“Engagement” is probably the key word for Activision-Blizzard’s current strategy. All 4 of its key growth drivers are built around increasing engagement with the publisher’s content in one way or another. That means playing the games, but also watching others play them. It’s no coincidence “engagement” was the third most used word by the executive team in the earnings call – behind only “game” and “franchise”

This emphasis on engagement is not something new or unique to Activision – or new to the business in general. And it’s absolutely legitimate and justified. Engagement is a necessary condition for the success of any game (you need people in your game to monetize – your userbase is your greatest asset). You need to create an experience players will want to engage with over long periods of time if you want to achieve some sustainable level of success. However, focusing on engagement only isn’t enough to have a high-performing title. There are numerous examples of titles that are appealing, engage a large userbase for extended periods of time, but that don’t succeed at monetizing. So, when considering product success – from a revenue perspective – it feels safe to say that neither engagement nor monetization alone is enough on its own. You need an engaging game in order to go up the top grossing charts. But you also need a solid monetization strategy to capitalize on that engaged userbase. Revenue performance doesn’t naturally derive from having an active user base in your game. You need to know how to capitalize on that engagement (and continuously work at it).

There is the “Laissez-Faire” approach, which suggests ignoring monetization and focusing on engagement only – monetization will naturally derive from engagement. What is more problematic is the – often implicit – claim that engagement and monetization are antithetical. For this approach, the best way to monetize is to avoid selling things to users. You should not be too forthcoming or proactive when it comes to monetizing your game. EA’s latest earnings call provides a good example of this. At some point in the call EA’s leadership emphasized the need to not monetize too much – and specifically to discourage users to spend too much – because ultimately, it’s bad for the bottom line.

 

That is a problematic claim. At the most basic level it’s problematic because it simply doesn’t reflect the reality of mobile monetization. It’s also problematic because it perpetuates a recurring theme – although less prevalent now than it was a few years ago – concerning the ethics of free-to-play monetization, and suggestions you should avoid monetization altogether. I’m not linking to any specific reference here but there are plenty and they are easy to find.

Looking at how spending is associated to engagement is instructive for 2 reasons. First, it strongly suggests you don’t cause users to spend; your biggest fans want to engage with your game the most. The players who love your game and engage with it the most are the same players who display an interest in spending in your game. And that’s why they display better metrics across the board. Second, it helps reframe differently the ethical concerns around free-to-play monetization. If the people spending in your game are the biggest fans, and actively want to spend to engage with the game further, the moral problem is no longer monetizing or not monetizing your game. The players who spend are those who like your game and want to spend. The problem is when you design your game to create frictions and frustrations, and then monetize the remedy for that. The problem is when monetization strategies are based on monetizing off negative emotions (that are artificially created by uninspired game design) and not providing value to the fans. There are sustainable ways to focus on revenue generation and not squeeze users. Those ways involve providing value to users and a premium experience of the game they love.

Spending and engagement

A lot of evidence points to the fact that monetizing is associated to both higher engagement and higher future spending. Note I’m not saying spending more causes users to engage more. Rather, spending is the manifestation of a high level of engagement and enthusiasm towards the game (and the more spending the higher the engagement levels). Ultimately, I believe more and more that monetization in mobile is less about making someone pay (someone who otherwise would not have spent) and more about capitalizing off levels of engagement and enthusiasm you can influence but have little control over.

The “focus on engagement, the rest will follow” mantra simply does not reflect the reality of mobile free-to-play monetization. There are a few constant patterns anyone with an access to a database of games can check. The more users spend, the more likely they are to return to the game and spend again. Take users on a given day: say a nonpayer, a customer (someone who has spent in the past but not on the day in question) and a customer who spent on that day. Consistently, regardless of the game the return rate will be the highest for user who spend (and higher for an active customer than an active nonpayer). To be thorough you can control for user tenure and only look at users who displayed a minimum level of engagement.

 

The same pattern occurs when breaking down the paying users per bracket. Customers spending more on a given day have a higher next day/week/month return rate than a user spending less.

 

The more customers spend on a given day, the higher their return rate – even if it’s only slightly. What’s more, when looking at redeposit rate – the percent of users spending again within a given timeframe – the more a given user spends, the more likely s/he is to spend again. Having spent in the past is the best predictor of future spend.

 

Regardless of how you look at it, spending is always positively correlated to engagement. If anything, the biggest indicator of payer churn is the day on which the transaction occurred – not the amount they spent. Most customers will have done their first purchase soon after install. What’s more, the churn rate of payers is higher when conversion occurs on install day. This can be due to a number of factors – among which users are disappointed by their purchase. But if you compare relatively to nonpayers, payers usually don’t churn more when conversion occurs on install day.

I think this occurs mostly because there is little commitment required for someone to spend on install day. Every user plays at least on install day – so you will come across users with a wide range of engagement level. For both customers like nonpayers install day is the day with the highest churn. Not because of monetization but because the first impression doesn’t live up to the user’s expectations. Overall, all metrics will be higher for a customer spending on install day – so there is no reason to avoid monetization early.

 

Is there even a problem with mobile monetization?

The data clearly shows that users engaging with a game on a monetary level is positively correlated to both future monetization and future engagement: the more a user spends on a given day the better. The more users spend the more likely they are to return to the game. And the more they spend, the more likely they are to spend again.

There are many user scenarios that can help make sense of that fact. Many subjective user motivations can help make sense of that objective outcome. However, arguing that monetization efforts turns people away is not one of those scenarios. If it were the case, we wouldn’t see higher return rates and higher redeposit rates for users spending more.

If regardless of the game users convert at the same pace (sooner rather than later after install) and early converters display better metrics, then that strongly suggest the content of what is being sold is not the main driver for monetization. If that were the case, you wouldn’t observe similar monetization (and engagement) patterns across all games. Rather, what that suggests is that monetization is an indicator of user engagement and enthusiasm towards a game.

You don’t cause users to monetize. But users who monetize provide you with critical information: they are auto-identifying themselves as your biggest fans. Because engaging with a game on a monetary level is not so much the consequence of in-game mechanics and tuning. It’s more the manifestation of the user’s delight. That’s why monetization trends are similar across all games. Users spend money when they like what they see and the experience they are offered – and want to engage with it at a deeper level.

That strongly suggests the problem is not being proactive with monetization. Your biggest fans want to engage with the game they love as much as possible – including at a monetary level. On a practical level as well, it seems like there are few downsides to be proactively – and as early as possible – monetizing your game. It’s safe to assume that someone who churns from a game because s/he dislikes seeing an offer has a very little potential to monetize in the first place (so even then you’re not losing out on much if those users leave your game).

So, the problem is not trying to monetize – it’s how (and what) you want to monetize. The problem is trying to monetize while selling things that add little or no positive value. To be successful at monetizing, you don’t want to try to make users do something. Rather, you need to find ways to capitalize on the things users are already doing and enjoy. Your biggest fans are the ones spending the most because they like your game. Ultimately, they are driven by positive emotions. So, the best way to be successful with your biggest fans is to cater to them and offer positive new experiences and reinforce what characterizes your game and makes it unique. An exclusive cool character, a VIP game mode, a cool skin, etc.

 

This doesn’t mean you should remove all win/fail conditions and only sell cosmetic items. It means you should aim to sell things that add to the user experience – rather than things that remove a negative experience. The goal of game design is not to create the friction, blocker or frustration your offer will then come alleviate. The goal of your monetization strategy is to add new and deeper ways to engage with your game design. And this is not coming from an ethical place but a very practical consideration. The problem is to base your entire monetization strategy on negative emotions (frustration, fomo, excessive scarcity). Not only does it look sleezy, it’s also not a sustainable monetization strategy.