In Six common mistakes when moving to live-service games and free-to-play, Ben Cousins argues that cosmetic-only monetization is a mistake:
The games that make billions from cosmetic-only economies typically only succeed because of the sheer numbers of players. On a per-user basis they actually have very poor monetization, relative to games that use more aggressive methods. This is because for a multiplayer game that is built from the ground-up to be about dominating other players, the proportion of the audience who are interested in self-expression via cosmetics is rather small.
He’s right. Traditional HD developers choose cosmetics because there are no core design implications. Cosmetics can be layered into nearly any game at any stage of production. But for it to “work” massive scale is needed and even then it’s risky. It’s no wonder that very few mobile games in the top 100 grossing that use cosmetics only monetization. But I also think Ben misidentifies the challenge of cosmetics. They are certainly not about self-expression (at least the successful ones). In fact, Ben is right: male-centric multiplayer games are about domination but this is why cosmetics are viable.
Ironically enough, this is best summed up by piece on “cam girl” economics:
Men want a few things, and probably one of the biggest is winning a competition.
You see, you’re not just trying to get a guy to pay you – you’re trying to get a guy to pay you in front of a bunch of other guys. This is a super key. A man wants to feel attention from an attractive women on him, and this is made even more satisfying when it’s to the exclusion of those around him. He is showing off his power by buying your happiness.
High-level cosmetics in multiplayer games often signal domination whether or not the cosmetic is attached to skill. Apex is particularly effective at this. Consider low and high level banners:
The stat tracker element directly shows a player’s time commitment to the game. We can also see the more exotic colors and shapes communicating danger. Sort of like the poisonous dart frogs: cute, but deadly.
And finisher animations are particularly humminating since both the player performing the finisher and the one being finished must watch.
None of this should be particularly surprising, we are political beings after all.
While these might be good observations, we need a falsifiable hypothesis of cosmetics. This allow us to make more predictive statements about how a new cosmetic will or will not sell. And to an economist this means a model!
Consider a basic model of cosmetic demand:
Player Cosmetic Utility Choice Model: Getting a Better Cosmetic
Player Cosmetic Utility Choice Model: Getting a Worse Cosmetic
Horizontal or Vertical Progression
Progression is a powerful toolkit, even for cosmetics. One way to combat the inflation problem is essentially print more money. And by this I mean introduce higher and higher rarity. Riot, for example, introduced Ultimate II skins (3250 RP).
Alternatively, the horizontal way to attack this problem is to add cosmetic vectors. Dota 2 has mastered this with things like chat lines and ping cosmetics as customizable vectors. Of course, this too will face challenges are players collect more and more items in the given cosmetic vector.
Cosmetics are a hard road to follow and inflation is always chasing developers. It's important to think carefully about mitigation strategies and how to grow cosmetic vectors overtime as you would any other element of a live-service.