One of my favorite folk-lore design positions is the notion of giving away free hard currency. Without hesitation, every product manager I’ve worked with will off-handily assert the “drug-dealer” model. Supposedly, after experiencing the wonders of hard currency, players will be more likely to spend real money on hard currency rather than just enjoying the free stuff. While free giveaways sound nefarious, it’s a common strategy in nearly all walks of commercial life: streaming services, cars, software, and Costco all employ trial mechanics to no moral confusion or controversy.
Despite strong priors displayed by PMs, I’ve never seen empirical evidence supporting the claim. But more importantly, I’ve never seen the argument entirely fleshed out. For example, does the theory suppose I’d maximize conversation if I gave players $100 worth of hard currency? Or will a mere $1 of free hard currency suffice? Do I send players hard currency on a schedule, or is an initial allocation enough? In true freetoplayeconomics.com fashion, we need a model!
Game monetization discussions tend to focus on what to monetize broadly (gameplay or cosmetics) as well as how to price it. As someone might imagine, these are crucial and foundational discussions to have. So naturally, therefore, it makes sense to invest a lot of human capital into optimizing them. Increasingly, however, I’ve become convinced that just making lots of stuff trumps all other optimizations. Instead of being an afterthought, supply-side considerations deserve to be front and center.
A few months back, a member of Biden’s campaign team appeared on CNN. The team member describes how the campaign managed to stay politically center: staying off social media. I tweeted at the time this was great advice for game devs.
The vocal members of any community tend to dominate the feedback. And as we know, this minority is not representative of the whole. Most anyone I’ve talked to will freely admit this, but we commonly ignore it when referring to the “community” of a game. For example, job postings for Community Managers emphasize social media management.
Even within gaming studios, I encounter a similar sentiment. Proponents of this position claim “firms use virtual currency pricing as a behavioral trick!” With virtual currency, there’s a disconnect between the real-world price and the virtual currency (VC) price. While true, there’s no intentional trickery going on. Instead, the reasons for VC are quite straightforward:
UGC platforms have hailed the rise of the Creator Economy™. Roblox, TikTok, and Youtube have democratized the creation of content, abstracting the costs of getting content to market. But we’ve assumed UGC cuts out content gatekeepers in favor of entrepreneurs. Everyone gets a warm glow when “the little guy wins”. And by all means, this appears to be true! Creators can single handily craft and distribute TikTok videos in seconds, not days or months. The barriers to Roblox creation are higher, but it’s a far cry from the rigamarole of traditional game publishing. The effects of UGC are profound: despite easing requirements with Early Access, Steam hosts 50,000 games to Roblox’s 40 million. It’s such a gap I made this handy chart to underscore the difference:
Blockchain gaming companies like Immutable and Mythical use games to “prove out the tech”. This strategy places games as a means rather than an end. But what exactly is the technology to prove and what are the gains to proving it?
The previous model of battle pass (BP) focused on average daily monetization cap (ADMC) as the key lever in driving more monetization from BP. Special attention was paid to the role of tiers and we’ll continue to do so here.
One of the more interesting shortcomings of BP is the inner temporal nature of the pass. The pass is available not on demand but at fixed time intervals. If a player joins in the middle of a twelve week season they face radically different pass economics then someone who started at the beginning of the season.
In 1931, American economist Harold Hotelling published the seminal paper The Economics of Exhaustible Resources. Harold described a problem many firms face: how much of a non-renewable resource should they sell at any given time? This problem is more apparent when thinking about managing an oil supply but just as relevant when considering how to manage match-3 levels.
Professional sports give us something to aspire too. Players are celebrated as heroes and children grow up wanting to become them. It’s no secret that the internet, and games in particular, have found even more ways to engross us in the world of sports. But the terms of that engrossment are not incidental, they’re crucial. NBA TopShot lets users “own” iconic moments. FIFA Ultimate Team (UT) has players collect star footballers. Fantasy sports gives betters big stakes based on outcomes. These platforms offer us an opportunity to insert ourselves closer to the action. French start-up Sorare fuses these aspects in a way we haven’t seen before; it’s the greatest challenger to UT and fantasy sports in years (sorry PES).