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Monetization Stack
by Xing Wang on 03/14/14 02:04:00 pm   Expert Blogs   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

DARPU and an Example of Monetization Stack

One of the key metrics people measure a game (or other products) is called DARPU (often just ARPU), Daily Average Revenue Per User.  Depends on the type of game, and how well the game is optimized, the ARPU can be very different. Think of a monetization stack as a break down of what features/categories that contribute to the ARPU. 

We'll look at an example causal arcade game. It has ARPU of 6 cents. In the chart below, we can see how each of the features contributes to overall proportion of the revenue. Ads is self explanatory.  The game has Energy, which kind of like lives, which are required to play a level in this game. It limits how many failures you can have before you have to purchase energy/lives to keep trying.  The game also has Pre-Game Power-ups, which means when you select a level to play, you get a chance to purchase a power-up (think of the "Color Bomb", "Jelly Fish" and "Striped and Wrapped" in Candy Crush Saga). In addition, the game offers In-Game Power-ups, which means while you are in middle of a game session, you can purchase additional power-ups (think of the "Lollipop Hammer" in Candy Crush Saga) to help you strategically. The game also offers continues when you don't pass the level, and get a chance to keep playing to beat the level.  In this game, these features all contribute different amount. 

Research and Plan: 

You can get real data for a monetization stack after your game is launched, but even before you start to  design game, you need to think about how your stack will most likely looks like. When you pitch a game, you'll often asked the question how are you going to make money. Monetization stack helps you answer that question. 

The monetization stack will vary depends the genre of the game you're working on. The monetization stack of a Card Battler (e.g. Ayakashi, Rage of Bahamut) or a 4X game (e.g. Hobbit or Kingdoms of Camelot) will be very different from an Invest and Express game (e.g. Farmville) or an Arcade Game (e.g. Candy Crush).  A same game can have different ARPU by platform (web vs. iOS vs. Android) or by market (China vs. US), but often the monetization stack percentages still look the same.

While within each genre, the different games will monetize different amount, but if you looked at enough games within that genre, patterns will emerge.  

Best games in each of the genres will monetize about the same range on the same platform in the same market.  Experienced game producers or product managers often will know approximately what is a good ARPU for a game of certain genre. For example, best Arcade/Causal games probably will have an DARPU around 6 cents to 8 cents on iOS.  

A deeper level analysis and research will reveal how much each of the major features/categories contribute to the monetization stack. Here, often there is pattern also. It is an still an estimate, but you'll get a sense of how much a similar features will contribute to ARPU.  For example, Ads will often attribute 1 cents towards ARPU. In many arcade games such as Candy Crush Saga, "Continues" will monetize much greater than In-game Power-ups, which in turn will contribute more revenue than Pre-game Power-ups. The Continue mechanism is especially powerful and proven, which will typically contribute 50% to 60% of the ARPU.  (Although I don't know the exact numbers of CCS, and I can't reveal the exact monetization stacks of games that I managed, but I had done enough Arcade games to know that is a good estimate.)

Based on your research data, you can create your planned monetization stack, more confidently answer the question how you are going to make money, and justify the numbers. 

How Stack impact Design considerations: 

During your planning stages, a monetization stack (even if it is just an estimate or target) will help you prioritize features. Perhaps even drop some features. For example, if we know that In-Game Power-ups often make more money than Pre-Game Power-ups, perhaps more thoughts should be put into the "in game power-ups."  

If you knew in most Arcade games, Continue mechanism is a main contributor to revenue, then it is important to think through what does continue mean in your game. For Candy Crush Saga, that is extra moves; for Ruby Blast, that is extra time. For other games, it may not be very straightforward. This will require the design of the winning condition (what does mean to beat a level) to accommodate this mechanism. It would be much harder to try to add this after game design (especially the winning condition) is baked.  I saw a lot of Causal/Arcade games that don't have this feature, then they are leaving money on the table. 

After game is launched, the monetization stack can be used as diagnose tool. For example, if your ARPU isn't as high as comparable games, then you can dive deeper by looking at your actual monetization stack from data. Often you'll find a category didn't contribute as much as expected or as competition, perhaps this feature is badly designed. It would help you focus your resource to fix those features. It also may show gaps between what your monetization stack looks like vs. other game's monetization stack. You can try to close the gap by adding the right features. 

Caveats: 

1. Cannibalization effect: we can't expect to keep adding monetization features and expect the revenue to keep stack up. For example: if feature A contributes 1 cents, but feature B contributes 0.5 cents. Implementing feature A and feature B will not necessarily contribute 1.5 cents total. 

2. ARPU (and monetization stack) is just one metric for indicate how good your game is. Don't ignore other metrics such as retention.  Sometimes it is a trade off. As you tighten the pinch, you increase the ARPU but sometimes you reduce the retention. 

Conclusion: 

1.  During planning phase/pitch phase, use monetization stack as a tool to answer the question how your make money in a F2P game and set goals. Do research to find out what other games' monetization stack look like. 

2. During game design/production phase, use monetization stack to help guide your feature priorities and determine best solutions. 

3. After game launch, use monetization stack as a metric to see how you stack up (pun intended) against competition and your goals. 


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Comments


Rod Chang
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Nice write up Xing. Cannibalization among different monetization mechanics is something that we are just beginning to grasp. But the monetization stack is something we used to guide the prioritization of our telemetry intrumentation and follow up analytic work.

Sean Howell
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A thoughtful and mechanical approach to monetization is far smarter than often the gut instincts used by many new developers...even at large companies outside of Zynga people often talk about monetization with a kitchen sink approach versus an analytical one. This is such a great quick read; I'd put it under the nose of anyone to at least introduce them to these basic ideas.

Mason Richman
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Thanks, Xing. Great perspective on monetization stacks! The piece of the monetization stack that I appreciate most is the portion that comes from users' emotional responses in-game, especially Continues and Power-ups, because it's so relatable. -Cheers-

Clement Marthe
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Pretty good article, monetization stack is definitely a great tool that can be used by game designers, marketers, business devs etc.
One thing though (might be off topic), when the game design is still at the baking process, how do you know if 2 monetization features will cannibalize themselves?

Xing Wang
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Thanks. Thais article is actually very high level. I will be writing another in depth article on cannibalization and other issues with features. Stay tuned

david vink
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I read this whole thing with interest. What have I become? Sigh.

John Bagoode
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Just what I was thinking. I feel bad now...

Felipe Budinich
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Nothing new under the sun, F2P is a step backwards in game design, back to the 80s, when Coin Ops dominated the market.

Kris G
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Here's a thought: make your game fun and people will buy it. focusing on 'monetization strategies' and optimizing for games for the 5% who want to pay is a nice way to cover up bad designs.

Xing Wang
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I think trying making game fun and this article's topic are orthogonal issues. Actually for a game to make money, it has to be fun first. The top 5% won't pay unless the game is fun in the first place. But ultimately making games is a business. It is much better to plan monetization ahead of time, rather than just hope it will make money. There is plenty of very well designed and fun games that make very little money.

Ken Love
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I think that I'd like to know how you go about getting to see your title first. After all you need to bait and get them on the hook first before you get them to spend, right?

I say.. "Design a fun game first." After you construct that foundation, then analyze it thoroughly to see where you might be able to plug-in sensible monetization methods that make sense. Don't put it in there JUST to have it in there.

You can talk monetization till yer' blue in the face. The true trick is.. "How do I get the user to D/L my app." Not even "How do I keep them?" But.. "How do I get them to D/L my app without having to essentially spend a million dollars on marketing.

Xing Wang
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Total agree. Monetization is just one piece of the puzzle to think about. User acquisition is another puzzle that is even more important for making a game successful.

In fact, monetization is an easier problem than user acquisition. As there are patterns to monetization stack for games in the same genre, so it is pretty clear what is achievable, and thus easier to predict the approximate ARPU of a game than user acquisition.

For User Acquisition, especially organic growth or word of mouth growth, often it is very hard to predict. For example, who could have predicted that Flappy Bird had such phenomenal growth. (Of course, hindsight is 20/20 and there are people analyzing why Flappy Bird had such growth.).

That said, try to predict/project things is part of a job for an EP or game Lead (when you pitch a game, you'll need a revenue/growth projections). There is a framework to think about user acquisition for games, which I'll write an article also.

Olga Sora
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Great article! I will add one more advice : before you start searching for the right affiliate program in your niche, first, identify what products and services your site's visitors may be looking for. It is much easier to promote something that you like or use in your own life. Before you start searching for the right affiliate program in your niche, first, identify what products and services your site's visitors may be looking for. It is much easier to promote something that you like or use in your own life.


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