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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 Previous Page 3 of 3

Jeremy Liew seconds those numbers, even though he isn't a developer. Liew is managing director of Menlo Park, CA-based Lightspeed Venture Partners, a major VC firm which has recently focused on funding free-to-play MMOs, mostly multiplayer, web-based games like Friends for Sale by Serious Business, which is on Facebook.

In a recent blog post, Liew reports that, according to his research, ARPU at several popular sites averages $1.25 per month, specifically $1.62 at Club Penguin, $1.30 at Habbo, and $0.84 at RuneScape.

"Having spoken to many other MMOs and virtual worlds on a private basis," he writes, "this estimate seems to be a good gauge for what a well-performing MMO can aspire to from a free-to-play business model."

In terms of ARPPU, he says, the range is from $10 to $50 per paying user per month, which typically comes from 5-10% of the total number of users in any given month. Sports and gambling games tend to be a bit higher, social games a bit lower.

Liew believes that free-to-play MMOs present a huge opportunity for smaller companies, which is why his firm invests in them, of course. He sees the business model as a "disruption" that, he says, larger companies have a difficult time surviving.

"The business policies that made big companies so successful can sometimes blind them to the things they now need to do to become successful on the other side of the disruption. It's hard for them to change," he observes. "Small companies transition much more easily."

Another advantage to building free-to-play MMOs compared with subscription-based games is, simply put, that peoples' expectations of their quality is dramatically different, says Liew. And with the bar set lower, development time and expense are easier on the budget.

"If you're putting out a World of Warcraft and are charging $60 for it, people are expecting a pretty good game for their money," he explains.

"But if it's free, you can practically throw anything up -- even if it's buggy, even if it's not feature-complete, even if it crashes sometimes -- and see how people react to it. If they like it, great. If they don't, you can either fix it and watch what your customers do -- or abandon it altogether. That's the great thing about the Web and about free-to-play."

His best advice to developers is to jump into the sector only if you can get your mindset around a lower-level of quality when launching your beta... and then iterating quickly.

"If you are a master craftsman who likes to spend six years making everything just so before releasing it to the public, then you're probably better off sticking with the older business models," Liew says. "Because you're going to have a tough time reconciling much, much lower revenue with high cost.

"But," he adds, "if you can wrap your head around the implication of less money in and less money out ... and you can develop the games with relatively small, multiple teams that are constantly turning them out like an assembly line ... you're going to find that free-to-play MMOs are an exciting and worthwhile place to be."

Article Start Previous Page 3 of 3

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