Kongregate: the science behind the massive profits of F2P games

http://www.kongregate.com/forums/2468-general/topics/431337-emily-greer-ceo-of-kongregate-on-the-science-behind-the-massive-profits-of-tyrant-unleashed-and-other-f2p-games

by tlarkworthy • 11 years ago

75 50 11 years ago

kongregate.com

fsk2• 11 years ago

Eventually, the pendulum will swing the other way. People will get sick of freemium games, and go back to games where you pay $1-$10 once.

Some people made a lot of money with freemium, so everyone is copying them.

I can't stand wait timers, energy systems, and all the other tricks they use to balance freemium games.

Many freemium games require an Internet connection to play, which is bad for me because my prime gaming time is on the subway while commuting.

Another bad part about freemium is that, when they someday shut down the servers, you won't be able to play the game AT ALL anymore. I can still play Super Mario Bros. even if Nintendo goes bankrupt and decides they don't care about the game anymore.

hellbanner5• 11 years ago

You're exactly right. However, back when the NES came out, duplication of an NES rom was beyond the average consumer. Now, say you release a DRM free game (that will be available regardless of internet connection, server uptime etc) -- how do you monetize it when fans will install free copies?

fsk2• 11 years ago

Those people were never going to buy anyway. There (hopefully) are enough people who want good games and are sick of the freemium garbage, that they'll pay for a game.

I.e., 100k paid sales and 10M "unauthorized copies" is still enough for an indie dev to make a living.

joshuapants• 11 years ago

There's a reason gog.com is making money. Going DRM-free doesn't harm your business, it just respects the users.

If people like a game, they will pay for it as long as you don't have some kind of annoying obstacle preventing them from doing so.

edit: DRM isn't even really a good counter to piracy for the most part. It will be cracked sooner or later (sometimes before the game is even officially released) and the people who wish to pirate it will do so.

larsiusprime• 11 years ago

I think Kongregate's perspective on F2P is a lot more nuanced than your usual F2P mills (Zynga, et al) on the subject, and I say this as someone who could hardly be described as a fan of F2P.

It's worth nothing that Anthony Pecorella, the speaker in the first linked video, also moonlights for an indie game company (Level Up Labs) that's been quite successful while tacking completely opposite to F2P. So in my experience he has a strong appreciation for both sides of the business. And Emily Greer is a super knowledgeable badass that one ignores at their peril -- a lot of her talks have really challenged some of my assumptions about the F2P business models.

Source/Full Disclosure: I know this stuff because I'm Anthony's co-founder at LUL.

patio114• 11 years ago

There is an interesting line in one of those presentations: (paraphrase) "There is a hyper-competitive market for player attention, which has caused the price of a game to fall all the way to zero, but after they're in your [end]game you are a monopolistic provider of the game content, so you can charge any profit-maximizing price."

This is a slightly more nuanced take than mine, which is that F2P games are what gamers have been voting for for years with their wallets, by stealing everything that wasn't nailed down and most of the stuff that was.

cat92• 11 years ago

I'd prefer the first explanation as well, not least because "optimize your business model for the people who are willing to pay you, not the people who aren't."

themartorana• 11 years ago

I make my living off of mobile freemium games. We don't do anything with replay timers or the like - we advertise, mostly, and have fun in-app purchases.

For a couple years we offered two versions of our apps - paid and free, free being ad supported. In a bid to simplify things and encourage more conversions, we switched to in-app purchase to get rid of ads. (Also, app stores had been optimized to push down app results for non-free games - plenty of reading out there about the causes and effects.)

To date, just under 5% of our revenue is paid. Despite playing for years, many people don't believe our games are worth $1.99. If you believe the race to the bottom will reverse itself, I'm here to tell you it won't. It's guided by the walled gardens and they like it this way.

We have had millions of downloads and on our most popular game, have abnormally long retention. Even some of our most die-hard players will not spend $1.99.

Maybe - MAYBE console gaming will one day return from F2P, but I doubt it. At least not in the near future - the industry is still moving towards it.

But in mobile gaming, success is a volume play. And the volumes won't part with $.99 in the traditional way. If they did, F2P wouldn't be a thing. And maybe gamers will pay for games, but the masses? Not so much.

welly• 11 years ago

I'm not what I would ever describe as a gamer. Well, I was massively when I was much younger in the arcade, 8 and 16 bit days but now, not so much/at all.

The problem I have with many freemium games is for me they have absolutely no lasting appeal. I would estimate that 75% of freemium games I've installed, I may have played a sum total of half an hour and then got annoyed/fed up/bored and removed it. Adverts, replay timers etc. are certainly to blame but what mostly is a turn off for games of these types is there is no soul in a lot of these games.

Take Triple Jump, Don't Step On The White Tile, Avoid The Blocks etc. for example(s). They're like Christmas cracker toys. You play them once or twice, discover how lame they are and throw them away.

While I realise those games aren't meant to be much more than that (and an SEO exercise), there are so many like these on the various app stores and few games that have any kind of depth to them. I would more than happily, and have happily, paid $1, $2 or more for a game that held my interest for longer than half an hour. The biggest problem I have is these throw-away games have been so cleverly marketed or SE-optimised that they make up the bulk of "featured", "highlighted" or "best selling" games and any game with a modicum of depth disappear into the ether, undiscovered. It's frustrating for someone who wants to play a fun, entertaining game, not an annoying, repetitive and uninspiring christmas cracker game.

zyx321• 11 years ago

Maybe - MAYBE console gaming will one day return from F2P, but I doubt it. At least not in the near future - the industry is still moving towards it.

That's an optimistic statement almost bordering on naive. What the market seems to be moving towards is adding F2P mechanics to $60 games. GTA V lets you buy in-game money for the multiplayer mode. Mortal Combat X has easy fatality mode where you get the famous "fatality" animations after every game (costing $0.20 every time it triggers). Almost every AAA game on the market lets you change the look of your character for a few dollars.

rtpg• 11 years ago

It's possible to make freemium without wait timers. See Hearthstone, League of Legends.

I don't see freemium disappearing anytime soon.

T-hawk• 11 years ago

Those both essentially do run on wait timers. You can earn the components needed to play at a high level gradually with a limited number of plays per day, or pay to accelerate that process.

This model isn't as harsh as actually locking out from the game if you don't pay, but it sure does move along the same axis of paying to alleviate a time-based restriction.

wordbank• 11 years ago

Eventually, the pendulum will swing the other way. People will get sick of freemium games, and go back to games where you pay $1-$10 once.
Some people made a lot of money with freemium, so everyone is copying them.

Freemium was a response to the market. Most of players are not willing to pay anything:

http://venturebeat.com/2015/01/05/monument-valley-developer-...

tlarkworthy2• 11 years ago

This is the best source of numbers I have found in the industry. Especially the CPI numbers and 6 months of buying installs before it paid off.

patio114• 11 years ago

Emily Greer (CEO of Kongregate) has a very good presentation, not to my knowledge already linked in this discussion, about F2P whales: http://www.slideshare.net/emily_greer/dont-call-them-whales-... Partially it's an apologia for the business model, but it is dripping with useful facts and commentary.

freditup3• 11 years ago

I used to be a moderator on Kongregate and had a decent amount on interaction with multiple of the administrators. I also was somewhat involved in the flash game market (just casually as a hobby). When I found out how Kongregate specifically worked with developers to help make games that target the 'whale' spenders, I was pretty shocked. Making games that are not enjoyable, just addictive, in order to take in thousands of dollars from single individuals just seemed so unethical.

I just glanced over that link of Emily's ethical rationale for this, and it didn't convince me. But I'll have to go back through it more carefully before I can decide for sure.

freditup3• 11 years ago

A few more thoughts on the matter of whales:

On Kongregate, 2.1% of users buy virtual goods. Of these, about 4% (the whales) have spent over $500 and bring in about half of Kongregate's revenue. Top spenders often spend $50K-$80K.

Emily's premise is this: that people who spend lots of money on games (whales) are people who healthily enjoy the games as hobbyists.

Her most interesting points, in my opinion are as follows:

We think whales are bad (but shouldn't) because they spend their money on virtual goods: "Spending $5-$10k on specialized PC Gaming rigs that improve your skills and enhance your competitiveness is not really that different from spending money for in-game items that do the same. But I bet you all ﬁnd it a lot easier to contemplate."

We think whales are bad (but shouldn't) because we don't think games are a legitimate hobby: "The bias against games is so insidious that even within the industry we’ve internalized it enough that we question someone with means spending tens of thousands of $s on a game, especially when you combine it with the low value we place on mobile and PC games and especially virtual goods. And so people jump to explanations like “mental illness” or “evil games manipulating players” when the real explanation is that they are rational, wealthy people who are dedicated fans investing in a particular game."

I personally don't agree with her though. We would have no problem with a person spending $10K on software. The issue isn't virtual vs. physical goods. The issue comes down to if games are a legitimate, healthy hobby or not. I would argue that they are not, at least for most of those who are whales. I don't have time to flesh this argument out tonight though.

hellbanner5• 11 years ago

"I spend several hundred dollars a year on my game. My first upgrade was to get a membership. Then I purchased new equipment. After playing for a bit, I upgraded to a better equipment so I could score more points in my game"

"..surprise, my game is Competitive Figure Skating. Games are hobbies. People spend large sums of money to compete in physical games, why the stigamtism against digital games?"

--paraphrasing Emily Greer.

Personally I find that a great argument of why freemium isn't inherently evil. Pay-to-win already exists in physical sports.

Japan, however, banned certain freemium games where you pay for increased chance of good rewards in a random check: http://www.gamasutra.com/blogs/BetableBlog/20120525/171124/W...

martincmartin• 11 years ago

I once had a job where I did data analysis of casino data, specifically slot machines. It turns out, casinos also make half of their money from a small number of people who gamble a lot. I've heard alcohol stores are similar.

jpatokal• 11 years ago

That's a lot of raw data and not a whole lot of specifics. Here's a dissection of how one particular massively popular F2P game (Clash of Clans) gets people to pay up:

http://gyrovague.com/2013/06/05/time-is-money-how-clash-of-c...

HN discussion: https://news.ycombinator.com/item?id=5825158

That's two years old now, but it's interesting to see some of the points in there validated by Kongregate's research: eg. how guilds primarily serve to exert social pressure, and how UAE and Kuwait have ridiculous whales (average spend per playing user $500!).

Animats• 11 years ago

I'm watching "Newbie to Big Spender: Understanding the Player Lifecycle", by Kongregate's CEO.[1] That's from 2012. This was made before they felt a need to apologize for the business model. It's openly about to hook players and turn them into big spenders. There's a 4-stage process to hook them. Few players start out as big spenders in a game. Heavy spending comes later. Game levels are designed accordingly. The user shouldn't be pressured to pay until they have 50 plays or so. By Stage 4 (Committed Players), players are no-longer price sensitive and will buy cosmetic items.

68% of revenue comes from players who spend over $500 in a single game. Their biggest whale back then had spent $30,000 on one game. All those people who spend $5 don't matter. That's the free-to-play business.

[1] http://developers.kongregate.com/blog/newbie-to-big-spender-...

fdb• 11 years ago

South Park had an excellent episode explaining freemium games: http://southpark.cc.com/full-episodes/s18e06-freemium-isnt-f...

tempodox• 11 years ago

There is an interesting article on how F2P monetisation works:

http://www.gamasutra.com/blogs/RaminShokrizade/20130626/1949...

Kongregate: the science behind the massive profits of F2P games

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