Monetizing a Mobile Game (Part 2)

In our last blog post we covered what everyone in the mobile gaming industry is doing to monetize their games, and some of the problems associated with these approaches—especially the problem of annoying users with persistent attempts to vacuum cash from their pockets. This week, let’s discuss the question of the “fairness” of some of the current monetization approaches, and perhaps more worrisome, the risk in these business models, and their viability for most of us, who are unlikely to create the next Candy Crush.

Fairness?

Some game developers believe that in-app purchases can be unfair since a small percent of the users pay for everyone else. King Entertainment supposedly monetizes only 3-4% of their user base, and that’s considered a huge number. Zynga is only half of that. Then, there’s the apocryphal story of the guy in Japan who spends hundreds of thousands of dollars each year on in-app purchases. Supposedly the game developer has assigned a full time employee to ensure the guy is happy with the game and keeps playing. Seriously? That’s a business model? If this one guy stops playing your business is over? But the point is that there are “whales” out there who may only represent 0.15% of your users, and these whales are the users who provide most of your revenues, while the vast majority of users don’t pay.

Is this “fair”? I’m not really sure. I’m a capitalist, and when we invest in creating a game, it’s our right to (hopefully) profit from that. But something does worry me about it, and I’m not the only one.

Flimsy Business Models

Beyond the concept of “fairness”, there’s also the question of the stability of a business model that depends on finding whales. What if you can’t find your whales—that small number of users who pay you? Maybe you think you’re going to be the next Candy Crush. Great, I hope that works out for you. But let’s be a little more realistic and assume you can get 100,000 downloads. And some of them are not going to play the game for long. But some do become regular players. Maybe 20,000. OK so if (according to Swrve, and discussed in the link above) only 0.15% of those players account for half your revenues, that’s only 30 users! So do you think you can make enough money from 30 whales to pay for all of your development and marketing costs? Maybe you find 60 whales and you’re absolutely killing it. But what if you just can’t find your 30 whales? What if you have the bad luck to have 20,000 people playing for free, and nobody buys your virtual cars, weapons, or cows. You just can’t figure out how to trap lightning in a bottle and get 30 people to pay you. Or maybe only 10 people do. But that’s just not enough to make a go of it.

So I believe that in-app purchases should work at very high user volumes, because in those cases the law of large numbers will take over, and you’ll probably find your whales. But this approach seems like a bad bet for the bulk of the games being developed. It’s just too risky that you won’t find enough whales. In our example, what if instead of using in-app purchases, you convinced the 20,000 people who play the game regularly to give you $4? That’s $80,000. Then, while you wouldn’t get rich after paying your development and marketing costs, maybe you might at least break even for a fairly basic game development effort. So that model is not only fairer, but less risky (assuming you can get those 20,000 people to pay you four bucks).

What Really Counts

Our game isn’t released yet, and it’s probably not worth worrying about whether we can find 30 whales, or 300, or 3000 at this stage. We need to have a game that provides good gameplay, and an addictive and fun experience for our users. If we don’t have that, there won’t be any whales. And probably no guppies either. So we’ve decided to worry about gameplay, first, and worry about monetization later. If we can create a fun game that people want to play, then we should be able to figure out how to monetize it. We’re not going to bank on a few whales, since we have some doubts it will work for a game with a smaller user base, since unless we’re lucky enough to get millions of users, there’s a risk that we just won’t find our whales. So we’ll probably make the game free to play for the first few levels, but offer some additional levels for a payment. That way, if people like the game, they’ll pay. And we’ll have the incentive to continue to create innovative new levels since people are paying for these. We’ll probably use some in-app purchases such as extra lives, and magic potions, but we’ll be careful not to be too annoying about this. I’m souring on ads, since I worry about annoying our users and wrecking the game experience. And a lot of the clicks these days seem to be accidental. I’m trying to think of an analogy…we’re going to stand on the sidewalk and hope that people accidentally drop some money, and then we’ll pick it up? But actually, it’s worse, since it’s as if we’re going to do something that distracts people, and makes them drop their cash. This is sounding more and more shady now that I think about it. Maybe we’ll revisit this decision on ads later. As we get a bit closer to release of the game, we’ll let you know how we adjust our monetization approach.