Icons from F2P games I've worked on.
A student asked me "why do companies hide their monetization numbers"? It is a perfectly good question and this is my response.
Throughout the game industry, almost every studio and publisher has a secret playbook. A playbook is a collection of tricks and superstitious mumbo jumbo that they think gives them the competitive edge over someone else. When Zynga was making big money on Farmville they actually sued people who revealed their playbook and many consultants would go around claiming to have the Zynga playbook and if you just hired them you too could be filthy rich. Almost everything they knew was common sense to anyone who actually had a F2P (free to play) game running and spent any time trying to optimize the KPI (key performance indicators). But as long as it is shrouded in mystery some consultants will continue to make money and companies will keep it from their competitors.
In F2P, the common wisdom is that 1% to 4% of players convert from free to paid, and the life time value (LTV) of that customer is about $5 to $10 on average. I know that many games fall short of that by a long ways, and ultimately those games are unsuccessful. As you know I worked on F.A.S.T. which started pay to play, at $10, and I helped convert it to F2P. F.A.S.T. was fortunate enough to have a conversion rate much higher than 4% and an LTV much higher than $10 – in fact it was higher than that per weekend. That was in the days when a million players was a lot. We did quite well until management stopped making new content to focus on new games. More recently Flappy Bird had 50M players. I find it difficult to fathom how much revenue a game like F.A.S.T could bring in these days... but if you look at Clash of Clans they claim over $3M per day when they consistently remained in the top 5 free games ranks.
The real cost of publishing a game is the CPI, or cost per install. The CPI for iOS games can be around $2.50 per install currently but can go as high as $7.00 per install on holiday weekends. If you want 100K installs you will pay more than $250K to get them. If a game company makes public their tricks for reducing those numbers or increasing the LTV they risk being bumped out of the bidding for new ads by someone who has more money and knows your tricks. Apple says 5000 games are published on the App Store every day. You simply can’t expect anyone to find your game without advertising on iOS – which is why Android, OUYA and even Windows Phone looks so much better as a small studio these days – let the big spending publishers have iOS until your studio can afford it.
There are all kinds of useful sites to learn what all this mumbo jumbo means. I suggest GamesBrief – sign up for the spreadsheet they share about ROI on F2P games. All my buddies in the industry use that site and that spreadsheet to build out their F2P business models. But remember, his numbers are only typical. You have to know a lot of people and a lot of backdoor secrets to get any real numbers for your competitors and games in your category.
There are sites like Flurry, Distimo and App Annie that will publish reports on trends – but they don’t usually provide the kind of detail you’d be looking for to properly build a business case for your specific game. I attend an awful lot of conferences and sit in long presentations to collect tidbits here and there. Many of those I share with colleagues and clients... as part of my consulting business at LudusLabs. For most studios I can directly show them ways to improve their game that will result in better than 20% increase in revenue by simply following some of what I call ‘best practices’. Still, many studios are reluctant to spend money to fix the problems and continue to suffer. It does cost money to run a game as a service and without continued investment in new content and new discovery all F2P games will languish.
With Steam announcing developer set pricing, there is a concern that the race to zero on PC games is here and soon all game budgets, regardless of platform will be in the $100K to $300K range and many games will suffer because they do not convert well to F2P (story games, puzzle games, adventure games, hidden object games... the list goes on and on). Those kinds of non-F2P games will have to use Kickstarter or other crowdfunding to fund their projects and adjust their budgets accordingly. I also don’t know that many indie game developers who really understand how to run a game as a service... they can make a great game, but have difficulty running the business side. This drive toward free could be a way to drive indie gaming back out of the publishing market and into the art games space again, or at least up to Kickstarter. I’m worried enough about non-F2P games that I pretty much had to decide to adjust my development style to match F2P – fortunately I came to that conclusion in 2008... before F2P even started on the iPhone. That gave me several years jump on most of the industry... with the exception of Matt Mihaly/Iron Realms and some South Korean developers like Nexon.
I chased the “secret formula” and buried myself in all the of mumbo jumbo until GDC 2013 when I heard some very successful F2P game makers like NimbleBit mention that what you really have to do is focus on making a great game that people actually want to play and give them a way to show their appreciation by purchasing useful content in your game. Don’t make them buy stuff like some of the more aggressively monetizing games (CSR Racing) – make your game engaging enough players want to spend on it. That actually makes much more sense to me... and is my advice to you.
"Make your game engaging enough players want to spend on it"
Also posted at www.hoppsbusch.com - my blog.