What is a Microtransaction?
A microtransaction is the purchase of one "piece" of your game for a set price. It is a one-time transaction that in some cases can be repeated. Used by itself, the term is so broad that it becomes a liability in any discussion. Here "what" you are selling is much more important than the fact that it was purchased piecemeal. So here I will discuss the what of non-subscription content purchases and attempt to wean you off of the term "microtransaction".
Virtual Goods Sales: Nexon began playing with microtransaction virtual goods sales when I was working for them as a designer in 2001. There are two dynamics that are important here. Do the items provide a competitive advantage? If so they are Supremacy Goods, as defined in my paper of the same name. This can have profoundly negative effects on your monetization efficacy.
Non-supremacy goods generally take the form of cosmetic and "flavor" items that do not provide a clear competitive advantage in a game. There are gray areas that may sell well, like items that are balanced but give more tactical options and thus provide more "flexibility" to the user.
Virtual goods can, in some cases, be sold by entities other than the developer. In these cases the process is often described as a real money transfer (RMT) sale. For a full discussion of these dynamics see my Real Money Transfer Classification paper.
In that 2011 paper, I broke down RMT into three categories. RMT3 is industrial gold farmers and sellers, which were organized almost 10 years ago by a company called IGE that caused considerable harm to our industry. RMT1 was the reaction to this -- what we usually now call "microtransactions." RMT2 is what came before both of these -- what I call "expert trades" between active participants in a virtual world. It was essentially wiped out by both RMT3 and RMT1.
 Blizzard recently attempted to bring back RMT2 and monetize it using a real money auction house in their Diablo III product, without understanding the involved potential pitfalls. I described these pitfalls six months before anyone got a look at D3 in this paper.
If you sell an item that can normally be earned via gameplay, then you are selling game objectives, and this breaks your game, as described in my Game Monetization Defined paper. This will have negative effects on your revenue generation.
Content Sales: If there is some part of your game that is inaccessible until you pay to unlock it, then I consider this a content sale. DLC sales are exactly the same thing, though usually that term is associated with single player game products, not online multiplayer games.
Note that while players can compete against each other in single player games via leaderboards (a very useful method of motivating your customers), this also reduces the Supremacy Goods effect of selling content that gives players a gameplay advantage.
Please note that for something to be a content sale and not a time gate (see below) it has to allow access to some part of your game that is normally completely inaccessible without payment.
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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.
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.
Rope em in, and suck em dry is hardly anything new, just new to us.
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.
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.
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".
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?
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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.
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.
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.
lThM
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.