Social Game Design: Monetization
As I stated last time: social game creation and distribution companies often discuss three important qualities of a game on a social network. Virality, Monetization, and Retention. Today’s topic is monetization.
What? You say that monetization isn’t a game design topic? That’s for marketing, sales, and business departments to handle? Look, I know you’re in the design business for the pure love of making the best possible games, but you’ve gotta eat too, right? Also, I believe monetization works ten times better if it is integrated into the design of the game by the designer. This topic is so huge I could probably write a book about it, so I must choose to narrow my focus for this first post about it. Today will be more of an overview and starting point for the topic that I will come back to from time to time.
Most games are monetized in one of these ways: Single (one-time) purchase; Advergames; Episodic content and paid unlocks; Subscription; Virtual Goods.
Social network games do not mix well with all of these methods. Single-purchase, for example, is a terrible way to make money in social games. All the other games are free, so you can’t ask for money up front, you’ll just get ignored. You could use the established download game model of free for a while (commonly 60 minutes for download games) and then charge the one-time fee, but it’s still a lousy fit for the environment. In social games you need players to keep playing and keep recruiting their friends.
While Advergames can work on social networks, they are pretty inefficient ways to make money for the game builders. For the company that desires the advertising it might be another story. As a game designer, I find this is just a sad way to leave a lot of money on the table. If you want to combine it with other methods (like virtual goods) that would be another story!
Pure subscription models also don’t work well on social networks for a lot of the same reasons single-purchase doesn’t work. The other games are all free and the smaller, more casual games you’re probably making for social networks don’t appear to be worth the price of a subscription. (Yes, I know you might be making more money with a virtual goods model than a subscription – but we’re talking about how it feels to players, not about reality.)
Episodic content and paid unlocks are a solid way for a social game to make money. The hard part is deciding what parts of the game will be locked and which parts will not. You need just enough to get players hooked, but still have enough meaty options for them to unlock. The more content you can add as time goes on the better. You can start with little or perhaps nothing for pay and so long as you can keep to a solid schedule of adding new content for pay your game may thrive. Episodic content is half of the “freemium” model.
Virtual goods are by far my favorite way to monetize a social game. The game is free, but must include items or objects that can be collected, used, or (often) worn by player characters. Almost all (if not all) of the best known social games sell virtual goods to their players. This is the other half of the freemium model.
Episodic content and virtual goods both must be designed into the game to perform at their best. It’s hard to add them later. How to best use them? That’s a topic for another day.
It should be obvious that if you want to make money from a social game there has to be a way for the player to put money into the game. The two major ways for this to happen are direct payment (they mail you a check, or input their credit card information) or they can do “work” for you. I use quotation marks there because what players do is not something you might consider work. Usually through a 3rd party, the player spends their time and attention on something that results in the generation of value for someone (hence “work”). It could be direct value to you, but usually you’re busy trying to make a game, not harvest the work of the internet masses (if you wanted to run wikipedia, well, I hear that job’s been taken.) So this third party asks the player to do some work and in exchange the third party pays you money. You complete the loop by giving the player something in your game. The industry term for these arrangements is “offers.”
Now you have two methods for players who want more out of your game to give you money. What are you going to give them in exchange? You could offer them individual rewards for each offer they complete, or let them purchase each reward directly with their credit card. There are some problems with this, however. On the offers side, it can be difficult to standardize the offers to be of equal value. The offer providers will have many options that are not of equal value to them. If you force a standardization on them you’ll be leaving money on the table – sometimes overpaying a player for a less-idea offer. Either that or you’ll only be accepting a very few offers, and players won’t be able to find an offer they find attractive (“work” that fits their preferences). On the credit card (or paypal, etc.) side, if you ask the player for direct payment for each little thing you sell them they will be annoyed. Also you’ll probably want a minimum purchase amount on a credit card transaction (you pay fees on those, after all) which severely limits what you can sell to the player.
For a single purchase game, like a retail game or a traditional download game these wouldn’t be big issues, but we’re talking about social games here, where the microtransaction is king. All of this leads us to the need for an intermediate step, a currency within the game that can aggregate the player’s payment in different amounts and from a variety of sources into one place. Then this paid currency can be used by the player in various amounts to buy things in the game that they desire. Freeing up the amounts both coming in and going out vastly improves the efficiency of the system and the happiness of all parties involved.
Using paid currency has other advantages as well. There is a significant psychological effect on the player of having a currency they are not natively familiar with. In the United States (for example) everyone knows the value of a dollar – it’s the money they (we) use every day. Another currency, anything from yen to your game’s paid currency, is less solid. The value of it is less clear and it has a bit of a fantasy quality. This is one reason people tend to spend more freely when on vacation – they can’t quickly calculate the value in their native currency, and the foreign currency doesn’t hold that intrinsic-value grip on their psyche. The paid currency in your game will act the same way.
When setting up a paid currency for your social game you will need to decide the conversion rate. How much of your game’s paid currency does a player get for their dollar (or euro, yen, wan, peso…)? I hope it’s obvious they should get better than 1 for 1. You want to make it difficult for them to convert, so I would avoid all strict factors of ten. If you observe some major and successful paid currencies you’ll see numbers like 80:1 (XBOX live), or somewhere in the 760s:1 (Nexon). The two biggest reasons for these inflated numbers are: giving the player a feeling of value, and reducing the size of your smallest price. When you pay $5 and get 400 paid currency you feel like you’re getting a good deal. When you’re shopping in the game’s store and you see something for a mere 10 paid currency, you feel you can easily afford it because that’s what? Some small fraction of a dollar that you can’t be bothered to calculate because you’ve already clicked “buy” and moved on.
In a free to play game with microtransactions and virtual goods, why shouldn’t you sell everything? If players are willing to buy it, shouldn’t you put a price on it and sell it to them? I have seen this attitude in a lot of people in the social games industry. Yet I strongly believe the answer is, no, you should not. I have had to fight to convince others that there should be desirable things in every game that cannot be bought. I will argue that having such things will actually increase your overall revenue, even though you’re not selling them. So what do I mean by things that are valuable but can’t be bought? How do players get them? They earn them. Your game should have things that are earned by playing the game, preferably by playing it a lot.
How does that help? If players can buy everything the want, some of them will do exactly that… and then they will be done. They have it all, and they will shortly find that your game holds nothing more for them and they will quit. Sure, you got some money out of them – but these were your big spenders, your whales! You want them playing as long as possible so they’ll keep giving you large sums of money. If they can buy everything right away, you’ll lose them. You need some things they can’t buy so they’ll have a reason to keep playing.
Providing earned-only things also helps the non-paying player. This player needs to feel they can compete with the rich kid next door who buys everything. If there are cool things that must be earned, the non-paying player can feel good about earning them (sometimes ahead of some number of paying players). You are rewarding their loyalty and commitment to the game with a cool thing. This keeps them playing longer, and the longer they play the more time you have to convert them to a paying player. Also, if the things they can only earn are really cool, they will have increased feeling that this game is “worth it” and might change their mind about putting in money for that reason (instead of the reason of “I want X”). Do I also need to explain why you need non-paying players in your game, even if they never pay? I shouldn’t need to, but here are two reasons: They tell paying players to come play, and they provide content (in any interactive game) for the paying players.
Needing earned-only things leads to the reasons why I believe two separate currencies is ideal in most free-to-play games. One currency for paid items, and the other for earned items. It is important that there is not any direct way of converting one to the other. Too many free-to-play games allow players to purchase the earned currency either directly or using the paid currency. That removes the main purpose of having separate currencies in the first place.
Dual currencies also leads to the third (and equally important) type of item for sale: the item sold for both currencies. Here’s one of my favorite examples: In League of Legends you can buy extra characters to play. The above image shows part of the store. We can see five characters for sale, each of which has two prices. The first price is in paid currency (the fist), and the second is in earned currency (swords). Obviously, your math should always work out so that the earned currency numbers are bigger, making purchasing feel efficient (compared to earning). Also note that some characters have the same paid price, but different earned prices, or vice versa (I think Garen was on sale at this time).
What does this do? Why is it so important to have two prices on these characters? It leads your players into the critical decision point of whether to spend money or not in a way that is most excellent for you. The player wants to own many, if not all of these characters (because your game design is good – a topic for another day). This player didn’t plan on spending money, so they are trying to earn them all. They come to buy a character and they start calculating: “I earn 500 a day, so it takes me a week to unlock Shen, or two weeks for Malzahar. It’s going to take me six months to get everyone I want… I can get there, so I don’t have to pay, but if I just buy Malzahar now I’ll save myself two weeks and be able to get Kennen that much faster.” In addition, there are important items in this game that must only be earned. This also enters the player’s thinking: “If I save 6300 earned currency now, I’ll be able to get the Runes (those earned-only items) I need that much faster. I can’t buy those, so perhaps I should buy the thing I can buy.”
With this system of dual currencies, items that are earned-only and items that can be obtained in both ways (and proper pricing) you can lead players into this pattern of thinking, which increases the chance they will make their first purchase. They feel they could earn it all, but they know they don’t have that much time, and they realize that time is money, and decide that your game is worth the monetary investment.
If the non-paying player in my story above felt the game was “only for rich kids” because everything was sold up front, for one currency, they would not have played it long enough to reach the purchasing decision point. If there were not ways to earn the valuable goods, and if there were not some earned-only items the player might not go through as many “pros” to making the purchase in their mind when they reach the decision point. Even for players willing to pay from the first day, these calculations are interesting and knowing they will earn some items and not have to pay for everything makes them happy, and more interested in your game. (Source: Design-Side Out)