Working in the free-to-play space on mobile is a real challenge, and building a great business model is an integral part of the process of developing games. Developer Aaron San Filippo talks about the bumps in the road he faced in the transition.
When my brother Forest and I started Flippfly, we struggled for a long time over the pricing strategy for our first project, an ios "Edutainment" app called Monkey Drum.
On one hand, it was unique (it's a combination of a musical sequencer with 3D characters) and it had great production values that would, in theory, set it apart from the average iOS entertainment app. On the other hand, we were completely unknown as a company. We were also releasing into the "Entertainment" category, and most of the successful apps there were free.
So we eventually decided that Monkey Drum would be free-to-play, and that we would implement a virtual currency system where users could earn coins through playing musical instruments, or buy the virtual currency in chunks for real money.
Two of our goals for the app were to gain users and to prove that we could produce a top-quality product. We largely succeeded at these goals: To date the app has been downloaded over by over 80,000 users, and has a 4.5-star rating. Users love it.
Of course, we also hoped that the app would turn a decent profit, perhaps funding the next project and allowing continued updates for some time. From the title of the article, you may have guessed by now that we failed in this regard.
The conversion rate was pathetic, and the average revenue per paying user was low enough that despite its decent download numbers and great review scores, we had achieved less than $500 in revenue after several months.
In retrospect, the mistakes we made are obvious. But since this time, we've seen these mistakes repeated by others, often small indies like us. So I'd like to share what we've learned and observed. Learn from our mistakes!
So, here are seven things you should do if you want to doom your free-to-play project to almost certain financial failure.
Our thinking with Monkey Drum went something like this: "If a good conversion rate is something like 1-3 percent, maybe we can achieve that by delighting our users into wanting to give us more." The more we look at effective F2P design and contrasted it with our app, the more we realize that this doesn't work in reality. Your users need to love your app -- but you need to leave them wanting more. Sure, there will be a small percentage of philanthropists who will give you a few bucks to support you as a developer or out of pure appreciation, but generally speaking, you need to leave people wanting, or your conversion rate will probably round down to zero.
With Monkey Drum, we provided reasons to pay in the form of additional instrument unlocks and, eventually, character customization items -- but we also provided them with a means of unlocking the virtual currency to buy these items, and this method was actually a lot of fun and not terribly "grindy." In the end, a lot of our players probably don't have that urge to spend because they're always having lots of fun, and because the items included with the base product provide hours of entertainment.
Some very effective F2P games are clever and calculating in how they create this "pay magnet" -- often by giving you opportunities to spend more and more virtual currency as you "level up" (Zuma Blitz from PopCap is a good example.) Others succeed by pure variety: by providing not only gameplay incentives, but vanity items, extra content, etc.
Whatever your strategy, please realize that you have to find a perfect balance between delight, and leaving users wanting more. If they feel that they have a complete experience, or a reasonable means to unlock these items through gameplay, they will probably not pay for more.
Free-to-play monetization is fairly simple mathematics when it comes down to it. Your revenue will be LTV (lifetime value: the average amount a paying user will spend over the entirely of playing your game) times the conversion rate (the number of people who will spend anything on your app) times the total downloads.
Just keep that formula in mind:
Revenue = LTV x Conversion x Downloads.
Astute developers will realize that the lifetime value of a user is capped at whatever the maximum possible spend is. If this cap is $1 or so (maybe you charge to unlock the "full version") then you need a great conversion rate, and with such a low LTV, you'll need to be lucky enough to achieve virality, because the cost to acquire users by any paid method would exceed the return on investment.
The truth is: free-to-play works in large part because of "whales" -- users who spend significant money in your app. No matter how good your app is, there will be a percentage who download it and never play it. Of those who play it, there will be a percentage that just plays once. Of those who really get into it and pay for something, many will only pay once.
What you care most about about are those who are left. If you provide continual motivation to spend money, then the "burning core" -- that subset of customers for whom this is the best app ever and part of their daily routine -- will push up this LTV to the point that it can start to make sense financially.
With Monkey Drum, we failed here. To be honest, we really hated the idea of "whales" -- especially given that our app was primarily for children, and we were hearing all the horror stories about kids spending hundreds on virtual currency. We had one consumable item in the app -- a bunch of bananas you can feed to the characters. But in our determination to not be evil, we provided a fairly easy means of earning enough coins to unlock more bananas -- not to mention our clear message to parents about how to disable in-app purchases -- and it turns out that most of our audience really enjoys the process of playing the instruments and unlocking these.