The try-then-buy model is something of a tradition in the PC gaming world. While most major publishers have left it far behind these days, developers like id Software and 3D Realms might never have risen to prominence if not for shareware.
Today, it's mostly smaller companies who embrace it, taking a leap of faith that players will be so engaged with their titles that they'll pay for the full version. But games-on-demand leader Exent Technologies argues that the model is broken.
These days, the company says, ad supported games are substantially more profitable for developers – with returns that are three- to seven times higher than the try-then-buy model.
"Basically that comes from making much more money per user," explains Kobi Edelstein, vice president and general manager of Exent's Free Game Services division. "It boils down to the fact that in the try-[then]-buy model, prices have been driven down by the big distributors. Where they were $20 a few years ago, now they're averaging $6.99. And conversion rates were always low. You'd be getting hundreds of thousands of users downloading a game, but only 1 or 2 percent were buying."
Making matters worse, the flood of cheap and free gaming that has hit the market via social networks and mobile platforms has lured away the casual audience that has become the bread and butter for companies that use the try-then-buy model. While they were able to handle low conversion rates previously due to the sheer number of people downloading trial versions, it has become increasingly hard to gain people's attentions today.
While companies like Microsoft and EA have put some effort into trying to build a market for in-game ads, their success has been questionable. Edelstein says that didn't surprise Exent.
"We looked at that market and thought it was still a bit premature," he says. "It's still an emerging media, so media buyers aren't ready to [put their money] there. It's a very risky upfront. "
Instead, Exent says the standard ad banner is the most reliable way for game makers to boost their revenues. Granted, the banner ad market is far from its peak, but Edelstein says the regular exposure to the ads – and the ability to play for as long as the player desires – add up to profits.
"What we're seeing – from the ad supported side – is users bring in lifetime values in the $5-$8 range," he says.
That doesn't sound like a lot, but it's something that's quickly made up in volume. And, he notes, it's still significantly better than try-then-buy.
"If you take 100 of the try-[then]-buy users, only 2 percent convert – and at an average price of $6 per game," he says. "Just to match what we're making per user [with the ad supported model], you'd have to sell 20-30 games per 100 users – and you're not going to do that."
Ironically, Exent's client base, which includes the games-on-demand channels of Verizon, Comcast and Qwest, isn't entirely sold on the company's theory that ad supported is the way to boost revenues.
At present, only 30 percent of Exent's business is ad supported, with the other 70 percent focused on subscriptions. Edelstein, though, says he expects the clients to make the switch – eventually.
"It's not that they're not taking the advice," he says. "It's just not the highest priority for them. … It's an issue of their roadmap. But they will have a free games section as well."