Monetizing Free-To-Play Gaming Models

eldavojohn writes "Last week, a game consultant named David J Edery gave his two cents on why free-to-play (F2P) game models aren't as prolific in the West as they seem to be in the East. Aside from a few unprovable cultural divides, he makes some interesting claims concerning conversion rates of non-paying players to paying players. Some customers pay hundreds for functional items and only a dollar on aesthetic items while other users might be the complete opposite. He also notes that converting a non-paying newbie into a paying customer is not the same as converting a non-paying salty dog. He defines 'aggressive monetization' to mean how much money will advance you 'unfairly' in the game. He focuses on two classes of items: those that provide performance-neutral aesthetics and those that provide performance enhancing or functional advancements. He claims to have access to ARPPU ('average revenue per paying user' per month) rates among several game developers and states that 'more aggressive monetization model and a loyal, niche userbase can hope to generate $50 per paying user per month, on average,' while 'a F2P game that limits itself to flat subscription revenue and/or non-functional items is generally more likely to fall somewhere between $5 and $10 per paying user per month.' Like any good consultant, he also gives ethics a footnote in an otherwise verbose post on monetizing free to play games. Has anyone here had experience pricing items and content in free-to-play games?"

Gaming profit models

[peterofoz]

From the games I seen I can draw the following profit opportunities:

• F2P comes with a banner or side advertisement. Subscribing eliminates the ad. Example: Runescape. Aggressive would be popup ads or commercials. More subtle is ads incorporated into the game landscape. Example: SecondLife
• In game items - cosmetic. You just have to look good in some social games. Aggressive is where you have to have a clothes item to enter an area or complete a quest where you already have a time investment. Example: SecondLife, Farmville.
• In game items - functional. These items let you get ahead with better tools or weapons. Aggressive is where it provides a really unfair advantage. Example: Mafia Wars. Some have have items using in game cash you can earn by playing or find along with other kind of cash you have to purchase. Example Farmville, Wizard 101.
• Time advantage. Some games have recharge timers where you can just wait 24 hours to recharge, or pay for an instant recharge. Example: Evony, Wizard 101 Pet Games
• Content - Games offer a F2P area with access to additional content by subscription or by single cost per area. Examples: Wizard 101. Some games provide a place to put content, but you have to create it. Example: SecondLife.
• Content + Subscription - Games that require you to purchase the content and then require a subscription for online play. Examples: Eve Online, World of Warcraft.
• Real World purchases - Games that blend game play with real world purchases, such as buying a coffee at 7-11. Example: Mafia Wars, Farmville. Many game makers also have a store where you can buy shirts, hats, mouse pads, etc. Examples: Slashdot, Jagex.
• Information - Hints and Helps - Games (typically puzzle quest types) where you might need a hint to complete a puzzle. You get the hints by purchasing a book or magazine, or by calling a help line that charges by the minute providing help via a menu tree. Example: Zork (classic). Newer games might use SMS Texting and let the phone company handle the micro-transactions.
• Marketing - Games that provide free play, but sell your email address and demographic details to third parties.
• IPO - Games that provide free play to build a 1,000,000 user base, at least until the company is sold to investors who then figure out how to monetize it.

There's probably more, but that's the ones I've seen.

It can be done right...

[Anonymous Coward]

To my mind, Kingdom of Loathing has done a fantastic job of handling this type of problem. Though not what most people think of when they think of a F2P MMO, they have made all items that one donates for tradeable, allowing non-paying players to experience the "premium" content if they are willing to farm hard and long enough for in-game currency. So people who are willing to pay can buy extra to sell in game to people who are not willing to pay real life money for them. It's a system that could easily have broken down horribly and made the whole economy wildly unbalanced, but through attention to detail and a commitment to making all items and content available for every player, they have succeeded where many games have failed.

Re:Long time lurker, first time poster.

[cbhacking]

Default posting mode for a new account is HTML, which ignores most whitespace (converts any amount of any type of whitespace into a single space, more precisely). You can either manually insert <p></p> or <br /> tags, or you can switch to Plain Old Text posting method. POT method still lets you embed HTML, but it will also auto-convert new lines in your comment "source" to new lines in the result that gets posted.

Also, always preview before posting.

Re:Gaming profit models

[gamricstone]

FYI you are not required to purchase content while playing Eve Online. All content expansions are included with your subscription cost. The first month is $5 more expensive, but it is passed off as an account activation fee. The account activation fee can be avoided if a friend gives you a PLEX (pilots license extension) or you are able to obtain one before your trial ends.

Otherwise I thought your post was pretty accurate.

Re:Best of BOTH Worlds

[war4peace]

Congrats, you have just described how EVE Online works.
I can buy a PLEX (30-day Pilot License EXtension) for real-life money and then selling in-game for in-game currency.
So let's see...
You are a player who doesn't really have enough money or is unwilling to spend them on a monthly subscription, but at the same time you have a lot of spare time. So you make lots of in-game currency (called ISK). I am a guy who can afford to pay the monthly fee but because of my job/real-life lack of free time, I can't afford making lots of ISK; however, I could use the ISK to buy in-game ships, modules and the like, for a better gaming experience. Therefore, I buy the PLEX for real-life money, sell the PLEX to you for ISK.
In the end:
- CCP (the game maker) gets its money;
- You get to play for free (no real-life money spent)
- I get my ships and modules (which I can lose in the blink of an eye if I'm a bad player...)

There are many good things about this whole approach to transactions:
a. PLEX value is not fixed, it varies in-game because it's a market commodity, based on the in-game demand/offer. b. The stuff you buy for those ISK amounts is all destructible. All of it. (okay, except stations, but if you are crazy enough to buy one with PLEX-ISK, you can still lose it.) It's not like in WoW, where if you die, you still get to keep your gear. Here, it's gone for good.
c. It reduced the ISK farmers to 0. A year ago, when I joined, most of the trading hubs chats were pestered by spamming trial characters flooding you with commercials such as "500M ISK for just 20 USD!" - now they are all gone. It's been months since I saw the last one.
d. It doesn't affect skills, skillpoints or how well you perform. Also, it doesn't affect which ships you can fly. You still need to train for those :)
So IMO, CCP really nicked the goal with this PLEX approach.