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What Are The Rewards Of 'Free-To-Play' MMOs?

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What Are The Rewards Of 'Free-To-Play' MMOs?

June 9, 2009 Article Start Page 1 of 3 Next
 

Yes, good money can actually be made in the rapidly-growing world of free-to-play massive multiplayer online games (MMOs), but just how much can micro-transactions actually generate? Unfortunately, average revenue per user information is often concealed behind the fog of competition by privately held game makers reluctant to report either very high or very low results.

To add to the confusion, some developers choose to report their "average revenue per paying user" (ARPPU) which, by definition, is always more impressive than their "average revenue per user" (ARPU). (Both of these statistics relate to monthly logged-in users, and the amount of monthly logged-in users cited in ARPU is often a fraction of total registered users -- a common metric used in press releases.)

The inability to get at the real "metrics-to-success" can make it extremely difficult for a developer mulling whether or not to enter the free-to-play MMO sector.

According to Daniel James, this "reluctance to clearly report revenues is a deliberate attempt to obfuscate the numbers." James is CEO of San Francisco-based Three Rings Design. "There seems to be a perception," he explains, "that there is a business advantage to not being transparent. But I disagree."

As James blogged recently: "People often ask me, with a wary look such as you'd give a lunatic, 'Why do you dish out your numbers like this?' It's a good question. There are possible downsides, but they are limited; if a competitor looks at my numbers and then goes on to execute better than us, I don't think that has much to do with our numbers. They executed better, that's the hard bit. Well done to them.

"The upside," he continued, "is that the more information that circulates the startup and games community, the more people will share their data. This rising tide will raise all boats. If I can shame my fellows into parting with their data, we'll all benefit."

Indeed, James reveals that Three Rings' MMO Puzzle Pirates takes in approximately $50 each month from each paying user (ARPPU) for a total of $230,000 a month, all resulting from microtransactions.

In February, 2005, James chose to launch a free-to-play version of Puzzle Pirates alongside the original subscription model (which contributes an additional $70,000 each month from subscription fees).


Three Rings' Puzzle Pirates

He admits he really didn't know what to anticipate in terms of revenue; there was nowhere to go to research how well microtransaction-based MMOs did elsewhere.

"We just jumped in," he recalls. "There were no data points and, frankly, every game is different, every play population is different, and extrapolating from one developer's data to your own is, well, an interesting intellectual exercise but it doesn't necessarily tell you what to expect."

Four and a half years later, James has learned a lot -- that the average revenue per user (ARPU) is between one and two dollars a month, but only about 10% of his player base has ever paid him anything. As a result, he says, approximately 5,000 gamers are generating the $230,000 in revenue he sees each month.

"The pivot number -- the number to focus on -- is not the $50 ARPPU but the $1-2 ARPU," he says. "That's the number that a new paying customer is worth to you. If that number were, say, 20 cents, you'd probably have a difficult time building a business."

"But if that number were, say, $3 then you have a good business that enables you to go to a flash distribution site and say, 'Hey, put my game up on your site and I'll give you a dollar for every new user you send me.' They'd surely be interested in that."

(Regarding registered users, a late 2008 press release from Three Rings noted that, over the lifetime of Puzzle Pirates, the game has seen seven million accounts created -- showing that the 'registered user' metric is not particularly helpful in extrapolating revenue-based success stats.)


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Comments


Aaron Murray
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My hat's off to Daniel James for sharing this information. I too would like to chip in with some numbers that I recently shared at a talk I gave at IGC Boston. They should serve to back up James' statements as I've seen similar results with my online game (Domain of Heroes), though on a smaller scale as DoH is new and only has about 30k players so far.



I'll break the figures down into Lifetime (8 months) and 7 day (last week). Daniel didn't mention this, but I would add that the numbers seem to get better each month as long-time players continue to make purchases and new features are added that retain/convert newer players.



Lifetime:

ARPU: $2.03

ARPPU: $59.27



7-Day:

ARPU: $3.51

ARPPU: $46.66



I'd also like to add that "Sales" events are huge. As in 10x revenue generation. This is why the 7-day ARPPU numbers (no recent sale) are lower than the lifetime ARPPU numbers this week.



Additionally, ads and "sponsored offers" (think TrialPay, Offerpal, PayBuyPartner, Gambit, Super Rewards, etc.) Represent an additional 10% on top of the purchases. Not a huge share, but an extra 10% is nice.



One final interesting tidbit that I've seen is pricepoints. Our microtrans game has pricepoints from $0.99 to $349.99 and about 80% of the revenue comes from purchases at the $19.99 pricepoint. So even though games are pitched as "free-to-play w/microtrans", the transactions can actually be major ;)



Information sharing like this really helps the industry, especially for smaller Independent companies like mine (Tandem Games).

Konrad Kiss
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Thank you for the awesome article, Paul, and thanks Aaron for sharing further details. Our (indie) company, Bitgap Games is about to come out with a free-to-play MMP (Xenocell) before September, and it is great to be able to relate to something later on when it comes to crunching numbers.



Although as you mentioned, it is really hard to draw consequences from different games - let alone different genres - it is still a huge help for us little people. So, thank you guys once again.

Caleb Garner
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Yea that's awesome, thanks for sharing. I attended the flash game summit the day before GDC in San Francisco and did my best to pump as much information out of these folks as possible. It's very discouraging at times because there is this wall of mystery, not just from MMO's but also sponsorships and impressions and anything else that relates to "rubber meets road". My data is not as personal, it's more flash game development oriented and it's not as fleshed out, but only because they didn't specify. This is stuff straight from my notes, heck maybe someone out there can fill in the gaps :)



Kongregate:

3% of mulitplayer gamers tend to pay, only have a few games out so far… 2% single player games tend to pay. Kongregate offers $5, $10, $20 per… $5 is the most common chunk. $3 per transaction is the most common unit of purchase amount.



Puzzel Pirates:

22% of Puzzel Pirates pay to play of active (regular) players. $20 average per active player $4.95 minimum for getting starte. 60% / 40% credit / PayPal



Dino Wars:

9% of Dino Wars active (regular) players pay something to play…



Zynga Notes (Social Networking games):

200 million people on facebook, Kongregate has 5 million

Mafia Wars over 1,000,000 a day

Some games making $10k – $30k a day on facebook

Pet Society 2.8 million daily active users

MindJolt has 300,000 active users daily on facebook

Zynga income is in three parts 33/33/33 ad revenue, Microtransactions and form filling out (?)

Simon Carless
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Caleb, the form filling out for Zynga is the 'incentive'-based business model where you'll get in-game credits in Zynga's games if you, say, sign up for Netflix, and then Netflix will give Zynga money for that referral. It's an interesting angle that hasn't been discussed much just yet outside of social network games, but I'm sure will be soon.

Caleb Garner
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ah ok that makes sense. very cool thanks :) yea that is an interesting angle

Mike Lopez
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Bravo to you guys for a call to action for others to share data in the free to play space and for sharing your own. I am not affiliated in your space but I agree with your premise that more data shared across the board is better for all.

Tim Holt
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There are some interesting parallels between the idea of free to play and the "free demo, pay for the full" model like some iPhone apps have. Here's a great post from NimbleBit going over the numbers for their iPhone development --> http://www.nimblebit.com/2009/06/nimblebit-numbers/



Kudos by the way for people who post this kind of stuff.

Dave Endresak
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Just FYI, there has been some discussion and pressure within academe to have professional research studies offered for free public use. Obviously this would be a great step in the right direction for any field of endeavor. It's great to see some people in gaming take a proactive stance with regards to this type of issue.

Jason Park
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I'm disgusted with Jeremy Lliew's view on encouraging poor quality in free-to-play, as should any pc gamer or publisher. Our users deserve better.

Eddie In
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My job for the past number of years doing biz-dev for Korean free-to-play developer/publishers has been digging up this data. Something I can share is that a big reason for all the hush hush is the very real fear that the numbers will be misunderstood. At the moment the most widely used KPIs to measure the business success of a client based MMOG are peak concurrent users (week/month), unique logins (usually monthly), percentage of those unique logins that pay and the average size of transaction (ARPPU). The danger comes when you try and compare these numbers with other games. The variance in the data across genres, regions, seasons, you name it is very large. There seems to be a perceived threat of some investor making a change in project funding because he suddenly thinks FPS games in Southeast Asia monetize better than browser games in Europe. This is an extreme example but I hope you all get the idea. Cheers.

Don Langosta
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A little disheartening to say, "we can throw any crap we want up there and see if the idiots'll pay for it." However I love F2P and am far more likely to give an F2P game my money than buy a subscription. The a la carte approach makes me feel more empowered but more importantly, if I stop paying money I can still play. In WoW, if you stop paying your subscription there's nothing you get to keep using. You just can't play anymore until you start paying again.

Josh Thompson
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It's great to see some numbers; I've always wondered how well F2P really worked. Now I'm wondering how more data could affect the market -- companies thinking, "Ah, we can throw something out there and stand to make a profit" or "Ah, we should take this more seriously"? While Jeremy Liew's statements seem to support the former, I'm hoping (and thinking) he meant: developers should understand that their initial earnings are going to be quite low, and should plan on that. But also plan to improve the game quickly and significantly post-launch once the revenue begins trickling in.

Anatoly Ropotov
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These numbers are meaningless as you can't compare most games directly.



There are many types of F2P games: session-based games, standalone social worlds, mmorpg games with item malls, mmorpg games with single virtual currencies. All of them have different values, be it ARPU, ARPPU, active to regs, price of reg, retention, etc.



Then you start taking into account other things, well...



There's number of online players per game. Is it per server or per shard? Or total? Peak or average? Does your peak and average includes actives and fresh new regs as well?

Active players - is it 2 weeks old number or 1 month old? Regs - do you purge db or not, etc?

How old is your game? What is your active churn rate, how often updates are pulled in, session time, etcetc.



And then the biggest question - WHAT IS YOUR USER COST.



I could go on and on, but it all doesn't make sense, you can't compare apples to oranges, unless you are really comparing 2 equal games, e.g. both are MMORPG games with real F2P (no premium features, players could earn all money without paying) in the same region (as ARPU between Germany and China will fluctuate by tens of percents for the same game after a year of running). And then it comes to the science of game design to determine the reason of the higher/lower ARPU.



F2P game revenue evaluation is a science where you should evaluate layers of profits inside the game and really know what you are talking about.



Now, spend 5 days playing 50 different mmo games and filter out 10 money-worthy out of them ;) Write me a mail, I'm looking for Country Managers in Europe to work with the games that have a lot of money - anatoly at astrumonline dot ru

Joe Hernandez
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Aaron Murray, thanks a lot for post and congrats on your game.

Would you mind sharing some info on marketing / distribution?

How much did you spend on marketing so far, what type of distribution deals did you do, etc?



Thanks!

Aaron Murray
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@Joe - I don't want to hijack the comments, but I'll answer briefly. You can email me at aaron@tandemgames.com if the answers aren't what you were looking for.

Distribution (currently) is solely through domainofheroes.com since the game runs without plugins...there isn't an easy way to hand a swf off to other sites.

Advertising - I spend approx 25-50 cents to acquire each player through online banner ads. That takes into account the click-through/sign-up conversion rate. Over half of the players are not coming through ads though, so that is good (free). I purchased a magazine ad but that didn't convert well at all (tracked with a signup code/freebie). There are some little 'viral' hooks in the game...like it can Twitter major events for you, etc. There is a MySpace and Facebook group. Stuff like that. Nothing grand yet. I'd say I spend about 10% of the revenue on acquiring new players.

Billy Joe Cain
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Thank you everyone for participating here.



I am working on a virtual world (in the planning stages) and I am trying to find costs and schedules for the more popular MMOs. Is there a shared resource?

Max Yankov
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Anatoly made a great point. It is important to notice that ARPU and ARPPU are far from the all data you need to get full financial figures.

You have to keep in mind:

1. The cost of registration (wich can go up to 1$)

2. % of users that completed the tutorial and newbie phase and became active users.

3. Typical lifespan of an active player in the game before they leave it

4. The server-side player cost.

That data is valuable not only for the marketing and business owner, but for game designers. Basically, operating a live game you want to bring it's revenues up, and by looking at it, designer can decide, what is more cost-effective for the game in the current situation: improvement of a tutorial stage or creation of content for the end-game.



As for the figures, I don't have an authority to announce the ARPU and ARPPU of games I've worked on, but can only provide you with the numbers from public sources. For example, dwar.ru, the most succesful game on russian F2P market was stated to have 200$ ARPPU with 10-15% of paying userbase. Of course, unlike Puzzle Pirates, it is much more hardcore browser-based game with many gameplay elements similar to "big" client games like WoW and Lineage 2.

Antonio Moro
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There's a place where to find some raw market numbers, like the size of the F2P market and the increase in the last 4-5 years? this ARPU/ARPPU numbers are interesting, but we also need to know some global numbers and how the different continents compares in terms of total market size and total market increases..



Any help is welcome, thanks


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