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Michail Katkoff, Blogger

November 22, 2013

5 Min Read

I left monetization as the last piece in the mid-core success series simply because I see monetization as a result of a well-functioning core loopstrong retention and meaningful social mechanics. Thus you won't find best tricks and tips on how to get people to spend in this final post of the mid-core series. Instead, I'll present monetization as a flow of all 3 of the success parts introduced in previous posts.

Formula for Monetization

On a high level, the formula for monetization is actually pretty simple: DAU (Daily Active Users) x Conversion (% of payers) x ARPPU (Avg. Revenue Per Paying User). Even though there are three key variables in the formula, we tend to focus on only the two latter ones with the discussion revolving around whales, price points, DARPU, amount of payers and all those little 'tricks' developers employ to incentivize players to pay and pay more.

Personally, I have a different approach. I honestly believe that in order to achieve that desired financial result you have to simply forget all those monetization features. Instead of monetization you should concentrate on retention, game economy and social mechanics.

I believe that demand for players to convert is created by slowing down the rate of progress in line with time spent playing a game. Social mechanics are vital in monetization because they make players compare their progress to others’ and thus tend to create a social obligation to keep up. 

Players are primed to spend when their progression slows down over time and theyare constantly comparing their progress through social interaction inside the game. 

The Monetization Don’ts

There are two commonly used approaches I suggest avoiding when it comes to monetization. First is the concept of in-game items, which players can only get by spending real money. Second is the concept of in-game sales.

1. Premium Items

Adding in-game items, which are sold only for hard currency, is the most-used way to create a pay-to-win game. By adding these super powerful items and offering them only to players who are willing to spend real money on the game, you’re essentially discriminating against the non-paying players, aka. the majority of a player base. 

If there’s absolutely no way to earn these powerful premium items, the players who have them will be seen more or less as cheaters when they rack up wins. And who wants to play against ‘cheaters’? Also, who wants to win when everyone around him knows he paid to get the W?  

Zynga's Respawnables encourages player to purchase premium weapons, whichplayers can get only with hard currency. These premium weapons eliminate all the need to progress and unlock new weapons thus killing the core loop. 

2. Sales

The problem with constantly running in-game sales is that they significantly change players' purchasing habits. Sure, you'll get those nice sales spikes when the sale is running, but once the sale is over, your numbers will drop way below the levels where they started. In other words, you'll teach your players to purchase only during sales and avoid making purchases at other times.

Product Managers, who like to run sales, tend to underline that they are selling virtual items (at least that's what I used to say a few years back), which is essentially an infinite resource. But virtual items have value and that value is progress. So running sales actually allows engaged players to progress faster and thus increases the demand for more content.

Game of Wars by Machine Zone is notorious with their pushy sales. They run so many sales that I'm actually unsure if you can purchase something that's not on sale.

Don't get me wrong though. I'm not totally against sales. Personally, I like to do two kinds of sales. First are sales aimed at players who haven't yet converted. Encouraging these players to make their first purchase, then stopping offering sales to them after the purchase is made is a sound approach. The second is seasonal sales. Halloween, Black Friday, New Year etc. Seasonal sales won't affect a player’s purchasing habits, as the season communicates clearly the uniqueness of a sale. 

Treat Monetization as a Flow

In my mind, sustained monetization is a result achieved through excellent game design, balanced game economy, engaging social mechanics and a fresh approach. 

Personally, I like to look at monetization as flow. It all starts when player begins the game, by creating the impression that this is a cool new game, full of action and entertainment. It's a game players haven't played before.

After wowing the player and getting her to come back, it's time to get to work. Make sure player enjoys playing the game. Gradually show all those interesting features that make the game experience so much better, and most importantly, create demand for the player to progress.

When your players want to progress, it's time to get those social mechanics in. Make sure that players can collaborate in a way that benefits both players. Also, make sure that the collaboration between players happens in an environment where both of them can show off.  

When your players are wowed from the get-go… When your players are enjoying your game and want to progress… When your players collaborate and show off their progress… Then you have a mid-core success. 

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