Generating Cash For Premium Flash

Microtransactions are doing a bang-up job of paying the freight for free-to-play MMOGs, as well as for Facebook and other social networking games. So what's keeping developers of premium, single-player Flash games from following suit?

Nothing, actually. In fact, a few brave souls have made the leap to microtransactions and seem to be doing quite well, thank you. And they're predicting that microtransaction funding will enable them to afford longer development periods -- say six months instead of two -- and larger teams that will result in Flash games with more content, better graphics and sound, and deeper mechanics.

Call it a win-win situation for the developers as well as for the gamers, even the ones who choose to play for free. Nevertheless, developers expected -- and have gotten -- some resistance from their fans.

Chris Harris recalls that when his company, New Zealand-based Ninja Kiwi Games, first posted zombie shooter SAS: Zombie Assault 2 on the Flash-dedicated portal Newgrounds, "there were quite a few expletives and loud comments like 'This is B.S.' and 'You're just ripping people off.' I'm sure that was because some gamers are just set in their ways. They reacted exactly the same way when pre-game ads were introduced. It's almost like introducing some new piece of technology to the elderly."

But, done correctly, games designed with microtransactions in mind need not infuriate gamers. Harris recalls that his team was careful to build a complete game for those who just want to play -- and beat -- the game for free.

"You can go through all 30 levels of SAS without paying a dime," he says. "We believe that to be very important. And people who don't mind forking over a few dollars for extra content can go to the premium license tab and buy some kick-ass guns, the ability to regenerate health, and even something called 'guardian angel' which lets you continue from where you died."

SAS: Zombie Assault 2

Most transactions cost $1 each, with the most profitable item -- the Zombie-Popping Party Pack, which supplies all guns, all upgrades, everything -- about $9.

What enables the game's pay-for-content mechanics is Mochi Media's MochiCoins system; gamers use MochiCoins in their account which they purchased using credit cards or PayPal. Similar micro-payment transaction systems are offered by Heyzap and GameSafe.

Ninja Kiwi built SAS with MochiCoins in mind, having rejected the idea of funding the game using pre-game advertising exclusively, as in its earlier games.

"That model just hasn't delivered for several reasons," Harris observes. "One obstacle is getting the advertisers to understand how it works; another is that our games are played all over the world and, in places like China where we're really popular, our CPMs looked pretty pitiful -- almost zero because none of the information on how to buy things is in Chinese. Obviously localization became a problem."

And so, since SAS launched in mid-June, it has made between 20 and 30 cents CPM on advertising -- compared with the average $3.60 per thousand game plays that it has generated, through over 50,000 completed transactions for premium weapon packs and level upgrades.

The fact that Ninja Kiwi is making 10 times more revenue through microtransactions than pre-game ads doesn't surprise Daniel Cook. Cook, a game designer at Microsoft and author of the game design blog Lost Garden, says that, according to his research, a microtransaction-based game will make anywhere from 10 to 100 times more per month per user compared to one based on ad revenue.

For example, he says, one game that's doing exceedingly well with Mochi Media's MochiAds is generating 35-50 cents per CPM while some of the more specialized networks can generate up to $1, "but that's very rare," he adds. "On the other hand, a relatively simple, first-out-of-the-gate game that's not well-optimized for microtransactions is making five dollars per thousand players, which is actually very low in 'microtransaction land.'"

Games that are well-optimized for microtransactions do much better, he says, which may mean that they are designed with a longer play cycle in mind.

"The majority of gamers tend to start purchasing after a week or two of play," he explains. "If your game is only capable of, say, an eight-minute play cycle, it's going to be more difficult to convert players into paying customers. That's why the games on Facebook, for instance, are doing so well -- those games tend to have longer game cycles."

Cook suspects we'll soon see a return to what used to be called the "shareware" business model that Apogee Software, Epic Games, and other publishers embraced in the late 1980s and early 1990s. In 1991, for instance, gamers would get the first third of, say, Duke Nukem for free and would have to pay for the subsequent two-thirds of the game.

"It just shows you that nothing has changed much in almost 20 years," Cook says. "Developers are still saying, okay, we're going to give you a great gaming experience but, if you want more, you're going to have to pay. The method of doing this has slightly changed, of course, but the basic idea keeps getting rediscovered every time there's a new electronic distribution platform."

The two biggest questions, says Cook, is whether gamers will pay for the additional content... and will there continue to be a user backlash against the system?

"Initially there was a large user backlash," he reports. "A year ago, developers were seeing their gamer-generated scores on web portals drop. But there has been less and less of that. What's happening, I think, is that players are being rapidly educated. By next year, I suspect there'll be multiple dozens of premium games out there that are funded by microtransactions, and gamers will have begun to appreciate the enhanced content."

Developer Sean T. Cooper suspects the same, which is why he is testing the microtransaction waters with his current project, Shadez: Battle for Earth -- the sequel to his popular war strategy game Shadez: The Black Operations -- which is expected to launch this month. The game will be free to play with additional missions available at 25 cents or so each.

Shadez: The Black Operations

"That price isn't fixed yet, but I want to keep it as cheap as I can," he says. "I'm not trying to rip people off; how can I charge them a dollar a level when it hasn't taken me that long to create it? Maybe we'll charge a dollar or $1.50 to open up the entire game."

Cooper's philosophy is to give away 75% of the content of each of his upcoming games and charge for only 25%. "I believe the Flash market needs to remain as free as possible," he says, "which allows the game to spread easily. If you become greedy, your game won't spread as quickly -- or perhaps not at all."

Cooper perceives himself as just one of several pioneers in the effort to add microtransactions to premium, single-player Flash games. But he foresees the space growing rapidly, especially because he reports that "Electronic Arts is having thoughts about entering the market."

"When someone like EA plans to join in, the competition will mean that Flash game development will radically increase in quality, players will enjoy the games more, they'll play them for a longer time, and then spend more money on them. I think you're seeing just the tip of the iceberg here."

While Cooper's Shadez sequel isn't quite ready for launch, he is anticipating microtransaction revenue of approximately $12 per thousand players based on stats for other games. As a result, he's devoted considerably more time to building the game than he had on his previous titles -- six months instead of two -- which means more and better content.

"If you look at most of the games I've developed, they are 30-minute experiences because I needed to cut short the development time to reflect my earnings," he recalls. "This new game will pack in 10-20 hours of play, in which we've raised the quality bar considerably."

Developers like Ninja Kiwi's Harris agree that microtransactions are key to improving the quality of Flash games, bringing them that much closer in value to today's retail games.

"I'm not saying that there won't always be a certain popularity for the 30-second disposable game," he explains, "but there's going to be a clearer divide between the people who make good Flash games and those who don't."

As a result of real and anticipated revenue generated by microtransactions, Ninja Kiwi -- a studio of four -- will bring in two more developers this month. And development work per game will expand from the previous four to six weeks to three months.

"I agree with Sean [Cooper] that this mechanism, if it proves to work as well as the early trend is showing, will increase the quality of Flash games across the board. I expect that, initially, some players will say, "This is bullshit... We shouldn't have to pay for Flash games... They're supposed to be free... What are you guys doing?" A good answer to that is, "Don't worry! Most of the content is going to continue to be free... but whether you choose to pay or not, the quality is going to go up."

Shadez: Battle for Earth

Cooper anticipates a time when Flash games will give retail games a run for their money in terms of value.

"We haven't had the money to do that before," he explains, "but this will become an opportunity for Flash developers to turn their marketplace into the largest one around. My personal hope is that gamers will put their middle finger up to the $50 boxed, retail products and, instead, spend the few dollars it might cost to play one of our games -- and have just as much fun doing so.

"I am definitely in the camp that it won't be too long before we become much, much bigger than the boxed game space and be the number one gaming platform," Cooper adds. "I mean, we can have 100 million hits in a year. The boxed version of games aren't likely to hit five million, now are they?"