[This article is cross-posted from the author's personal blog, yayitsandrew.com]

Want to make money like League of Legends? It's simple, be a hobby for millions of gamers worldwide! Every F2P game aspires to becoming a hobby and League of Legends has done it. Just like any other hobby you'll need to pony up a lump of cash to really get going. To LoL's credit, your early sessions are free. After that, you probably have expert friends that already play (and convinced you to start playing) who will tell you the best way to spend your money. But you're not really getting into it without eventually spending money. That'd be like trying to ski without buying gloves or a jacket.

I mention the hobby property of LoL not as an explanation for how they make their money, but because it is important to recognize that LoL has obtained this special status and you must always ask yourself if the facet of the game you're interested in is monetizing because of the hobby thing, or because it's a valid micro-transaction model?

I know that's not very specific, so let me first dispel the most common LoL misconception and then go into detail on all the things they're doing right. If you want to know how to properly use LoL's monetization model, keep reading.

The Great LoL Misconception

LoL doesn't monetize because they have a release cadence of new champions. They do make money because of the champion cadence but the cadence isn't why they make their money. This goes back to the hobby thing. This is one of those hobby things. If you make a game and think you will get money with champion cadence, you will have to make another game. Because your game isn't a hobby and your cadence content isn't going to sell well enough to build a business.

This is analogous to how World of Warcraft became popular and then we stomached an entire decade of me-too WoW-style games which wasted millions of development dollars because we thought a subscription based MMO was a valid business model. It wasn't, WoW was just a hobby.

Actual Ways LoL Monetizes

Okay, now let's get to the good stuff, here's things you can do in your game and point to LoL and say "There is my proof that this works." All that's left is to implement it properly.

Some quick games industry terminology if you're unfamiliar: soft currency refers to game currencies that can be acquired by playing the game. Hard currency is a game currency you must spend real money to acquire. Hard currency is sometimes given out for free during promotions, but in very small quantities. You can treat hard currency like real money because of how tightly controlled it is.

Create a Currency Waterfall Effect

There are two major things you have to buy in LoL if you want to be competitive. The first is champions, and the second is runes. Runes are tiny little stat buffs and you can equip 30 of them onto a champion. Just how tiny? An armor rune will give you 1.41 points of armor; the average character starts with around 16 armor. Runes are tiny little stat buffs.

Since they're tiny, to get an advantage you need a lot of runes. A high level player with a couple years invested into the game will have over 300 separate runes, each one costing the equivalent of 3 or 4 games worth of proceeds. LoL games take an average of a half hour.

So you need a lot of runes, no big deal, just buy them right? Let's look at the currencies you can spend in-game.

Wait you can't buy runes for hard currency? Nope. This is the core mechanic of the currency waterfall effect. If you want to be competitive you have to buy champions and runes. Since runes can only be purchased with soft currency, and you need so many runes that they can literally sink your soft currency for over 600 hours of gameplay, it's probably unwise to waste soft currency picking up champions. So you buy champions with hard currency. This is the most efficient way to get what you need to play the game at a high level.

The game doesn't tell you champions are only available for hard currency, but because of the cascading effect of all your soft currency being already sunk by runes, champions may as well be only available for hard currency.

Once you're already spending hard currency on your champions it's not very hard to get you to spend a little more for a bundle that includes a custom skin for the champion. This reinforces that you buy champions with hard currency.

Put Bologna Around the Dog Pill

Even though it's inefficient to waste soft currency on champions it's very important that they be listed as having soft currency prices. This is because it gives LoL the perception of not being pay-to-play. "You can buy anything with soft currency!" a player might say; even though they themselves would never spend their soft currency on champions.

Perception is important in F2P games, more so than in traditional boxed software. When you have something your players might view negatively such as in-game items that are available for only hard currency, you have a dog pill in your game design. The manner in which you 'spin' that feature to alter its perception is the bologna. A dog won't eat a dog pill, but if you hide it in bologna he will.

Don't Fix Highly Engaged Pain Points, Monetize Them

Once you can identify players as highly engaged -- those who play so regularly that they are unlikely to quit -- you can start to treat them like they were boxed software buyers. In the console days when players had to pay $60 up front you could get them to sit through a lot of uncomfortableness before they got to the good part. Chalk this up to any number of well-known consumer behavioral traits. In F2P you aren't afforded this luxury. Your players have invested nothing and will leave at the first sign of confusion, boredom, or frustration. Until they're highly engaged.

LoL has some UI which lets you save configurations of 30 runes so that you don't have to equip them before every game. They're called rune pages. You start with only 2 of them. Since you could want a rune page for every champion you frequently play, and sometimes multiple rune pages for different ways to play a champion, by the time you're advanced at LoL the 2 pages will not be enough. It's trivial from a technological standpoint to allow for the creation of any number of rune pages to meet your needs, but this isn't what LoL does. Instead, they sell you more rune pages.

You can buy them 1 at a time but they cost as much as a champion, and because of the currency waterfall effect you shouldn't waste soft currency on rune pages. You can also get a bundle of 7 pages for a hard currency discount.

Since rune pages are not a problem until you're highly engaged, and highly engaged players won't quit the game over a lack of rune pages, it doesn't make sense to simply improve this facet of the game and give it away for free. Sometimes F2P isn't pretty.

Remind Players They Are Being Inefficient

Every match of LoL you play awards XP towards leveling up and soft currency to spend in the store. There's a lovely bar showing you how much you earned and where it came from. But hey, even when you win a game the bar is only half full? Why is the other half grayed out and telling me I missed out on some soft currency?

In LoL you can buy soft currency accelerators for hard currency. One of them will double your soft currency winnings for 10 matches. Another will double all soft currency you earn for 24 hours. These are the only ways to get that missed reward and even though they are premium features you will be reminded after every match exactly how much you're missing out on.

Every Other Textbook Trick

LoL is also doing all the stuff you probably already know about; this is the stuff you could pick up from any business or marketing readings. I won't go into detail on them but here's a list if you wanted to look them up separately.

Notice any other clever techniques? Share them in the comments.