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Is your microtransaction-based game set up for failure or success? Consultant and writer Ramin Shokrizade discusses a new class of goods that is likely to damage the health of your user base -- and in this article, posits rules for goods as well as taking a hard look at how some games function.
Modern microeconomic theory classifies various goods and services as "inferior," "normal," or "luxury," based on their behaviors in markets and how they are selected by consumers. Interesting discussions also arise regarding goods that defy the intuitive ways they are expected to behave in markets, like "Giffen goods" and "Veblen goods."
The purpose of this article is to introduce a new model for one of these (at least initially) unintuitive goods that are exceedingly rare in the "real" world, but that are the most common type of good used in the sale of online games: supremacy goods.
My study of microtransaction monetization models since 2001 was the inspiration for this new goods model. Microtransactions are currently the preferred method of charging for online games, and the sole method of direct content sale (not counting indirect revenue streams, such as advertising) for many large companies such as Zynga and Nexon.
Microtransactions involve the sale of specific virtual goods or services, as opposed to a flat one-time fee or subscription. Typically hundreds of microtransactions are available to gamers in each title, and in most cases they can be used to increase the success of players in reaching game objectives relative to those that do not make these microtransaction purchases.
This gives rise to the term "pay to win." For those that do not pay, these games are described as "free to play".
The "Golden Ticket" Scenario
Imagine that I have a ski resort that operates 18 ski lifts with associated runs, and that I charge $50 for a daily use general lift ticket that allows unlimited use of any run (with one catch). I sell 2000 of these tickets every day. My new marketing consultant comes up with a great idea to boost revenues: the "Golden Ticket." The Golden Ticket allows the holder to have exclusive use of any run they desire. Any general use ticket holders on the run will be escorted off and directed to another run. By selling these at $10,000 each, I am told that we can boost revenues from $100,000 per day to perhaps $180,000 or more per day.
 On the first day, it works like a charm. We sell five Golden Tickets and our usual 2,000 general lift tickets and make $150,000, for a 50 percent increase in revenue! On the second day a strange thing happens: We only sell four Golden Tickets, and 1600 general tickets. We take in $120,000, which is not as good as the previous day, but still an improvement over the old monetization model.
By the end of the first week we are bottoming out at three Golden Ticket sales and only 200 general ticket sales -- we only made $40,000!? How did this happen? This seemed like a sure winner.
For the general ticket holders, being bumped was very inconvenient, and reduced the value of the lift ticket purchase in their eyes. What was even worse was the anxiety created over not knowing when they would get bumped.
For those purchasers that valued their time more highly, this inconvenience was enough such that they would not have come to our ski resort even if the general tickets were given away free of charge. For some of our wealthiest skiers, they could have paid the $10,000, but for them skiing with others and meeting new people was part of the fun so they had no desire to take advantage of our Golden Tickets.
For those that did buy the Golden Tickets, the novelty soon faded, such that repeat buyers were rare. Some of these big spenders actually enjoyed watching the looks on people's faces when they got ejected, and as the number and enthusiasm of remaining general ticket holders decreased, this thrill also waned. While this situation might offer them the chance to meet others just like themselves (fellow Golden Ticket holders), these people had a propensity to want to ski by themselves (that's what they paid for, after all), so their social interaction with their limited number of peers was close to nil.
The Golden Ticket is an example of a supremacy good. A supremacy good is a good or service that reduces the value of all other linked goods and services in its space, including itself. Supremacy goods can initially appear to monetize very high, but over time consumers become adept at identifying any monetization model that contains them. This causes the advantages of the introduction of supremacy goods to self-extinguish. There are two exceptions:
- An environment where every product contains supremacy goods,
- A product that consumers perceive as a mandatory purchase.
Good examples of the first case would be online games in China, or games on Facebook. In both cases, there are essentially no alternatives. The sale of SUVs (sport utility vehicles) in the United States is an example of the second condition. In this case, the purchaser is buying a perceived unfair (independent of skill) survivability advantage over those that do not have SUVs in the event of a crash.
While the proliferation of SUVs makes driving more dangerous for everyone, most consumers in the USA perceive automobile purchases as non-optional. Thus to compete (survive), there is strong pressure to also purchase an SUV. As SUVs fill the roads, the initial safety advantage that was purchased decreases in value, because two SUVs colliding are less safe than two small cars colliding. Thus SUVs are a rare example of a non-virtual supremacy good that does not auto-extinguish (at least not for safety-related reasons).
Microtransaction-Monetized Games
These products are almost always sold as online "free-to-play" games. In multiplayer games, where inter-player competition is strongly encouraged (to drive sales via the "SUV" exception) there is no charge whatsoever to log in and be defeated by a payer. This is an undesirable outcome for a number of reasons, so people not wishing to buy victory will tend to leave these products for alternative offerings. In China, or perhaps on Facebook (more on this later), this option may not immediately present itself.
Multiplayer games are generally played on servers, where each server is a distinct play environment that is separate from other servers. For payers on these servers, a game of "virtual chicken" arises where the committed spenders will attempt to outspend each other.
Once the "winner" has been determined by spending the most, monetization activity rapidly approaches zero and servers become similar to ghost towns. The typical Asian microtransaction model-based product adapts to this by starting new servers every few weeks to allow players on dead servers to start the process over again on a new server. Unless you plan to "spend the most" on this next server, at some point the whole process becomes apparently futile, and the consumer will adapt by realizing the only way to win is to not play.
Multiplayer games on Facebook currently exactly follow the trend described in the last paragraph. While no company was willing to give internal numbers, I was able to confirm informally that this scenario is occurring in both Asian and Western mid-core social network games by discussing the subject with developers at GDC 2012.
Single player games, like the now-famous FarmVille (a Zynga product based on a number of other products), are generally referred to as "social games" on Facebook because they are run on that social network. They have a number of anti-social elements, like spam, so I refer to these products as "social network games" to be clear.
Since inter-player interaction is limited in these games, purchases cannot be used to directly harm the play experience of others not spending as much, as in multiplayer microtransaction games. Nonetheless, social network games are designed to foster a certain amount of "hey, look what I did", to create peer competition. Thus the sale of game objectives will act as a more mild supremacy good unless peer pressure is intense inside a friend network, in which case you get the "SUV effect" boosting sales.
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Also note that SUVs are held to the lesser crash standards for trucks as opposed to the proper crash standards for vans and "passenger vehicles". That's one of the reasons why they make more money for the auto industry and have been marketed so heavily.
To summarize succinctly: SUVs are held to a LESSER safety standard than cars, vans and minivans. If you think you are safer because it's "bigger", you are an idiot.
"People driving or riding in a sport utility vehicle in 2003 were nearly 11 percent more likely to die in an accident than people in cars"
For my part I think you overestimate the degree to which co-operative gameplay mitigates the effects (or changes from) of supremacy products.
As a game player myself I know I would resent another ally being considerably more powerful than me because she paid more than I, even though we are working together to complete the same goal.
I want to believe that given enough practice and commitment I can be the very best player in the game, so my allies are also my rivals. However if I only need to spend money to become the 'best' the game becomes more like a mundane task, an upkeep not a gameplay challenge.
My experience of other players' play styles in co-op games suggests to me that I am far from alone in this trail of thought.
Gather I suggest that in either co-op or pvp games payments should be aimed at either vanity desires, alternative but balanced forms of power, or more choice of content to play, new levels for lack of a better term. We should avoid raw power products like the plague in all games.
At this point do they feel the need to spend more to score better in the game, if so I believe power based virtual items remain an issue.
To get back to the point of how games score players, and specifically what data the game shares with it's players.
Intentionally not giving out the tools to rank the skills of team member can go a long way to dispelling concerns over relative power levels. However this in it's self is not a perfect solution in my opinion as the ability to clearly chart one's own progress in game is a big incentive to continue playing for many players, so they might lose interest if the ability to record their own data (and by natural extension the chance to compare themselves to allies) is not provided.
Lastly I'd like to mention my experiences with World of Warcraft as my main reference when it comes to the concerns players have with the relative power of their 9 - 24 allies. When playing in these large co-op game sessions I often feel like the players are as much competing to best each other's performance as defeat the enemy monsters.
Going so far as to be more concerned that other classes will 'beat' them in raids (not pvp), when they feel underpowered, rather than worrying about their ability to complete all of the challenging content.
They have a huge store and is a single player game, how does this compare, if at all ?
I think that this is interesting and will help me to balance my game for people that just want to play for a few minutes each day.
Thanks for sharing all of that information.
If any developer reading this is thinking about other markets like China, Russia, Turkey, Indonesia, Brazil or Poland, they really should not believe that "any advantage that can be bought should be allowed in cooperative play, but not in competitive play" or "limiting how often or when players can purchase one, or better yet give every boost some disadvantage along with it". Too often I have to facepalm while reviewing those so called "fair monetization" models.
I've done little research myself; I take it that Supremacy Goods are less of a concern in those markets? Why do you think that is? If you were to have two separate monetization models on different servers to adjust for those notions, or would it just be a better idea to release two titles under separate names?
First of all, the concept of "fair play" is less critical in some markets, especially Eastern markets. This is changing, but at a much slower rate than it is in the West. In interviewing Eastern gamers and media academics, they are becoming conscious of "fairness" but it is still a very new framework for them.
The other thing to point out here is that all games in the East outside of Japan are "unfair", so it is impossible for me or Dmitry or anyone else to do any sort of A/B testing on this metric since we only have "A" presently.
I really like your article, it's a huge step forward for american MMO developers. However it is still fundamentally biased. You argue that perception of "fair play" is important and it's changing in Eastern markets. Well, vast majority of players simply don't care, end of story. "Fairness" is not in top5 factors games are judged by in Eastern markets. Instant fun, deep combat mechanics, compelling conflict, simple UI, localization quality, shop variety - they all are much more important.
The A/B test is very simple: 10% are devoting their time to WoW, LoL or Aion, and that's fine. The other 90% prefer freemium; despite that subscription-based "fair" games dominated the market here in early 2000s, they lost the battle long time ago.
You're exploring the subscription->freemium transition happening in USA and parts of the Europe, and in that context statements such "any advantage that can be bought should be allowed in cooperative play, but not in competitive play" sound perfectly reasonable and viable. However it's a recipe for commercial failure on many other markets outside of USA. People are willing to pay to be powerful in conflict, not to be slightly better in grinding waves of mobs, even with their friends.
On a side note - why you consider Japanese market as "fair" ? Their culture of gambling-heavy freemium scares even me, they're really crossing the line between gaming and gambling. Or is it just me and casinos are culturally acceptable in the States?
I'm not aware of any game successful outside China that has any "Supremacy Goods" as described by Ramin. Perfect World is a great example, a truly freemium title successfull all over the world, with deep and balanced monetization model which clearly favors paying users. Yes, one can purchase power (that's THE point of spending money btw). And no, one cannot purchase "You win" button as Ramin frightens.
The key formula is very simple: raw advantage increases linearly while price increases at least exponentialy. Person who spends $100.000 will be only like 50% more powerful than non-payer.
As for the worldwide releases, revenue model need to be redesigned every time for best fit to the country. We do it @ Innova with all titles we publish, like we were the first to release originaly subscription Lineage 2 as a freemium game back in 2008. Even titles freemium by design, like Point Blank (#1 FPS in Russia), yield as much as x2 more revenue after careful fine tuning to local pricing standards, tastes and customs.
As for Japan, saying that games outside of Japan are not fair does not mean I said games inside Japan are fair. If I say that all numbers outside "Set A" are >3, this does not imply that all numbers in "Set A" are < 3.
I completely agree with you about the potential for truly cooperative games. Farmville came close, but the model can be improved. Not only do you have the potential to sell prestige goods to individuals, you have a shared social sense of responsibility, so any purchase not only helps you but also helps out the whole group.
What fun is a baseball game if the other team gets 4 outs an inning. What fun is football is its not 11 vs 11. Sports have worked for centuries because the field is fair. Game companies and designers need to pay heed, sports have already laid the design work out for what works and doesnt in competitive entertainment.
The free to play and be fodder nonsense is a marketing gimmick I really doubt it will become institutionalized in its current format. After all, as a life long gamer above all else, been around as long as these games have, all I ask of a competitive game is that first and foremost, is the field level and fair?if not why would I waste my valuable limited entertainment time there then.
I also don't like that notion, but it does seem that it's a popular idea that some markets support.
/), most of the products people are mentioning here, especially in China, are not even games. They are what I call "entertainment products". This is why I am seeking to carefully define terms in this space since it is difficult to have productive discussions when we are all using different language.
A good example of this was Shattered Galaxy (Nexon, 2001) which was the Western version of Tactical Commander, both made by Nexon. I designed SG to be much more "fair" than TC and most of our players were Eastern and barely spoke any English even though the game was in English. This was the first MMORTS btw (200 customized units per battle), and set the bar for less ambitious games that followed like World of Tanks and League of Legends.
Yes, if the items that were being monetized had an impact on the fundamental rules of the game, as in the examples you cited, I would consider it poor monetization design, at the very least.
However, a more accurate analogy would be the general training and equipment costs for sports. There's a reason established nations generally do better than third world countries in the Olympics. It's because a great deal more money has been spent throughout the athletes' lives making them the better competitor (fitness equipment, nutrition, coaching, etc.).
Further, consider the breadth of prices between similar pieces of sports equipment. With titanium, graphite, carbon fiber, and whatever other materials or production processes are used, athletes can marginally improve their performance. Will a professional athlete using entry level equipment be beaten by a newbie wearing the most expensive equipment? Almost certainly not. However, will such a deviation in equipment quality give a player of similar skill levels to another an advantage? Most definitely.
I think this lines up perfectly with Ramin's assertions, and I also believe this model (as it does in the real world) will thrive.
Kudos.
http://www.slideshare.net/bcousins/paying-to-win
Although it can be argued that over the long term lifespan of this game, selling supremacy goods did hurt profits and player enjoyment.
The first thing they did right was to tighten up their virtual economy, which was flooding initially. Since their monetization was dependent on in-game currency scarcity, the lack of such scarcity essentially yielded zero monetization. They did get some monetization from people buying costumes, but here all of their conclusions regarding this were false because they don't understand how virtual economies work.
The other thing they did right was ignore their forum posters. These posters are hardcore gamers like myself. If they post to complain, it is not because they don't want to spend, because they do. What they are complaining about (even if they are dishonest about it) is that the monetization model was changed mid-game, and rightly so. It is always better to launch with a good model because radical changes later are going to piss off your users and lead to bad free PR (negative virality).
I would argue here that their introduction of mild supremacy goods had little positive or negative effect on their monetization. Almost all the improvement came from correcting the virtual economy flooding. Their conclusion that more items to sell is better is false.
Finally, I would point out that all of these games use the antiquated 11 year old microtransaction monetization model and that they could at least double their conversions and revenues by switching to a more modern model.
I'd like to share a quick thought about the discussion of crowding causing increased aggressiveness. I personally don't find this to be a rule that is universally true.
Since this article has already discussed League of Legends, lets use it as an example. LoL has relatively small teams playing at a single time, yet my experience in the game has revealed one of the most hostile communities I've seen. I believe this is actually due to small team sizes in that: A) people get upset if you are not pulling your weight despite your best efforts on a relatively small team, and B) a single 'griefer' on your team can easily wreck your game by 'feeding' the enemy team thus making them more powerful. Riot has even tried to curtail player hostility with the 'Tribunal' peer review system, though despite this effort I have not seen any noticeable improvement.
Now, lets say in LoL you had 30 players on a map instead of 10. Now each player's contribution is smaller in comparison to the whole. A single weaker player won't necessarily bring down the whole team. 'Feeding' is somewhat nullified due to one player not being enough to feed the entire opposition. Additionally, the weak player is unlikely to feel singled out and is less likely to be chastised. It would also be more feasible to overwhelm a powerful player who is dominating via attrition. It would seem to me that crowding may, in this case, actually decrease hostility.
I would amend the initial statement to instead say that increased agresivness is caused by the degree to which one player can negatively impact another player's experience. One bad experience can cause a cascading effect as victims become predators through learned behavior and a desire for payback. Like the article implies, getting more players all comes down to improving player to player experience by creating and continually reinforcing a positive environment.
(I also think LoL needs more maps to increase the utility of existing characters, add visual variety, and increase player retention. Such maps could have more players per map, but this is somewhat beside the point. It has also been roughly 6 months since I stopped playing LoL, so perhaps some of this has changed).
Now I agree that the opportunities for griefing in battle arena games are a serious confound, and there are a number of ways to mitigate this that RIOT games or Wargaming.net have not figured out yet. That does not mean these solutions do not exist (because I've introduced them into my designs), but these two good companies just have not cracked that nut yet.
I don't know if you've seen this, but what you said reminded me of an interesting experiment where many Minecraft players were forced to play in a limited area with fixed resources. While it doesn't directly involve involve monetization, its an interesting look at player behavior. It would be interesting to see the results if the players were allowed to buy resources with currency in the experiment.
http://www.minecraftforum.net/topic/1212125-closed-map-experiment/
How do you propose that Riot prevent purchasing a desired Champion from reducing the utility of each additional purchase?
Great article, Ramin!
I had a question about this statement:
"This also implies that there is a vast untapped market for massively multiplayer cooperative games that, to my knowledge, do not exist yet."
I was wondering if the author has tried Horizons of Istaria(or whatever it's latest incarnation is called) which I recall was a pure PvE game where players are pitted against "the Blight" in an endless war to reclaim their world.
There is no pvp element in the game that I can remember, and I'm curious how you think this model would work with a micro-transaction based system.
I found the design of Horizons very inspiring and my experience in that game (I was the highest level Tinkerer across all servers) showed me that players can get very enthusiastic about a game where violence is not the focal point.