisions back in the day. Now, it looks like we’ll all be making the same decisions for mobile games, thanks to Pocket Change.

Pocket Change is a startup founded by Ari Mir and Amos Elliston that is looking to be the universal currency for mobile games. The company provides an SDK for game developers that is designed to increase revenue and distribution for games. Funded by Google Ventures, First Round Capital, and a number of angel investors, the company is launching publicly today for Android devices.

The problems with making money in the mobile gaming world are well documented. The market is almost entirely hit-or-miss, and for those games that do make it, they are most often reliant on an ad-supported model. Not only are these ads commonly ineffective, but they also take up valuable screen real estate on the small devices. The developers could go to a paid-only option, but people are hesitant to actually purchase the applications, but the number of apps people purchase is declining over time, as this article shows.

With Pocket Change, game developers have a new option for making money off of their work. Instead of going via the established routes, they can hook into Pocket Change’s SDK, and establish a pay-per-play model, using virtual tokens. Each play costs a set number of tokens, and every time the session is finished or the character loses or dies, the player needs to virtually insert more tokens, much like an arcade machine.

A token system would be moderately innovative for any independent game developer to roll out, but it takes on an additional level when the tokens can be used universally, across different games. If you buy the tokens in one game, you can use the same tokens in a game by a different developer. This adds tremendous value to the purchase, because the tokens will eventually be valuable across a wide variety of games.

When the user first opens the game, they are gifted a number of free tokens. These tokens allow them to play the game for free to get a feel for if they like it or not. When the user decides that they want to keep playing, they can purchase a virtual package of tokens and continue playing. If they don’t want to continually purchase more and more tokens over time, Pocket Change allows the user to fully upgrade to the premium and unlocked version of the game for a one-time fee.

One issue with this virtual arcade model is that in an arcade, you can immediately see which games are available for playing. Depending on the number of machines, you adjust your purchase of tokens. For a virtual arcade, there’s no knowledge of what other games are part of the Pocket Change system and which aren’t. To fix this problem, Mir says that they are thinking about rolling out a standalone application similar to Game Center that would feature the games that have Pocket Change integrated.

If users don’t want to purchase additional tokens, they have the choice of earning the virtual currency. By completing offers like watching a trailer, installing an application, connecting to Facebook, or inviting friends to a game, the user earns additional tokens that can be used in any Pocket Change-enabled game. This system has been abused in the past (see Scamville), but Mir insists that this will be different, as Pocket Change has no incentive in abusing the user.

The offers system is also where Pocket Change plans to make most of its money. Because of how the iOS App Store and Google Play are set up, Pocket Change can’t make a meaningful amount of money from a revenue sharing model. The company takes 30 percent of the revenue from token purchases, but that immediately goes to Google and Apple because of the in-app purchasing model.

Pocket Change is currently being tested on about 75 games as part of its private beta, and has seen 1.5 million users play on its platform. According to Mir, these developers are seeing revenue increase by about tenfold, while also freeing them from supporting a freemium model or giving up valuable screen real estate to an advertising network.

The token system is only one part of the advantages that Pocket Change gives developers. The system also provides a gaming intelligence platform for gamers, that they would normally not be able to have access to.

For major gaming companies like Rovio, Zynga, and PopCap, which see tens of millions of gamers access games every day, user data is cheap to access. Testing new features, and quietly seeing what price changes work and which ones don’t is relatively simple. For smaller game developers with a smaller install base, it is much more reliant on guesswork.

With Pocket Change, the guesswork that smaller developers use is minimized, as the company already sees over one million users on its platform and can test on a much larger level. If the company wants to see how changing the pricing of tokens effects revenue, it can simply tell its pricing system to test a new pricing tier for 1 percent of gamers and monitor how it changes the system. This is something that independent game developers would have a much harder time doing.

As of today, Pocket Change is only available on Android. According to Mir, the company is looking to roll out an iOS version later this summer. IOS may present a problem for Pocket Change, as Apple is not normally fond of middlemen, but Mir says that, “we will do everything by the book” and that they will follow the rules of the App Store so that they can go after the entire mobile market. It’s not clear if it will work, but it is the right strategy to take.

Bringing the old school arcade model into the new world is a different take on how to monetize games, and if the current revenue increases hold true over the coming months, Pocket Change may make it big. That is, if they can make sure tokens don’t get stuck in the machine. Nothing is more annoying than that.

[illustration by Hallie Bateman]