Embracing monetization in free-to-play

When the mobile versions of Command and Conquer and Diablo were announced, there was a strong outcry from fans of the series. And that type of reaction is not unique to those 2 franchises – or new among a vocal portion of mobile players. And this resistance to monetization in free-to-play games – or at least unease – remains pervasive even within the industry.

My point in today’s post is that this unease is not justified or warranted. Not only are these concerns not justified. Monetizing your game well involves embracing what free-to-play monetization is all about – and appreciating and acknowledging the real value you are actually bringing to your paying fans.

There are 3 points in particular I’ll address in today’s post:

  1. The ethical concerns around monetization in free-to-play involve a mix of different ideas and feelings. Most importantly, the ethical concerns involve a very functionalist understanding of monetization. The ethical concerns emerge when you start thinking the main (or only) thing monetization ought to be is improve your customers’ in-game performance.
  2. When you look at a few very common and widespread monetization patterns in free-to-play games, you see how player behavior actually invalidates the instrumental and functionalist understanding of monetization. Players spend because they enjoy your game and are entertained by it – they don’t only spend to achieve something in game.
  3. Revenue in free-to-play games depends on a small group of very engaged and committed paying users. But if you agree with the claim that you don’t make your users spend (you really don’t coerce or deceive players into spending), then that is no longer a valid and legitimate concern. If your players are spending, it’s because you are bringing value to them – even if you don’t think you are providing them value, or if you don’t think you are providing them that much value.

Once you see things that way, it actually helps you frame monetization in a positive way: what you are doing when you are monetizing is providing your biggest fans with different and appealing ways to engage more deeply with your game. You are providing entertainment value.

 

What is behind the ethical concerns?

If a game is deceiving its players into spending, or relies on dark patterns to monetize, then that is clearly a cause for moral concern (and in most jurisdictions I believe simply illegal). But you don’t come across many of these deceiving tactics in the app store for any of the top grossing titles. These morally questionable behaviors are often associated with poor revenue performance. If your revenue depends on misleading your customers or providing them with a bad and frustrating experience, then you probably don’t have a long-term cash flow secured. On the other hand, the idea that free-to-play games rely on predatory monetization tactics that are fostering and encouraging compulsive behavior are simply not substantiated. But sometimes it feels like that’s what’s implied in the critiques of free-to-play monetization.

Unfortunately, it feels like five years later Ben Cousin’s GDC talk still remains relevant. In his talk, Cousin mentioned the case of pinball machines that were banned in New York city until 1976 (because they robed kids of their pocket money). That still resonates strongly today with current critiques of free-to-play monetization. But this rejection of monetization in mobile games has never been clearly formulated or grounded in any one thing. At times it feels like there is a mix of different concerns all conflated together: lack of value of in-app purchases, the moral corruption associated to spending on futile things, predatory tactics based on fostering and encouraging compulsive behavior, etc.

To be fair, it seems like every form of entertainment has to struggle with some kind of ethical concern. You don’t hear many ethical concerns around the price of a movie ticket, but there have been plenty of moral concerns around movies (one movie is corrupting youth, another one reproducing some form of inequality, etc.) – or really pretty much any other form of cultural production. The one thing that is for sure is that monetization in free-to-play is not intrinsically bad. Jacking up the price of a life-saving medicine does raise some key ethical concerns. Mobile games are part of the larger entertainment industry, and those raising moral concerns probably need to take a step back and get some perspective. Keep in mind not only is spending in the game optional. Simply playing the game is optional.

I don’t think the solution to this is to have some (always arbitrary) ethical scorecard for your game. I think the first step towards alleviating this concern about the ethics of free-to-play is to start by asking ourselves how we understand monetization – and see if player behavior actually corroborates those assumptions. We need to spend more time thinking about what the purpose of spending in game is, as well as the reason why players are spending (and who is spending).

The ethical unease around monetization that remains pervasive is based on a partial misunderstanding of players’ triggers to spend. It’s also based on using models of economic behavior not adapted to entertainment products. Mobile games are not a functional product – they don’t serve any extrinsic purpose. And if you are thinking the value of monetization in fee-to-play games must be in functional terms, you’ll probably always see monetization in free-to-play as inadequate. And here this is not only a moral concern. If you only think about monetization in mobile game as a cost/benefit calculation, then you are a) misunderstanding what one of the main drivers to spend is and b) closing off many opportunities to monetize better.

So, I would argue the main problem depends on how we approach monetization in free-to-play games. Or rather, it depends on the implicit value we project into monetization in free-to-play games. At the heart of this misunderstanding of the ethics of free-to-play (or more plainly said the unease associated to selling things to players) lies the assumption that monetization in free-to-play is functional and instrumental. There is a very pervasive sense that monetization ought to be for functional items. By “functional” I mean one of the main assumptions concerning free-to-play monetization is that spending in your game should be useful. That spending should help complete in-game objectives, perform better and to overcome challenges.

In some games that makes sense. In that respect, slots games are very pure. In their ideal form, slots games feature only one currency circulating in the game. Players spend coins in a slots machine to earn coins. The currency serves both as an energy system and as a reward – the input and the output are on the same level. But even then, that’s in its ideal form. Many slots games have introduced non-functional items. Coin Master has also added some meaning/narrative/thematic layer on slots games (you can read the great post on deconstructor of fun).

IMG_8809.JPG
This part of the game doesn’t have much to do with slots

 

Match-3 puzzle game like Candy Crush can be another example of games that approach pure functionality. The players’ only interactions are playing a match, making a move on the puzzle board, and using a boost. And the only dimensions of gameplay are winning or losing a level. There isn’t much outside of that. But even in the case of Candy Crush, the visual gratification that accompanies using a booster adds a non-functional dimension to this functional item. In other words, there is no purely functional game – and even in very functionally-driven games, there is a non-functional aspect at play.

If you start thinking that players spend in your game simply because they love your game, and because they want to engage with it more and experience new aspects of it, then the ethical concerns lose a lot of their strength. And a lot of evidence suggests that fans don’t only – or even primarily – spend in order to beat a level or complete any other extrinsic goal in your game.

 

Players spend for entertainment value

There is a lot of evidence that strongly suggests the utilitarian assumption concerning monetization doesn’t hold. A player spending in-game to achieve something would need to a) have played enough to get a clear understanding of what the functional value of the item purchased is and b) spend to perform better after a real challenge has been encountered. When you look at the way players spend – especially when it comes to the first purchase – then player behavior doesn’t match those 2 points (it’s actually pretty much the opposite).

All game data shows that a large portion of paying users make their first purchase very soon after install. That’s simply not enough time to understand what a game is about and what the in-game impact of the item purchased is. Also, many players make their first purchase even though they are not confronted to a need to perform better – many players convert after a win or before playing a mission they never played before (and therefore have no sense of how difficult the mission will be). What’s more, players converting the earliest are the one who end up having the highest LTV. And there is absolutely no rational reason for this. Players converting early don’t have a lower win rate (at least in my case I’ve never observed anything along those lines), and at the beginning games are usually easier – so there is less reason to spend to perform.

The thing is, if despite all that you still want to firmly believe that people monetize for utilitarian of functional reasons, then you need to start assuming players are either being deceived and/or are acting irrationally (read, compulsively). But if you are doing that, you are actually reinterpreting player motivation in order to save your belief concerning what monetization ought to be. Player spending behavior simply doesn’t match the functionalist model. But if you want to save this functionalist assumption, you need to assume players are driven to act irrationally and without self-restraint. And that’s when you need to have some moral evaluation of the situation (to save the functionalist assumption).

Incidentally, if you start speaking to your players it becomes very easy to get insights into what is driving them and why they are spending. And in that case, you don’t need to focus on any of your beliefs, you just need to try to understand your players. It’s very easy to get players to agree to speak with, and that can be a huge source of learning. You should have a system in place to talk to your players on a weekly basis.

There is a much simpler and more intuitive explanation to account for the way players spend. And in this case, you don’t need to project many moral considerations into the situation. Mobile games are a form of entertainment. Think about the triggers to buy a movie ticket, go spend a night out, buy tickets to a baseball game or go bowling. There might be some functional goal involved: you might want to go to the movies to get close to a person of interest, bowling might be your way of staying fit and active to ensure you have a long productive life, etc. But in general, you wouldn’t think the driving force to spend on entertainment is some form of functional value. You probably also wouldn’t consider the $10 spent on a movie ticket raises many ethical concerns.

If you start thinking players spend in your game because they simply enjoy it, then the observed player behavior starts to make a lot more sense. And as you get rid of the assumption monetization in free-to-play ought to help players perform better, then you are also getting rid of what is behind a lot of the moral unease concerning free-to-play monetization. Players who like your game the most want to spend in order to engage with more aspects of the game, to experience parts of the game they couldn’t without spending. That’s why your best players convert early – players who like your game the most are the ones who want to spend on your game the soonest. And that’s why early converters end up being your best customers. Those who like your game the most are the one who will want to engage with it the most – and in the process who will spend the most in your game. And that’s also why so many players – especially those converting early on – don’t spend after a loss. They don’t spend to overcome a challenge. They spend because they are enjoying the game and they feel spending in your game helps them enjoy even more. Your players are not buying in-game items. They are buying entertainment value.

 

You don’t make your biggest spenders spend

I’ve always disliked the use of the term “whale”. The fact that such a condescending, derogatory and disrespectful term is commonly used in the industry to qualify its biggest fans and best customers is very telling of the deep-seated unease with free-to-play monetization. Beyond this terminology, the fact remains that a disproportionately small portion of your customers (and an even more disproportionate portion of your installs) will account for the vast majority of your revenue. And that’s ok – and probably very normal when your product requires very little commitment to download. Wanting to build a monetization strategy based on a large percent of your installs spending a little (instead of a small group of engaged customers spending large amounts) simply doesn’t feel realistic and effective.

Pretty much regardless of the game, a small group of customers will be driving a large portion of the in-game revenue. And the lower 50% of your payers (when looking at their LTV) probably account for less than 10% of your game’s revenue. But here is one of the most simple and compelling points of Cousin’s GDC talk. There is the implicit assumption that this is the result of deception, psychological tricks and predatory techniques. Those heavy payers cannot control how much they spend and are actually not making their rent payments because they are spending in game (my caricature). But aside from the fact that there is absolutely no evidence backing up such claims, this assumption overlooks 2 key points. The first one is often mentioned. You can play any free-to-play game without the need to spend. In fact, the vast majority of players installing a game will never spend a dime. But there is one much more important and fundamental aspect that somehow gets overlooked – much too often in my opinion. Simply launching your app and playing your game is optional. Your players have the upper hand when it comes to the way they play and spend in your game.

Churn is something real when there is a contract involved – when you churn from your cable provider, you are ending the commitment to keep on paying every month (you’ll keep on paying until you act and cancel the contract). But in mobile games there is no such commitment – in fact it’s the opposite. Every day you need to give your players a reason to come back – and hope that they do. And that’s what’s great about free-to-play. You always need to put your best out there every day. And you have to do your best to ensure what you are putting out there is what your fans want. Once your game is out there, you don’t control the way players will perceive it or how they engage with it. Once your game is released, it becomes your players’ game. It doesn’t really matter how you understand it or what your initial design intention was. Free-to-play ensures players determine the value they are getting from your game. And they only keep coming back if they find there is value.

The question of your biggest payers also touches upon how we understand monetization – and how we characterize the triggers to monetize. You don’t make players spend. You don’t take someone who doesn’t like your game and who doesn’t want to engage with it on a monetary level, and then make that person spend thousands of dollars, mortgage their home and spend their kids’ college funds to keep playing and spending (it’s actually a good thing for Machine Zone that line of defense didn’t show up in the case of the man who spent $1M in embezzled money on Game of War).

You don’t make your best customers spend. Your biggest spenders are your biggest fans. They come to your game and want to spend. They like your game and want to engage with it in multiple ways. And if they like your game they keep spending in it. You don’t make your biggest fans spend against their will. You game generates different levels of enthusiasm. And the users with the highest levels of enthusiasm end up spending the most.

Mobile games are a form of entertainment. Some people can spend large amounts of money on entertainment (think about yourself, what’s your entertainment budget every month?). Some players like your game a lot and want to spend in it – and they keep spending because your game and what you sell provides them with value. Again, it’s not about what you think is valuable and makes sense. It’s about the entertainment value your players are getting from your game, and the amount of money they are willing to spend for it. Once you start thinking like that, you can embrace monetization in free-to-play games and not make it about a moral challenge.

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