Let’s go whaling: A guide to monetisation through in-app purchases

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Torulf Jernström is CEO of Finnish developer Tribeflame.

His blog is Pocket Philosopher.

You can read all his weekly PocketGamer.biz columns here.

An oil sheik and a wall street trader got into a fight, who won?

All the other players who got to play for free! (And the game company)

This week, I will finally get to the big monetisation article. It’s a subject lots of people want to know about, even though their problem is often elsewhere – in retention.

Anyway, let’s get down to it with everything I have learned over the years about monetisation. This one is focused on In-App Purchases (IAPs). Next time, I will write about the other half of the story, which is advertising.

Let’s start with the most important thing: have enough to sell. As I have outlined before, the most important rule of a mobile F2P game is not to run out of content. If there is always something you can pay or play to get, you will have the basics for both retention and monetisation. Top games now have in-game economies worth tens of thousands of dollars.

Categorising players

I’ve seen a few different ways to break down monetisation into categories. One way advocated by Will Luton  is to offer each Bartle Type their own things to buy. Content for Explorer types, Customisation for Socialisers, Competitive Advantage for Killers and Convenience of speedups for Achievers.

Customisation of purely aesthetic things is nice, but will usually generate only single-digit percentages of the income.

The problem with this is that Content is incredibly expensive to make. Basically, no team can create new content at the pace required to keep superfans satisfied. Customisation of purely aesthetic things is nice, but will usually generate only single-digit percentages of the income.

The vast majority of the income is likely to come from things that give a meaningful in-game advantage, as opposed to fancy hats that lack any effect on gameplay.

Competitive advantage means pay-to-win, which can be very lucrative with the right approach. However, make sure that you do not overdo it and end up with an unbalanced game that feels unfair to new players and anyone not spending money. The power-gap between payers and non-payers should feel reasonable.

This leaves us basically with the speedups that Will Luton calls “Convenience”. Most of F2P revenues come from selling different versions of speedups. It is similar, but slightly different from straight-off pay to win.

Think of two friends: one with a lot of time, but little money, and his career driven friend with more money but less time. The speedups should allow them to progress at the same pace. The career girl can pay to keep pace with her friend who has more time to grind.

Hook, Habit and Hobby

This brings us to monetisation by stage of progress. I really like Dimitar Draganov’s way of breaking down games into Hook, Habit and Hobby.

In short, the Hook is what draws you in. Great production values, a unique game, etc.. After that the game has to develop into a Habit that you do several times per day. Last, is the Hobby phase where the players spend more time thinking about the game and it’s different layers.

Early on, in the Hook phase, the game should offer some great value “ice breakers”. Something quite cheap that feels very valuable – designed to convert players into paying customers.

Converting people early has a several virtues. First off, it’s the biggest step for a customer to take. If they do buy the ice breaker, they are way more likely to buy other things later. It’s also great for retention. Someone spending early on is mentally committing to the game and will play it more often.

By making upgrades into lotteries, you can both add excitement and effectively make the game longer.

In the Habit phase, it’s all about progressing through levels or building out your village, etc.. Here, we will be selling faster progress. With premium currency speedups you’ll be getting your cool new stuff now, instead of after a couple of days or weeks of grinding. A few things to think about at this stage:

  • Can you prolong it with using gachas instead of direct upgrades? By making upgrades into lotteries, you can both add excitement and effectively make the game longer. Look up “Skinner Box”, if you want to know why that works.
  • No hard pay gates! Having a level that you can only pass by paying is still a bad idea. The free players are still valuable for you when marketing your game and producing content in PvP games.
  • Try to keep an acceptable power gap between spenders and non-spenders in the game.

Last, the Hobby phase. This is where you have the superfans who have already upgraded their stuff maximally. To these players you can sell consumable boosters of different kinds – effectively allowing for an infinitely high spending cap in the game.

For instance, in many war games, this means speeding up training of armies that are then consumed in the next battle.

Before diving into the tricks, take a minute to decide how you want to earn your money. Is it the King model of relatively low spend from a huge volume of users? Or is it the Machine Zone model of very high spend from a much smaller number of superfans?

That’s the framework. Now for some of the tricks used.

The Hot State – Thinking Fast

One of the best books about behavioural psychology is Daniel Kahneman’s Thinking Fast and Slow. He’s one of the founders of the field, and got a Nobel prize for it. Even the name of the book gives us a first hint about how we should design our games.

In short, our brains work in two ways – the fast way (intuition) and the slow way (thoughtful reasoning).

Without effort, you can tell what 2+2 is, and complete the phrase “bread and …”. To tell me what 17 * 24 is, you have to start your slow reasoning brain with quite a lot of effort.

The thing is, no one will start the slow reasoning brain to make a purchasing decision in a mobile game. It does not matter if you are offering great value. It’s just too much effort to ask.

In practice this means that you might (as we did) offer help to the player in two ways. Some booster is very powerful and is offered up-front before playing – you have to plan ahead and think a little before you see it’s a good investment.

I will work harder to keep $100 in my pocket – compared to the work I will do in order to gain an extra $100.

Another booster is available right when you need it in the game – like a revive button available for a few seconds after dying. This rule explains why the latter one will be much more popular than the first. Aim for instant gratification!

Loss aversion & Endowment effect

People are odd in the way that we value things that we already own higher than things that we do not own. I will work harder to keep $100 in my pocket – compared to the work I will do in order to gain an extra $100.

This means that you can always give the player some resources, and then threaten to take them away. This is way more likely to trigger use of hard currency than a straightforward sale of the same amount of resources.

A lot of games lets players collect resources during level, and then takes the resources back at the end if the players do not finish – and offer the player an opportunity to keep what they gained by paying hard currency.

Basically this has been used in arcade games since the 80s. Put in another coin when you are at your personal best so that you do not have start over from the beginning.

For a deeper understanding of the psychology at work, pick up either “Thinking Fast and Slow” by Daniel Kahneman, or “Predictably Irrational” by Dan Ariely.

Offers and Scarcity

People value things that are hard to get. Underneath it all might very well be the same triggers as for Loss Aversion and the Endowment Effect.

Scarcity creates demand. Even if nothing needs to be scarce in a digital game, you should create rare items that players lust after. Time limited offers are a form of scarcity that play on the fast thinking and loss aversion aspects to become a really great monetisation tool. Combine with gacha (see Clash Royale)!

Subscription model

Try to sell things that pay off over time – the more you play, the more value you get out of it.

This helps monetisation and retention at the same time. For instance, the Clash of Clans builders work like…

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