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Why freemium mobile developers can't succeed without whales
Why freemium mobile developers can't succeed without whales
February 26, 2014 | By Alex Wawro

Less than two percent of freemium mobile game players spent any money on in-app purchases in January, according to mobile app analytics platform Swrve's inaugural monetization report.

The report purportedly surveys the in-app spending habits of millions of people playing mobile freemium games on Swrve's platform in Jaunary 2014.

Of those surveyed, only 1.5 percent spent money on in-app purchases, and the top 10 percent of those spenders accounted for 50 percent of an app's monthly revenue. Swrve reports that people in the top 10 percent of spenders averaged seven purchases during the month, with an average purchase value of just over $11.

That suggests that less than one percent of a freemium app's player base -- 0.15 percent, according to Swrve -- generates roughly 50 percent of all IAP revenue. Developers can't give up on the whales, because whales are simply too crucial to the success of these games.

The fact that a relatively tiny sliver of the audience is generating the lion's share of a game's revenue isn't surprising -- we've long known that the business of freemium game design is akin to chasing whales. However, the relative sizes of Swrve's numbers are notable; they suggest that top spenders are responsible for an increasingly large portion of a mobile freemium app's total revenue, leaving developers less room to succeed without them.

The report is worth reading in full for further insights into the current state of the mobile freemium game market. Notably, Swrve claims that roughly 47 percent of people who started playing a new freemium game went on to make an in-app purchase, and the average time to first purchase was roughly 24 hours.

Swrve also reports that 72 percent of all revenue generated by a freemium app player is generated within the first three days of play, suggesting that developers should be able to deduce a player's interest in spending money shortly after they start playing.

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Ian Uniacke
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I think the problem is more to do with the terminology that is used eg whales and hunting.

The actual concept of whales is not a bad's exactly how a bunch of legitimate businesses work. In my opinion we just need to come up with better names (and possibly better mechanics). When you play a board game for example, most people never pay a cent, it's just the one "whale" that buys all the games and invites their friends around. So I think we would be better to think of the whales as magnanimous users. And also if we see them this way perhaps our mechanics will reflect this (just for example maybe their name appears as a donator in other peoples games).

Kyle Redd
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"The actual concept of whales is not a bad's exactly how a bunch of legitimate businesses work."

Examples of other "legitimate businesses" employing this model include:

- casinos
- various other forms of gambling outfits
- chop stock brokerage firms
- ?
- ??
- ???

R. Hunter Gough
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Ken Carpenter
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Unfortunately your examples are nothing at all like freemium. In fact, they are the exact opposite of freemium.

Freemium games only make money from a very small percentage of players.

Casinos and other forms of gambling make money off of almost everybody.

Sure there are whales in gambling (i.e., the ones betting the most), but they also don't always lose and a casino can have a perfectly good business without them.

Also, boiler room type operations similarly take advantage of everyone. Nobody rides for free.

I'm not sure which other "legitimate businesses" use this "whale" model though.

Katy Smith
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- Any "the more you buy the more you save" type place (Groupon)
- "Pass the hat" shows at places like RenFaires
- Any "Free X for coming to this seminar / tour / demonstration" event
- Frequent shopper bonuses (my Nook tells me when it's free smoothie day at Barnes & Noble)
- Store cash (for every 50 dollars you spend now, you get 10 dollars to spend later!)

I can understand why the concept of "whales" feels weird, but it's not all drugs and gambling :)

Amir Barak
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Religions... They've been free-to-pray for eons now.

Aaron Steed
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I like to call them Personages Loving Extreme Buying. Or plebs, for short.

Jeff Leigh
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Just the fact that "whale" has become an accepted industry term says all sorts of things about the mentality of free-to-play developers. Clearly that industry is so ashamed of itself it does not want to recognize the people who play their games as even being human.

For anyone in doubt, this is how free-to-play game developers view, discuss, and treat gamers: as animals. Gamers are "cattle". Gamers are "sheep". Gamers are "whales". Gamers are animals that should be rounded up in pens and fed 'free games' - all the while being analyzed, fattened (read: become entitled), and tested upon until they find the right formula to the person's wallet.

In one Gamasutra article we are pretending to be enlightened by passionate pleas from people expressing valid observations about the rampant sexism and racism in the industry. In the next article, forget all that.. let's talk about those animals and their movement patterns.

No offense to the article's author, but personally, I'd much rather read about an industry that is at the fore-front of technology: pioneering new ways to connect with people, with Customers (with a capital C), than read the dehumanizing metrics and the usage patterns of a thousand "whales".

Paolo Gambardella
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I strongly believe that if a game has a good retention the dev can really build a great business thanks to the conversion player->hobbyst. League of Legends is a good example for that. There is not any rule in that, I also know many hardcore companies making premium games only thinking in money. Good games will always exist, indipendently by the business model.

Hakim Boukellif
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Can the market support more than just a handful of "hobbies", though?

Paolo Gambardella
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the market can always support good games.

Wendelin Reich
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This article commits a typical fallacy: current F2P monetization depends on 'whales', therefore F2P is inherently dependent on 'whales'.

This dependence on whales could actually change, and I hope it will. It is an artifact. IMO it is caused by two things:

(1) Developers don't cap spending, thereby allowing 'whales' to exist in the first place.

(2) A vast number of players, myself included, is suspicious of games that don't cap spending because we fear being sucked into an infinite loop of spending money.

In other words, current F2P has CHOSEN to depend on whales becaue it scares off the vast majority of normal, risk-averse customers. I don't think it has to be that way.

Tom Farrell
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Couple of points on the research that maybe aren't being teased out or acknowledged as much as possible:

First - that top .15% are spending an average of $80 a month. I don't think that supports the frequently told anecdotes of players spending thousands a week. Don't get me wrong - I am sure they are out there, but the industry doesn't RELY on them and this research doesn't paint that picture.

Second - if you look at the revenue distribution from those spending money (and they are the customers, after all), it actually conforms rather neatly with the pareto principle. It isn't unusual. Perhaps the existence of a large group of non-payers makes the numbers feel more stark, but there are many, many, many industries that see 50% of revenue from 10% of customers.

I'd also agree with a lot of the comments above. This data describes current reality. There's nothing to say it has to be this way, or should be this way, and I firmly believe we are only scratching the surface when it comes to "pioneering new ways to connect with people" in Jeff's great phrase. Excuse the plug but that's what we try to do for our customers every day.