Understanding the realities of video game monetization

If there's one word that can cause chills to instantly run down the spine of any game developer, it's "monetization." Here, experts on the topic discuss the intricacies of converting free users into paying customers.
If there's one word that can cause chills to instantly run down the spine of many game developers, it's "monetization." Making money from games used to be so much simpler -- you'd slap a fair (or not so fair) price on your product, make it available to the public, and away it would go, for better or for worse. Nowadays you have to consider which parts of your game are going to make money, whether you're nudging consumers in the right direction, whether you're balancing the money-grabbing with enough fun to keep the player onboard... and that's before your game is even on sale. Just how difficult is proper monetization for your game, then? Gamasutra asked a wide range of experts in the field, with the aim to better understand the realities of monetization in a "race to the bottom" economy.

Kate Flack, Mythic Entertainment

Mythic Entertainment, a subsidiary of Electronic Arts, has had plenty of experience with video game monetization, and in particular, the subscription and free-to-play models on PC and iOS. "There's no one answer to why certain games are in the top charts," EA's Kate Flack tells me. "Each one is a unique combination of great marketing, visual appeal, a good launch date, technical robustness, compelling game play, accessible monetization options and even just hitting the zeitgeist at the right time," she adds. "You can be certain there's a dedicated dev team working hard to respond to live data, add features and support their customer base." Attempting to look at the top-grossing games on the App Store and decipher what they all have in common will be fruitless, Flack suggested, and completely miss the point (and joy) of designing games. "I liken it to writing," Flack says of monetization. "Format defines structure and styling. An author creating a short story has different constraints to someone sitting down to write a novel." In the same way, a game developer needs to have at least a rough idea of how they're going to make a living from their games before they start designing. "Is it subscription? Well you better plan to entertain people for a long time then," she says. "Paid App? Then your quality bar better be set right. Freemium? Think about your opportunities to ask for money. You can fill in the exact details as your prototype starts to take shape. You can't jam things in at the last minute - why would you treat your game like that?" Unfortunately, if there are any developers out there looking for a quick template or two for monetization strategies, Flack says that you should probably stop looking. "Everyone seems to be looking for an off-the-peg solution to monetization - a one size fits all silver bullet that will lead them to profitabilityville," she laughs. "This idea that there is one 'right way to do things' is a fantasy." "The truth is that you want to create something tailor-made to the unique qualities of your game and you as developers," Flack adds. "The things that work for a large company going for the top grossing charts are not the things that will work for an indie team looking to make $200,000 a year in their garage." You should start by figuring out what exactly your financial goals are, suggests the Mythic dev, and then approach those targets as you would with any other design goal -- and you shouldn't feel pressured into going free-to-play just because everyone appears to say that's the way to go. "If paid app works for you, go for it," she notes. "Just because you see a bunch of talks and articles about freemium it doesn't mean you have to follow suit. Mobile gaming is a vast market - billions of people - and there is enough room for all kinds of games with all kinds of payment models."

Keith Katz, Execution Labs

Keith Katz from indie games incubator Execution Labs has plenty of experience when it comes to monetization tactics, and sees common patterns in many of the top grossing games on the App Store. "There are certainly some game design commonalities among [the top grossing titles on the App Store] that contribute to their continuous presence at the top of the charts," he explains. "Most of them have great social engagement mechanisms, for instance, and that helps. These companies also spend a ton on user acquisition, which most people can't (and shouldn't) do." But really, he argues, the majority of these games sit at the top of the charts for months on end for the same reason that we all heard Daft Punk's 'Get Lucky' for four months straight over the summer: most people just focus on what is presented to them. "It's the same thing on the App Store: most users just take what's shown to them on the top charts, and this results in glacial change at the top," he notes. "Once you're up there, you're up there, and Apple and Google don't seem inclined to alter their discovery process any time soon. It's a totally fucked up situation, and it's not good for the industry. Can you imagine having to listen to the same Weekly Top 40 pop songs every week for a year with maybe four or five new entrants every week? Would that be good for music consumers or musicians?" When small studios come to Execution Labs looking to get help with monetization, the team drops a whole ton of money-knowledge on them, especially if they haven't been integrating this sort of thing from early into development. "We really beat them up about integration of monetization mechanics into their early game design documentation," Katz laughs. "This is something we believe is critical. When you play a game that has bolted its F2P mechanics on top after the game is mostly built, you can smell it." "You really have to be thinking early on about the emotions and behaviors you're aiming to stimulate among your players, and how they will respond to those stimuli," he adds. "Then it's a matter of finding the right balance between providing plenty of content for people to play for free while allowing your biggest fans to give you money for the parts of your game they really, really love." It's this understanding of "super fandom" for games that helps to drive monetization, Katz argues. You should always have a good idea of what your monetization levers will be, regardless of how far you are into development. "There are so many nuances depending on what kind of game you're making that impact how and when you should monetize your users," Katz muses. "So I'll take the easy way out and come at this from a high level. I tell small developers all the time that I think the chances of developing a successful premium title for the App Store or Google Play right now are effectively 0 percent. Maybe if you own a tasty license and then you've got some shot at it, but that's not going to be the case for 99 percent of developers." Thus, Katz says your choices are as following: Go free-to-play, or don't bother at all. "The discovery just isn't there," he argues. "This is not how I would draw it up, because personally -- and I get the irony because I talk about F2P all the time -- I'd rather just give someone a wad of cash for a premium experience. But it's where we are for now, and it means that game developers must learn new skills that they probably don't even want to contemplate." He understands that a lot of developers don't want to think about monetization, and find the entire act rather unpleasant. But it's key that studios realize just how important it is, and figure out how to get help if they need it. "Every developer out there has access to so much more information on F2P design than they did just a year ago, and they have to take advantage of it," he notes. "They may have to dig for it, but it's out there." Katz adds, "You know what else is out there? Thousands of successful and failed F2P games. It's like you have a box full of free business school case studies to examine, free of charge. Do that, but -- and this is critical -- don't study the successes so much! Spend time way down in the top 500 downloaded sub-categories and study the failures. You'll start to see patterns and will be able to avoid making the same monetization mistakes in your game."

Ethan Levy, FamousAspect

FamousAspect is a monetization design consultancy firm run by Ethan Levy, an 11 year veteran of the video game industry who has worked as a designer and producer at studios like Pandemic, BioWare and PlayFirst. "I have a theory about gaming in general, that it is very soothing emotionally," explains Levy, "such that playing any game is a form of self-medication to help relieve a player from the psychic pain and stressors of everyday life." With this in mind, Levy has observed that mobile gamers tend to have a "go to" game that gets them through the day, and games like Candy Crush, Clash of Clans et al do a great job of fitting that description. "Whatever the game is, it generally gives the player a relatively simple, repeatable set of action he can enjoy in short bursts of relief throughout the day," notes Levy. "In the case of mobile, these are games that work on an easily accessible device the player carries around with him and can deliver a satisfying gaming experience in bed at the beginning and end of the day, on the couch while watching tv, at the end of (or during) the work day, on the toilet (don't pretend you've never played a game on the toilet), etc." In other words, if you want a better chance of rising up the Top Grossing charts, you'll want to provide daily joy and relief to your players, while making sure to keep the experience fresh over time with new content, be it new levels, units or global events. And this is where the monetization starts to kick in. "Cultivating this long-term relationship with the player is key to staying on top," says Levy. "I believe that a game team needs to be as mindful of monetization on day one, as they are of fun factor and long-term player engagement. I prefer to work in a design process that forces game designers (and all members of a game team) to consider monetization and metrics from the earliest stages of proposing a feature where applicable." Having said that, he think it's certainly possible for a studio to add successful monetization options later into development -- although adding monetization early into development is preferable. "I also think that monetization needs to be something all game team members think of and embrace," he adds. "It cannot be the sole responsibility of a single product manager, producer or consultant. Every member of game team makes choices big and small that affect a game's monetization design - from the way combat formulas are calculated to the placement of buttons on the screen to the text on those buttons." It's when members of a team start distrusting or feeling embarrassing their own game's IAPs, that flaws in the design start to seep through - thus, it's doubly important to make sure everyone is onboard.

Martin Koppel, Fortumo

Fortumo operates a worldwide mobile payments provider, yet COO Martin Koppel tells me that regardless of your monetization strategy, you need one key ingredient first -- a good game. "A bad game will not become successful even if it has a brilliant monetization strategy," he says. "Meanwhile, games with excellent content and quality will keep players coming back for thousands of game sessions, and it is a logical consequence that these games also make the biggest profit. Staying on top of the charts for a long time requires creating an addictive game which has just the right amount of monetization to not break gameplay." For those studios who do have a great game (or concept) on their hands, though, Koppel explains that, from his perspective, a free-to-play game can only be successful if the monetization has been naturally built into the game -- essentially developed alongside the actual game, rather than as a separate entity. "People want to buy either very cool items to show off (like a Mighty Eagle), items that help them become better in the game (a box of grenades or a Lamborghini Diablo) or even better, these two combined," says the Fortumo COO. "You simply can not add such things in a later stage of game development." Of course, you still need to be careful with how you balance monetization versus gameplay. There's nothing more annoying that a pop-up box that asks you to pay to proceed, for example, regardless of how much fun a player is having. "Regarding the technical integration of payments, it is perfectly fine to leave it to later stages of development if you plan to focus on Western markets where credit-card based payments work fine," Koppel suggests. "However, if you want to go into markets like India or China, you can forget about getting revenue from platforms like Google Play. Credit cards are non-existent here and you need to integrate several different payment methods. Without prior experience in these markets, getting everything set up and running takes time so you need to start early." So what tips does Koppel have for developers starting out with monetization strategies? Are there any key factors that devs should be keeping in mind? "Getting to know the payment behavior in each specific target market helps avoid mistakes in monetization," he answers. "Developers often overlook purchasing power parity. If you are selling 'A Powerful Sword' within your game for $10 in the States, you can’t ask for the same amount of money from users in Brazil or India, as this amount of money has a much higher value in these countries." Indeed, knowledge of different local app stores, currencies et al is important for sale of games worldwide, and Koppel says that "every developer should start tracking KPI-s like retention, timing of payments, geographical distribution, ARPU, ARPPU, conversion, drop-offs, average time to first payment, effect of discounts, campaigns and special offers from day one." Metrics like these help you to understand the intricacies of converting free users into paying customers, and motivate them to spend even more money in your games. "For example, if you know that the average user takes 15 days to pay, you can show every user who has not made a purchase by day 16 a discount offer within the game to introduce them to in-app purchasing," Koppel adds. "Downloading local, successful apps and figuring out how they are monetized helps to avoid the most common mistakes in overseas markets."

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