Monetizing "Free to Play"

“Free to Play” is a great concept, but a terrible name.

The name creates a negative emotional response in potential customers who are skeptical about any endeavor being truly free. The concept of free, however, remains a huge motivator; everyone likes getting a good deal, and no one likes paying for something if they don’t have to.

As creators of casual and social entertainment, our challenge is to develop a product with a monetization scheme that overcomes the barriers to adoption, retains loyal customers, and generates a predictable recurring revenue stream.

Defining a winning product

A successful product is one that is entertaining, emotionally rewarding, minimally invasive, and offers a monetization pathway that feels like a welcomed solution to game play, rather than an annoying pitch or a cheap bait-and-switch.

David Chang, Executive VP of Business Development and Marketing at the online game publisher Gamescampus agrees with the problem of the “Free to Play” naming issue. He suggests instead calling the games "MTS Games" (Micro-Transaction Service Games) or even MTG (Micro-Transaction Games).

Micro-Transaction Game sounds a lot more respectable, but it loses the allure of free. Each company will have to decide which label is better for generating adoption and rewarding loyalty.

Mr. Chang may be onto something, however, with his suggestion. It somehow rings more true. Authenticity goes a long way in social media. Let's look a little further into his suggestions.

He goes on to list three requirements on an MTS or MTG game:

An MTS game would be a game that:

1. Requires no purchase to download and play the game

2. Does not have a level-cap or content-cap beyond which you need to pay

3. Is at least partially monetized by sales of in-game goods

The first two rules set out by Chang are simple enough. The third rule becomes more interesting. Selling in-game items is the core of most successful monetization schemes for casual and free games.

Selling In-Game Items

Customers are only interested in buying in-game goods if the value proposition of the purchase is clear. Different customers buy for different reasons. Our job as game creators is to lay this out clearly, so that the customer understands why they would want to buy.

Personalization

Some customers buy for the pleasure of personalization. In this monetization pathway, common in-game purchases are costumes for avatars, décor for in-game habitats, and virtual pets or accessories.

Leveling Up

Other customers are playing to win a mini-game or to level up. For them, the motivation to buy breaks down into either increasing their power, ability, or speed. When the clock is ticking away and a player is running out of time to complete a level in which he or she has invested a lot of time and effort trying to win, buying a booster or power item can be very appealing.

Repeat Sales

Getting customers to buy once, however, is not enough. Most successful monetization models have a pathway for repeat sales to customers. This can take the form of new assets to be used in personalization. Think of this monetization pathway as the casual gamer equivalent of fashion – every season it goes out of style, to keep up, you are always in a state of transition and mutation. The pleasure in fashion is to continue to change, while overall staying true to your own sense of style. This works well in personalization. Offer many different choices that still retain the overall identify of the player, just don’t offer them all at once. Roll them out over time and in limited quantities. Limited edition items rule the street fashion world, and they also rule the personalization of games. It seems counter-intuitive to inject basic supply-and-demand scarcity into the digital world – where any asset is a digital copy of another – but players are paying for exclusivity – the pride of owning a unique item – and so limiting how many people can buy a personalization item is welcomed by players, not shunned.

At the core, however, is the pleasure of self-identification. I once interviewed a hard core gamer who also hung out on casual sites. He claimed that at first he thought he would never buy a personalization item for his avatar, but then after playing a while he gave in saying, “What can I say? I wanted my avatar to look more like me.”

If your customer base is less interested in décor, and more interested in playing to win, then repeat sales are also possible. To these players, sell a power item or a booster item with a time limit – so that you are in effect “renting” it during key moments when the player needs extra help in order to level up. Not only is this a great motivator for a sale, but is also a way to incur the goodwill of the gamer. Instead of blaming you for charging extra for the booster or power item, they will blame themselves for not being able to get through the level without extra help. If you offer the item in such as way as to seem helpful, your sale will come as a welcomed solution, rather than an annoying pitch.

These basic ideas are just the tip of the iceberg in terms of creating solid monetization pathways.

I need your help:

I am working on a longer, more detailed report on monetization pathways for casual and free games, as well as new social media entertainment products. If you have a great example or story of a monetization pathway that worked well (or failed miserably) please let me know. email: james.buckhouse@gmail.com

Here are links that dig deeper into this topic:

http://news.cnet.com/8301-13846_3-10164614-62.html
http://en.wikipedia.org/wiki/Free-to-play
http://news.cnet.com/8301-13846_3-10282180-62.html?tag=mncol
http://lostgarden.com/2009/07/flash-love-letter-2009-part-1.html
http://www.flashgamesponsorship.com/advice/advice-from-industry-players/selling-premium-content-the-drunken-masters-experiment.html
http://www.gamasutra.com/view/feature/3924/wheres_the_cash_for_flash.php?page=1
http://www.gamasutra.com/blogs/GregMcClanahan/20090325/985/Nitpicking_Flash_Game_Summit.php
http://www.gamepoetry.com/blog/2009/02/27/interview-with-kongregate-about-sponsorships/
http://www.slideshare.net/capncleaver/metrics-for-a-brave-new-whirled?type=presentation
http://evolutionlive.blogspot.com/2009/06/ten-ways-to-monetize-your-flash-game.html
http://virtual-economy.org/blog/arpus_in_social_networks_and_s
http://www.heyzap.com/developers/guide