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The Language of Monetization Design

March 13, 2013 Article Start Page 1 of 3 Next

Automobiles and computers were so simplistic in their first 10 years that today we have a hard time looking back and appreciating just what a leap in technology they were at the time. Like all technology, they benefited from the iterative process, slowly adapting to changes in allied technologies, consumer demands, and infrastructure. Today both cars and computers have components in them that did not even have names 10 or 20 years ago. Before they could be added to these products, they had to be thought about and given names so that they then could be optimized and adapted to various uses.

Today the technology of monetization design is literally in its first years of creation. The concepts can be quite complex, but in talking about them we use broad terms like "free-to-play," "microtransactions," and "pay-to-win" to explain things that would be difficult to explain in detail. The good of this is that others can have a general idea of what you mean without a long academic discussion.

If a developer says "I am going to replace the subscription in my game with microtransactions," then we can all nod and pretend we understand what the developer is saying. We can also pretend the developer understands what they are saying. The downside to this simplification is that often no one in the conversation understands what is going on at a level that can be applied to product.

Here, I am going to attempt for the first time to put a majority of the monetization design language I have been developing over the last four years in one short article. All of these terms have been used in my other papers on and here on Gamasutra, but never in one place.

I cannot understate the importance of a unified language for this space. Its importance goes beyond intellectual discussion. The whole "subscription vs. microtransaction" paradigm is so limiting that it is crippling our industry. There are not two ways to monetize a game. There are millions, limited only by our imagination and our ability to articulate our ideas to our fellows.

What is a Subscription?

Generally, this is a recurring charge for service. In games, it usually means you pay one fee monthly and get the entire game 24 hours a day, seven days a week. To be clearer, I describe this as the Unlimited Use Subscription Model. The weaknesses of this model are profound, and go beyond the scope of this article.

Any part of your game can be charged for in a recurring fashion, for any duration you set. You can have as many modules of your game as you like charged for in a recurring fashion. I call these limited subscriptions microsubscriptions. Microsubscriptions can be used to gate content access, boosts, time, or any other feature you can think of. There are two primary advantages to offering multiple microsubscriptions in your product:

  1. This allows the consumer to tailor your product to their needs. You can't, and should not, want to try to predict how each consumer will use your game. Make it flexible enough to appeal to the widest possible audience.
  2. This allows you to continue charging for your game service, and thus maintains your revenue stream beyond the first month.

The end result is you capture the biggest possible slice of each consumer's available gaming budget.

Article Start Page 1 of 3 Next

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Fernando Fernandes
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"Pay-to-Win" -- dumbest thing ever. Fuck this.

Jason Lee
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Fuck what? The fact it exists? The author's exploration of the concept? He explains it well in his ante analogy, if you read the link to the "How 'Pay to Win' Works" article. Or do you just want a forum to complain about how it's poor design, just like how the author points out?

Ryan Christensen
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True, but every game, even life, you pay with time or money to win.

And the winner takes all. The thrill of one more fight, the last one to fall... Some people pay for Sweet Victory, because they don't have the time.

As long as time and money are balanced right it can be fair in PvP, and I'd argue it actually might be closer to real life.

I always remind people of the arcades, it was always pay to win and metered but was fun as hell. I think a bit of coin can make a game more fun. Who didn't love clinking your tokens/quarters up on the video game for next.

Ramin Shokrizade
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I think many people enjoy games as an escape from reality. I don't really think success lies in reproducing those inequities in virtual environments. With a bit of creativity and know-how I think it is possible to make something better than reality, and still make serious money at the same time.

Diana Hsu
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Keepin' it classy. :D

Fernando Fernandes
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lol I'm not attacking the author in any way. He did a great job. I just dislike Pay-To-Win like EA does. It surely destroys what could be great titles... For instance, the latest Fight Night (round four? nah, I think it's 'champion'). Anyway, yeah. Fuck Pay-to-Win. And fuck the managers behind it. Plus, fuck 'classy'. I don't give a shit about it.

Julian Gosiengfiao
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"Creating a game that provides a quality experience for these high-budget, relatively casual players without resorting to Supremacy Goods should be the ultimate goal of a well crafted monetization design."

The holy grail.

edit: Realized that may have sounded dismissive. But I just can't help but look at the top charts on mobile and see ante everywhere as a fixture of well-monetizing multiplayer games.

Ramin Shokrizade
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I agree that the standard in competitive mobile and social network games currently is the ante game. Clearly I don't think this is a sustainable situation or I would not have spent the last 8 years developing alternative models. I don't even consider these games, I call them entertainment products. Nonetheless, if developers are not given other business model options they will continue to use what works. Ante games will continue to work until there is a better option available to consumers. Once that happens, the "age of ante" will pass and we can get back to making games again.

TC Weidner
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comparing monetization with computers and cars? really... Sorry monetization has been around since the days of sleazy salesmen, ( aka forever) its hardly anything new. Whats unfortunately new is that this slight of hand, prey on the weakest, fine print way of doing " business" has reached the gaming industry.

Rope em in, and suck em dry is hardly anything new, just new to us.

Paul Boyle
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Yeah. The meat of the article is not *terrible*, although i find it filled with the same sort of 'duh' statements that have laced the last 3-4 years of "Let me tell you about monetization" articles. For instance, does he really need to conclude by telling you his definition of hardcore, and the fact that RMT games are about whales?

But the initial paragraph really oversells the position of 'monetization' and starts things on a sour note to what is already a sour subject for many. Both in comparing it to a technology that was essentially developed along a trajectory that only improved for the consumer, and in comparing 10 years of early 1900's development to 10 years of internet-age development.

Isaac Knowles
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It's useful to have a classification system for revenue models. I think there are two big unanswered questions, though.

The first relates to the standard Acquisition/Conversion/Retention issues. Each of these payment models is going to have a huge effect on individual incentives to a) try the game, b) pay something for the game, and c) stick with the game. To the contrary of your section on subscriptions, you CAN and SHOULD attempt to predict what players will want to do with your game, because if you don't you can't even guess about how your payment system will affect those three variables. I think c) is particularly important because the value of a converted player depends on the intensity of their payments and how long you can expect to receive payments from them. The payment system you choose will have a profound impact on player lifetime, and perhaps even player interpersonal relationships, all of which affect the value of the game to players.

Then there's the issue of costs. Each of these models has particular kinds of costs associated with them. These include customer service costs, loss of value of intellectual property (via your RMT1/3), and economic management costs. A microtransaction system requires significantly more economic management than a subscription model. My guess is that a subscription model costs less in customer service, as well.

My point is this: Classification is good. But the analysis is ignoring some really important knock-on effects of revenue model choice.

Ramin Shokrizade
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I'm careful not to discuss specific monetization models in public spaces, since all of my models are generally proprietary. Here I am seeking to define terms and expand on some of my previous virtual microeconomic models. I am attempting to establish language, and perhaps suggest goals we can strive for, but I try to avoid telling you how to get there since that is limited only by your imagination and understanding of the space.

I'm clear that I don't use either subscription or microtransaction monetization models, as both are seriously flawed except in a very rare circumstances. Thus I am not going to be lured into defending either approach, or even participating in a conversation as to which is better since the answer would be "neither".

Jeremy Reaban
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If P.T. Barnum were alive in the age of the internet, he'd own the world...

Nathan Salisbury
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'Subscriptions' or 'Microtransactions' are not a montetisation strategy invented by the gaming industry. In payments terms microtransactions are simply low value transactions - what is the definition of low value? There's not a lot of science behind this... generally speaking they are under the $10 mark... I find it hard to believe that there are monetization experts out there with proprietry monetization models..?

Sebastian Coman
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Hey Ramin,

I have a question about a specific game. Clash of Clans is a semi-competitive game. Some see it as competitive and want to prevent raids, optimize their attacks and top the leader boards. Also, it gives you the illusion of it being a PvP, or even a multiplayer game. But it's not.

It's definitely a pay-to-win game with no spending cap that has certain competitive elements to it. Players ante up by buying better defence and attack units. But there are only a few who actually care about the leader boards. Not many are bothered about the "trophies" they're earning, and even try to keep them down to farm resources more easily. It feels like the vast majority of players just enjoy playing by themselves (as it's not PvP nor multiplayer) while socializing with their clan, if they found a friendly one. Gamer types I suspect in CoC: explorers (many), socializers (many), achievers (a few) and killers (none, as it is not possible to kill others' game experience).

Is this a pay-to-win game that is not broken, that monetizes well and will continue to do so? Might this be an exception to the rule of pay-to-win breaking the game?

Ramin Shokrizade
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I have not played the game yet (I will check it out tonight), but I did just watch this video which was very informative:

It is clear from the vid and your description that the game is not an ante game, because I cannot directly harm your play by paying. Thus the negative effects of the "pay to win" model on retention and conversion will not be as pronounced. Still they will be significant, and the reason people are complaining in game that others are "buying the win" is because it lowers the prestige of their efforts, knowing that someone else just spends some money and does everything effortlessly.

This prestige is a form of equity. In fact, in online games, it is the most valued commodity in existence. Everytime someone buys something, those that do not lose a bit of prestige equity. This upsets them and it should. They are being robbed, though the quantitative effect of this is probably lost on them, they feel it on a qualitative level. Instinctively.

I'm not saying these models don't work, because they do. Poorly. Conversion and retention rates are low under this model, but not as purely whale dependent as would be the case as an ante game. A model that preserves prestige equity and monetizes with that in mind will easily outperform this model by all metrics except that it will not be popular with whales. That is okay because the demand for whales is so high right now that they are spread thin, so depending on them is a losing formula for success.

Jason Carter
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"The whole "subscription vs. microtransaction" paradigm is so limiting that it is crippling our industry. There are not two ways to monetize a game. There are millions, limited only by our imagination and our ability to articulate our ideas to our fellows."

Could not agree more. Well, millions may be a stretch but I agree that people are stuck. Especially, the bigger industries. They see what works, or copy a new technique that someone else does, but they all seem to fall into the same trenches as others.

For instance, maybe this would work, maybe it wouldn't but what about: Pay per hour?
What I mean by that is say you have a $10 per month subscription. Now that $10 covers if you played 100% of the time down to say 75% of the time. Any time under 75% of that month would be discounted and rolled over to the next month and then the difference up to $10 would be charged to your card. This way you probably would never end up spending $10 unless you played all the time, and you could rely on never spending more than $10 a month.

For example, player A spends 10 days of play time in January and player B spends 20 days of play time in January. Player B would spend about $8 for the month while player A only gets charged $4-5 for that month. This would need to be balanced for the cost of a player in game for the server and perhaps it's too complicated but it's something at least I've not seen. (Perhaps it exists).

That's just an example, probably not a very good one, and similar to what you said about microsubscriptions, but there are so many possibilities. Maybe for 1 game out there this would work best, but if no one tries it who knows.

Steven Christian
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I quite like the Star Conflict model (a new F2P game on Steam).
There are several Tiers of ship/equipment which must be earned by everyone.

Within these Tiers there are several different levels of equipment which can be earned.
Levels one and two are purchased with ingame earnable credits.
Level three (blue) is purchased the same way but requires reputation with a particular faction to unlock.
Alternatively, you can purchase the highest level (gold).

Also there are two bonus levels which come from rare drops (green and purple).
Green is almost as good as blue (very slightly inferior), whereas purple is almost as good as gold (again slightly inferior).

Gold is obviously the best, but the difference is slight compared to blue (and very slight compared to purple), and battles are mostly won by skill and strategy (aiming, teamwork, etc), so these P2W items are almost not worthwhile.

Though there will be people with limited time that will purchase them (and if you are serious about the game you will purchase them for the slight advantage).

But as someone who has made no purchases ingame, I don't feel like whales have much of an advantage over me (as I believe that I probably have more skill than them).

This seems to be a good balance as the different Tiers still need to be unlocked, and people from different Tiers don't fight each other (so Tier 3 only fights against Tier 3 and so on).

There are also the standard flavour items and double xp/credits earnt limited-time items.

Each Tier also has Gold ships that can be purchased straight away, or once you build up more rep, you can purchase ships almost as good at the higher end of the same Tier.

Ramin Shokrizade
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It does not sound all that different than World of Tanks which I used as a case study in my Supremacy Goods microeconomic model:

Richard Black
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I've enjoyed many of your articles recently most particularly as they approach a lot of what I've been thinking about the game industry as a whole from an entirely different angle. I've been looking at games and mmo's more from a sociological perspective I suppose.

To me gamer's in mmos have become 'nomadic' in a large part and that created difficulty for the subscription model as a whole. In the early days you had very few options in mmo's so you found one that you enjoyed and built yourself a community of friends and guildmates you played with long after exhausting content often because you had very few other options of where to go. Games could count on recurring subscriptions over the long term simply by filling certain genres that were unfulfilled as they had little other competition. As more and more worlds opened up you were able to subscribe to however people began to look for more and more content, even if simply to exhaust a new world before returning to one you had more friends within.

Given how rapaciously many gamers drive themselves through new game worlds many could play through an entire game from launch to end game in under a month. If the end game was therefore less satisfying than the one they had come from and were already established within with a community they were close to they would simply move back to their old game or move on to the next new game about to be released.

Expecting a gamer to stay for months or even years without playing anything else is no longer a reliable business plan for any mmo and hasn't been for quite some time. Constant recurring subscriptions a month or two after launch are not what they used to be leading the search of other forms of revenue and to me the rise of microtransactions.

I think it's been exascerbated for a long time now with how common it is to launch games now without a proper degree of 'polish' that would have been unheard of not too many years ago. Games launch now not with just a few bugs but with whole aspects of game play missing like auction houses or mailing systems offline until they can be patched at a later date. From the marketing and sales departments perspective I can understand the desire to start monetizing games right away but when most of your customer base comes from another game where they are likely already established, customized, with friends and a society, and smoother gameplay I think doing so is just another way to ensure after the first month your potential subscriber will return to a competitors world or try another of the many offered these days.

With new means of revenue come new concerns, but also a potential end to some old ones. If you don't rely on a monthly subscription model you do not have hold your customer in game to the exclusion of others. You can expect a gamer to play in multiple other worlds hoping between content, updates, and expansions when they arise expecting them to return to sample yours. You can offer a variety of character customizations, skins, mounts, furnishings, faster travel turn arounds, all to help gamers play more of the way they want to within your game and perhaps spend more in a month than they would have in a year of the previous subscription.

Or you can drive them away and to one of your many competitors with poor customer service, bugs, lack of content, broken content, restrictions on play, or constantly trying to sell them things. I think these days most people have developed a filter to ignore most attempts to advertize to them anyway, as they are so insistent in todays society, so relying upon them is questionable anyway and should be weighed against the annoyance factor. With so many competitors any annoyance is likely to be a customer looking to another game world or another launch.