Microtransactions: A Love Story


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I gave this talk at Unite 11 and will be giving a similar talk at GDC Online 2011. It's an ode to microtransactions. I walk through the history of games monetization on the open web, Facebook, and later mobile. I arrive at microtransactions and how they have quickly become the standard for monetization across all platforms. I also run through best practices when designing a game to maximize revenue through microtransactions.

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  • * Thank you for coming. Davey and Ngozi are talking about some really cool stuff next door so I’m grateful that you guys are here. It’s also an honor to close the conference. This is my first Unite, and my first month with Unity, and I’m really just honored to be here. Alright, let’s get to it!
  • Let ’ s start with talking about how games make money.
  • (Read the slide.) 10+ year old model, started on web. Let’s see an example.
  • We all know this game. Couldn’t find a Bejeweled 1.0 graphic, but this is exactly how it was back in 2001 on popcap.com. Look at this Call to Action. Note that the “Try Now” button is the largest. Let’s take a closer look.
  • Trial period = F2P? No!! 3 things: visible price point messaging is “ try ” not “ play ” word free is not emphasized Let’s look at some messaging for F2P games today.
  • This is how F2P is typically messaged in a call to action. No price point The word FREE is often emphasized, sometimes in ALL CAPS We have play, start, join, choose. Note the lack of the word Try. There’s no try in F2P. In the words of a very wise creature…
  • Play or play not. There is no try. Is this model --- the paid download / one and done --- still alive? YES.
  • It ’ s now mobile. Same 10-year-old model began anew on mobile a few years ago. Does it exist still on the web? Yes, but not as much.
  • Telltale still makes it work on the web. For those of you who know, Sam & Max is a great comic and now a great series of games by Telltale. For those of you who don’t know Sam & Max, you should! They’re awesome. I have the TV series on DVD if you’d like to borrow it.
  • But is moving to mobile. That ’ s the paid download model. How else can we monetize?
  • So much inventory ---> low CPMs + too many middlemen ---> not much $ for devs
  • Frankly, this is not a very scalable model for developers. Began on Open web Miniclip, Addicting Games, and other web portals. Aggregate games, make money from advertising. Devs would get a small cut. On Facebook. Rock You, Slide, and MindJolt, GooBox, etc. These companies were huge for a little while, and then fell by the wayside. You can make a little money, but not a much. Are ads bad? NO . The position you want to be in? BUY AD INVENTORY, NOT SELL INVENTORY. How else can we monetize?
  • Great model for large games with TONS of content; not realistic otherwise 1 months of content is A LOT Revenue is still limited by subs fee x subs months
  • example of subs models, including a children ’ s mmo What else???
  • emphasize ANYTHING Let’s see some examples of games that use MTX
  • * here are some mtx games, web / facebook / mobile * casual themes for kids or moms * are mtx for only these types of games? NO.
  • * Core themes for males 13+ * Note that MTX is absolutely NOT just for casual themes anymore. MTX it ’ s quickly becoming the Standard monetization method for games on web and mobile. Review stylistic differences in logos between last slide and this one Back to the monetization methods
  • Let’s map these on a simple Business School 101 graph of Revenue Potential Lack of friction for customers getting in the game
  • Let’s start mapping our monetization methods
  • High friction, decent revenue
  • Low friction, low revenue
  • * friction spread: f2p (Puzzle Pirates, Star Trek Online) to pay up front (WoW) - BUT, WoW just went f2p for the first several levels, i.e. f2p is becoming the dominant model * good revenue potential
  • Best revenue... what about friction? MTX can go F2P or Paid Download - this sets the Friction point Let’s talk about MTX and F2P. They’re not the same, but they do complement each other.
  • Do you need f2p? Not always. General rule is that a casual game is better positioned f2p, core game as a paid download. But we ’ re seeing “ premium ” casual games positioned as paid downloads too.
  • Going back to our graph
  • That’s the place you want to be. Free is great, but let’s talk about MTX, b/c that’s why we’re here.
  • note that i ’ ve just done steve ballmer thing
  • from Mobile, but this is true on the web
  • Here ’ s the Top 10 Top Grossing on iOS from a few days ago. SHADOWNGUN IS THERE NOW!
  • The upside for the No.1 slot rises every day, will probably be $200K+ by 2012
  • Will be 80/20 by 2012, thanks for Jeferson from Flurry
  • avg customer >$12 spend BUT What ’ s that distribution like? Do people spend more than $12? How about $50? $100? More? How many spend that much?
  • i.e. More stats
  • explain graphic, the long tail, thanks to Chris Anderson from Wired
  • explain the long tail, i.e. where the revenue is
  • explain the whales * 10x the avg customer spend * transaction 5+ times * where a large portion of your revenue is concentrated * how much can whales spend? Hundreds on mobile. Thousands on the web!
  • How do we get there?
  • Here are 6 guidelines. Let’s go through them one at a time.
  • 1. Time in game = more opportunities to monetize 2. Engagement loops increase time in game 3. Core design of the game should keep this in mind. Solve these issues before you build anything!
  • what does this mean?
  • If you sell this, the game ends and so does your monetization potential. Remember: time = money! Example: Infinity Blade - can ’ t buy skills, only weapons. Still have to grind away to build skill set to win.
  • 1. You can always lower prices later. It ’ s hard to raise prices after the fact. 2. You can lower prices, but keep some high price points around. At least a few people will definitely buy them. At worst it’ll pay your bar tab for a few nights. It might pay your bar tab for a few months. 3. The high price points make the lower price points more attractive. Don ’ t sort by price. 4. Your players are an oven, a furnace, and will burn through whatever content your feed them. Understand the content consumption (i.e. burn) rate, manage your art pipeline, and keep the fire stoked. FOR EXAMPLE: Jetpack Joyride… Love the guys at Halfbrick, make some of the most entertaining games out there, Fruit Ninja and now this one. JJ was a great first shot at MTX but they gave away the farm. I spent a few bucks and now I really don’t need to spend again. EVER. Price high!!
  • Why should you hire an analyst? Let ’ s talk about the current trend in mobile, which was the trend on Facebook 3 years ago (and still is in many ways).
  • First you clone games
  • and then hire quants to analyze customer data to maximize revenue GO BACK AND FORTH BETWEEN THE 2 SLIDES! SAY CLONE AND QUANT.
  • No, you don ’ t have to clone.
  • But you have to Quant. The value add is huge.
  • 1. This is a high level talk. Let Dave McClure explain the details in his deck. Regarding the where, lightweight solutions exist. Simple DB queries are powerful. Kontagent is a great SaaS solution. Heavyweight strategies like Tableau/Microstrategy aren ’ t immediately necessary (and they ’ re expensive), but if you can afford it, go for it. 2. A/B testing, merchandising, targeting 3. Don ’ t let data paralyze you. Sometimes the data are unclear and you have to trust your gut.
  • 1. Pull everything you can from the client and stick on your servers. Makes for true continuous deployment. 2. Make this all configurable from the web such that a non-engineer (i.e. PM) can make changes any time, any place. 3. Ideal situation: Artist makes an asset, PM uploads to server, prices it, and deploys it live WITHOUT EVER BOTHERING AN ENGINEER. SCRUM at 11 AM --> Deploy at 5 PM. Six hour release cycle . (With data to review after dinner. Or breakfast the next day.)
  • * Data answer several questions - who, what, where, when, how... Not the why. You have to talk to customers to understand the why. * Eric Ries customer dev/lean startup philosophy. * Speak to your whales (and some non-whales) to understand what makes them buy so much (or so little) so you can “ Grow More Whales. ”
  • Microtransactions: A Love Story

    1. 1. Microtransactions: A Love Story
    2. 2. How do Games Monetize? Unite template 09/15/11
    3. 3. Paid Download <ul><li>Pay once, and that ’ s it </li></ul><ul><li>Try and buy (reduces friction only slightly) </li></ul><ul><li>Max revenue per customer is the cost of the download </li></ul>Unite template 09/15/11
    4. 4. Unite template 09/15/11
    5. 5. Is this Free-to-Play? (hint: NO!) Unite template 09/15/11
    6. 6. Unite template 09/15/11
    7. 7. Unite template 09/15/11 Play or play not. There is no try.
    8. 8. Unite template 09/15/11
    9. 9. Unite template 09/15/11
    10. 10. Unite template 09/15/11
    11. 11. Advertising <ul><li>Game is almost always free </li></ul><ul><li>Ads appear as banners, during interstitial moments </li></ul><ul><li>Developer is paid per 1,000 views (CPM) </li></ul><ul><li>Revenue potential is small </li></ul>Unite template 09/15/11
    12. 12. Unite template 09/15/11
    13. 13. Subscriptions <ul><li>Great for MMOs with months/years of content </li></ul><ul><li>Not so great otherwise </li></ul><ul><li>Max revenue is defined by length of customer engagement </li></ul>Unite template 09/15/11
    14. 14. Unite template 09/15/11
    15. 15. Microtransactions (MTX) <ul><li>Customers buy in-game currency and spend it on... </li></ul><ul><ul><li>weapons </li></ul></ul><ul><ul><li>upgrades </li></ul></ul><ul><ul><li>skills </li></ul></ul><ul><ul><li>Expansions </li></ul></ul><ul><ul><li>avatar customization </li></ul></ul><ul><ul><li>faster service </li></ul></ul><ul><ul><li>anything you care to offer </li></ul></ul>Unite template 09/15/11
    16. 16. Unite template 09/15/11
    17. 17. Unite template 09/15/11 MetalStorm
    18. 18. How Do Games Monetize? <ul><li>Paid Download </li></ul><ul><li>Advertising </li></ul><ul><li>Subscriptions </li></ul><ul><li>Microtransactions </li></ul>Unite template 09/15/11
    19. 19. Unite template 09/15/11 Revenue Lack of Friction
    20. 20. Unite template 09/15/11 Revenue Lack of Friction Paid Download
    21. 21. Unite template 09/15/11 Revenue Lack of Friction Advertising Paid Download
    22. 22. Unite template 09/15/11 Revenue Lack of Friction Advertising Paid Download S u b s c r i p t i o n s
    23. 23. Unite template 09/15/11 Revenue Lack of Friction Advertising M i c r o t r a n s a c t i o n s Paid Download S u b s c r i p t i o n s
    24. 24. F2P vs. MTX <ul><li>F2P removes barrier to entry </li></ul><ul><li>MTX removes cap on revenue/customer </li></ul>Unite template 09/15/11
    25. 25. Unite template 09/15/11 Revenue Lack of Friction Advertising M i c r o t r a n s a c t i o n s Paid Download S u b s c r i p t i o n s
    26. 26. Unite template 09/15/11 Revenue Lack of Friction Advertising M i c r o t r a n s a c t i o n s Paid Download S u b s c r i p t i o n s F2P MTX
    27. 27. Why MTX? Unite template 09/15/11
    28. 28. Why MTX? Unite template 09/15/11 1. Revenue
    29. 29. Why MTX? Unite template 09/15/11 1. Revenue 2. Revenue!
    30. 30. Why MTX? Unite template 09/15/11 1. Revenue 2. Revenue! 3. REVENUE!!!
    31. 31. Some Stats Unite template 09/15/11
    32. 32. Unite template 09/15/11
    33. 33. Top 10 iOS Grossing Unite template 09/15/11 1. 7 of 10 are F2P
    34. 34. Top 10 iOS Grossing Unite template 09/15/11 1. 7 of 10 are F2P 2. 9 of 10 have MTX
    35. 35. Top 10 iOS Grossing Unite template 09/15/11 1. 7 of 10 are F2P 2. 9 of 10 have MTX 3. 10 of 10 are games
    36. 36. Top 10 iOS Grossing Unite template 09/15/11 1. 7 of 10 are F2P 2. 9 of 10 have MTX 3. 10 of 10 are games 4. No. 1 slot earns $100K+/day
    37. 37. Unite template 09/15/11
    38. 38. Unite template 09/15/11 <ul><li>>40% of revenue from IAP </li></ul><ul><ul><ul><ul><ul><li>(paid download is $6.99) </li></ul></ul></ul></ul></ul>
    39. 39. Whales and Long Tails Unite template 09/15/11
    40. 40. Unite template 09/15/11
    41. 41. Unite template 09/15/11 <ul><li>Long Tail: 20% of Customers </li></ul><ul><ul><ul><li>80% of Revenue </li></ul></ul></ul>
    42. 42. Unite template 09/15/11
    43. 43. Designing for MTX Unite template 09/15/11
    44. 44. Designing for MTX Unite template 09/15/11 1. Scalable game play 2. Don ’ t break the game 3. Don ’ t give away the farm 4. Server-side when possible 5. Hire an analyst 6. Leave the building
    45. 45. Scalable game play Unite template 09/15/11 1. Time = $$$ 2. Engagement loops 3. Solve this in pre-production!
    46. 46. Don ’ t Break the Game? Unite template 09/15/11
    47. 47. Don ’ t Sell the “ I Win ” Sword Unite template 09/15/11
    48. 48. Don ’ t Give Away The Farm Unite template 09/15/11 1. Price high on day 1 2. Caviar items 3. Apply some menu science 4. Manage the content furnace
    49. 49. Hire an Analyst? Unite template 09/15/11
    50. 50. Unite template 09/15/11 Tiny Zoo Tap Zoo Zoo Story Tap Pet Hotel Tap Petshop Restaurant Story Tiny Chef World of Fashion Fashion Story
    51. 51. Unite template 09/15/11
    52. 52. Clone & Quant Unite template 09/15/11
    53. 53. Clone & Quant Unite template 09/15/11
    54. 54. Clone & Quant Unite template 09/15/11
    55. 55. Hire an Analyst Unite template 09/15/11 1. Get metrics a. What metrics? Google AARRR from Dave McClure b. Where do I get metrics? Talk to Kontagent. Have your analyst query your DBs. 2. Experiment! 3. Don ’ t get lost in data
    56. 56. Server-side When Possible Unite template 09/15/11 1. Optimizing requires constant change in assets and values 2. Client updates in iOS = ~1 week 3. Server updates = immediate 4. Bonus: Configure from the web
    57. 57. Leave The Building Unite template 09/15/11 1. Get the “ Why ” 2. Customer development 3. Cater to your whales
    58. 58. The Magic Recipe Unite template 09/15/11 Great Game Designs + Great Technology (Unity!) + MTX = Great Businesses
    59. 59. Q&A Unite template 09/15/11