The popularization of digital games has had profound effects within the interactive entertainment industry. The shrinking gap between producers and players is presenting the industry with a new set of challenges, but also exciting new opportunities. Today’s audiences have come to expect more sophisticated gameplay even from relatively simple games. We are witnessing a trend in technology which is pushing games to new platforms and distribution methods, slowly rendering the days of boxed games obsolete. As a result, new models for monetization and engagement are becoming necessary. Game companies are quickly coming to this realization, with many embracing the change and many more shifting, or planning to shift, their business models to adapt.
The elephant in the room of new monetization strategies is the free-to-play (or F2P) model. F2P games are games which are available at no cost to players. Microtransactions within the game are then used to monetize the game. Players can play for free, but are often encouraged to pay for certain in-game items (like powerful bonuses, levels, costumes, etc), and maintained through frequent updates and patches over long periods of time. In other words, in the F2P era, games are becoming less like a product and more like a service.
Over the last 5 years, we’ve been witnessing the games industry shift more and more towards the Games as a Service (GaaS) model. As a result, games have been enjoying longer and longer life-cycles today than ever before. A major contributor to this, of course, is the shift to digital distribution which makes it easier for gaming companies to release patches, title updates, and add DLC to their games to keep them fresh. With distributors like Steam and the Apple App Store able to carry thousands of titles at once, games have more opportunity to earn income long after their initial release.
SuperData has found that effective monetization through free-to-play and GaaS is putting considerable pressure on pricing within the industry, as premium titles now compete directly with games that ask for no upfront payment to start playing. More so, it has lowered the barriers to entry for players, the influx of demand has resulted in a glut of supply and competition. According to industry sources, there are currently over 170,000 games active on Apple’s AppStore platform, which all compete for a similar audience.
Success in this new age of game monetization
Almost anyone who has ever sold something is familiar with the concept of a monetization funnel. Within the new age of free-to-play this visualization is more important than ever before. New revenue streams have quickly made inroads in the gaming business, while traditional ‘units sold’ often still functions as a stepping stone from which game companies expand. Acquisition, retention, and monetization are pretty simple concepts, but if you’re looking at employing a Game-as-a-Service model your approach and focus will have to diverge from that of a traditional pay-to-play game.
The name of the game for boxed game sales. Make your game, get it on a shelf and dump money into marketing to get people to buy it. This model worked very well for many years, but in this new age of digital distribution and its increasingly connected consumers, the idea of spending a bunch of marketing dollars to get as many customers as you can to make a high-cost one-time purchase has become a dangerous trap to fall into. With that being said, the prospect of acquisition is very easy to become enamored with, “we built this game, now let’s get a zillion people playing it” is a great thought to have, but it’s not the be-all-end-all of how games achieve high lifetime value (LTV) anymore. A lot of F2P game makers are still making the mistake of spending too much money on acquisition, but in the age of F2P and GaaS it’s kind of like pouring a bunch of water into a leaky bucket, everyone falls out and they make no money.
Retention is the most critical piece of the F2P monetization funnel, and the one thing that anyone selling a service should embrace. A core aspect of the F2P model is achieving a high LTV (Lifetime Value) from your customers. Lifetime Value being a major function of retention, you will want to figure out which features and mechanics are going to keep your players engaged with your game, and make them core aspects of your game which are incredibly fun and rewarding.
Keep the customers you get
Its almost inevitable that throughout a game’s lifespan, players will continuously fall off or stop spending (Churn), but if your retention strategy is sound, you will also be developing a hardcore or even a loyal casual following who are willing to spend more and hopefully make up for the churn. In order to maximize your chances for retaining your playerbase, keep your game free to play forever. That’s right, enable your players to experience nearly all of your game for free. Don’t kick out the players who will never pay, they may introduce someone they know to the game who will. Instead of kicking people out of your funnel who aren’t profitable, give your fans a way to buy anything they may want, offer a virtual currency that is earnable in-game to keep them playing. Keep it fresh. Track retention, churn, and play duration. The best performing F2P games are releasing new material over time. The name of the game is delivering ongoing value to keep your players engaged. Give everyone a reason to love your game enough to spend money inside of it; make everyone a “Whale” because a whale is just a symptom of a highly engaged player. Your retention strategy should always be a part of your game that players want to keep coming back to.
The goal of your game, even if its free-to-play, is to make money. So, how do you ultimately monetize? Well, hopefully you’ve got a strong retention strategy in place, so the next logical step is figuring out how to convert some of those players into payers. If your game is fun, and your players are loyal and engaged you should have plenty of customers who are willing to pay for the additional value you provide. Your responsibility is to ensure that your DLC items are desirable and that your pricing is right. You should always be thinking of ways to incentivize your players to buy. Offer rewards for spending goals, bundle, and make as many things as possible earnable by playing the game. Drive higher ARPU (average revenue per user) by selling things like gear and enhancements, time displacement (speed up/slow down task duration), costumes & vanity items, maps and map skins, virtual currencies. You will never get everyone who plays your game to pay. Don’t be discouraged. According to NewZoo, only 39% of console gamers in the US never spend money on console games, and 55% of mobile gamers never spend money on mobile games. Even if you do all of this right, there is still a chance your game could fail, always listen to the voice of your community and learn how to do things better.
Being Disruptive and Delivering an Experience
Gaming is one of the most interactive and engaging forms of entertainment. It is one of the few forms of interactive entertainment that entire communities are able to be built upon. How you leverage and interact with that community will be key to your games ability to build, retain, and later monetize your playerbase. Use tools like Steam Early Access or Apple’s TestFlight to test your model with a sample group of players, which can be a great way to get early feedback and test your ideas. The game companies of the future will take risks and test their strategies endlessly. The most successful games will be those that provide their players with the most opportunity to build equity. For players, experiences are what keep them coming back to play again. Every F2P game needs some kind of “quality hook” that allows players to immediately discern that your game is worth their time, some way for them to tell that it was professionally built by a developer who cared about providing them with a great experience. Whatever the hook to your game is, make it something powerful, fun, and rewarding.
Free to play is only the beginning
The F2P model opens a lot of doors for the games industry, but is only the beginning. Even though it’s been around for a little while now, the free-to-play model is still not mature. There are still tons of opportunities to be disruptive and to think outside the box. Extending on the F2P model will be key for games of the future, as F2P is only a small piece of the high-LTV puzzle. The companies that embrace this will set themselves up for success out of the gate. In this new gaming ecosystem, game companies will have to think more like marketers and service providers from the very onset of their planning, all the way to their post-launch support. They will partner with other brands, and attempt to engage and delight their players from angles that exist even outside of gameplay.