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Successful MMOGs can see $1-2 in monthly ARPU June 9, 2008

Posted by jeremyliew in freemium, games, games 2.0, gaming, mmorpg, subscription, virtual goods.
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There are not many publicly available statistics on the free-to-play industry in the western world. Here is what I found on the web for some of the popular virtual worlds and MMOGs:

Second Life

Second Life’s economic statistics are reported monthly. In May 2007, Second Life reported:

$165m Linden dollars sold by Linden Lab through the Linden Exchange in May
$127m Linden dollars paid via weekly stipends in May
860k residents logged in over the last 30 days

Since Linden pays $300 Linden dollars in weekly stipends to premium members, there are around (127m/300/ 4 weeks=) 100k premium subscribers paying $6-10/mth. Lets call that $800k in monthly revenue from premium subscribers.

Linden dollars currently exchange
at 264 Lindens to the USD, so Linden Labs made $165m/264 = $625k in currency sales.

These are the two primary sources of Linden dollars into Second Life’s economy, so Linden Labs made at least $1.4m in revenue from the 860k residents that logged in over the last 30 days, or roughly $1.70/active user.

UPDATE: Several comments note that I have ignored the bulk of Second Life’s revenue which is derived from land maintenance. An updated analysis is here.

Club Penguin

When Club Penguin was bought by Disney in August 2007, it was reported to have 12m registered users and 700k paying users. As the monthly charge for paying subscribers is $6, this suggests monthly revenues of around $4.2m. Compete reported 2.6m UU to Club Penguin in that month. Dividing these two numbers we get around $1.62/active user (where an active user is defined as a unique user in that month).

Habbo Hotel

At AGDC in September of 2007, Habbo Hotel‘s lead designer, Sulka Haro gave some statistics on Habbo Hotel’s usage:

Habbo Hotel has approximately 7.5m unique players per month globally — nipping at the heels of World of Warcraft. In the seven years since the game launched, 80 million accounts have been created. Globally, the game typically has 100,000 concurrent users playing at one time.

Furthermore, Habbo was estimated to do $77m in revenue in 2006. In the middle of 2006, Habbo had around 53m accounts. Assuming a similar ratio of monthly players to total accounts in mid 2006 to what Habbo has today, that suggests that there were around 5m unique players per month at that time. Dividing $77m by 12 months by 5m unique players suggests about $1.30 in revenue per active users.

Runescape

Finally, Jagex’s Runescape claimed 1m players paying $5/mth in May 2007 and 6m players per month in October 2007. That suggest $5m/mth in revenues from 6m players, or around $0.84 in revenue per active user.

In summary then we have:

Second Life: $1.70/mthly user/mth UPDATE: Should be $9.30/mthly user/mth
Club Penguin: $1.62/mthly user/mth
Habbo: $1.30/mthly user/mth
Runescape: $0.84/mthly user/mth

The average across these four is $1.40/mthly user/mth*. UPDATE: excluding Second Life, should be $1.25/mthly user/mth.

Having spoken to many other MMOGs and virtual worlds on a private basis, this estimate seems to be a good gauge for what a well performing MMOG can aspire to from a free to play business model.

Do readers have any datapoints that they can add to this survey?

* Note that this is based on monthly users. Many MMOGs calcuate their average revenue per user (ARPU) based on Peak Concurrent Users. On this basis, ARPU can be more than an order of magnitude higher than the $1.40 guideline.

Comments»

1. nabeel hyatt - June 9, 2008

These numbers feel about right for the very casual web-based MMOs, but seem low for free-to-play download (although their cost of customer acquisition is also much higher).

Take the the $1.6m in virtual goods that were spent in Maple Story last February (from a Business Week article). At the time they were widely quoting 3m registered users. Assuming a registered user to active player ratio closer to Habbo than CP, we’ve got around ~$5/user. This is not that far from some of the other F2P download MMOs that are performing well.

But I’d like to see some more data on Nexon, Neopets, Outspark, K2, and others to let everyone get a sense of where they are. I know I have some data on Three Rings if I dig in to my notes (or Daniel could just chime in)

/ nabeel

PS – Also– the $77m figure for Habbo is a little higher than they actually reported, as Sulka corrected me when I used that figure early last year:

http://nabeel.typepad.com/brinking/2007/03/microtransactio.html

The figure they use is $55m for 2006 which would trend your number just slightly down.

2. Jussi Laakkonen - June 9, 2008

Agreed with Nabel, they seem a bit low for free-to-play games.

IT Territory, the leading provider of F2P games in Russia, has ARPUs of $1-3 across all users, with conversion rates at 30% (ARPU for paying users was around $30-37). Figure is from Casual Connect Europe 2008 conference.

Cafe.com / Boonty, claimed that their trials with F2P model (they are moving away from try-and-buy casual games) was €5-10 across all users. The figure is also from Casual Connect Europe 2008 conference.

Habbo’s split is apparently 85% virtual goods and 15% advertising,

If I have my notes from Daniel James’ presentations correct, ARPU for paying customers was $45 at 5% conversion rate, so ARPU for all users would be around $2,25.

3. hunter - June 9, 2008

i’ve heard Second Life revenue figures (unconfirmed from non-linden sources) which are considerably higher, probably based on private island and other land sales. For SL, perhaps even more than the other worlds you mention, i bet you’ve got a non-trivial number of users paying hundreds of dollars monthly. Land sales and reoccurring rent is like the third and largest leg of the SL rev equation along with the premium accounts and current exchange you note.

4. Matt Mihaly - June 9, 2008

On Second Life – does that take into account land sales/rentals? That’s a significant source of revenue for Linden.

On the rest, it’s difficult to compare as what the definition of an active monthly user is differs from game to game. For instance, some people discount the users who churn out pretty much immediately and others count those users. If you can generate a steady incoming flow of new users (media attention, advertising, or general marketing) you can really boost your active users, assuming you count those as actual active users (which you shouldn’t imho).

Still, overall, your numbers seem in the ballpark to me on a gut level. Interestingly, Iron Realms has numbers more than an order of magnitude greater than the $1.40/active user/month, but its games are very niche compared to the ones you’re quoting.

5. jeremyliew - June 9, 2008

@Hunter and Matt,

Do you have any thoughts as to how to estimate land sales and maintenance revenue from the publicly available info? I too have heard numbers multiples higher than what I came to for Second Life, but couldn’t figure out how to estimate land revenue, so figured that this was a lower bound.

6. Daniel James - June 9, 2008

These numbers are consistent with what we do on Puzzle Pirates — ~$350k / m revenue, ~200k players active in that month, ~$1.50+ / player / month. Lots of those players are churning out in their first month, though, so the actual ‘revenue per real player’ is higher.

I think it’s possible to get an idea of the size of the ‘grid’ from Linden’s stats and thereby estimate the land rental fees. Last time I made a guess, about a year ago, it came out to be over $1m/month, assuming that Linden nets out approximately the same from private islands vs. shared land units.

7. Second Life monetizing at 5x higher than other casual MMOGs « Lightspeed Venture Partners Blog - June 10, 2008

[...] business models, games, games 2.0, gaming. trackback Yesterday I pulled together some analysis of monetization rates for casual MMOGs. In my analysis I estimated that Second Life was making around $1.4m/month in revenue from premium [...]

8. Wagner James Au - June 10, 2008

This is good stuff, Jeremy. As some suggested above, Linden’s virtual land provides the lion’s share of their income– based on their published figures, it’s the bulk of their estimated $96 million run rate:

http://nwn.blogs.com/nwn/2008/05/how-much-is-lin.html

There’s currently 14,597 islands, and they make an average of $1200 for the sale of each; they charge $295 per island per month for land use fees. (I say average, as island pricing has fluctuated recently.) So about $17,500,000 for the island sales, but that’s a one-time fee.

Recurring income is around $4 million/month in island land use fees. The Lindens also charge land fees on the cheaper, Linden-controlled mainland continents, and that’s maybe 30-40% of the total land mass, so say $2 million/month more. Add the island sales and commission revenue from L$/US$ transactions, plus the 92,000 Premium account holders paying $10 per month for another $2 million total a month. All that tabulated, $8 million a month gross seems like a safe (if very sloppy) guess.

9. rationalist - June 10, 2008

Important to be careful with terminology. You cite “860k residents” accounts that logged in to Second Life in 30 days, and then use that to calculate revenue “per active user”.

As Shirky and many others have tirelessly pointed out for a couple of years now, “residents”, by Linden Labs own definition, means “avatars”. A given user can (and many if not most do have) multiple avatars.

At the end of 2006, when Second Life was reporting 3.2 million resident, he estimated the actual number of active users at below 135,000. This is in line with many estimates and studies done by others.

In fact, there are reports that the number of avatars per user has actually increased significantly this year, as a result of efforts to game the economy and other exploit-oriented dynamics (and, some cynics charge, as a result of the developers’ desire to pump up numbers at a time when growth of active, concurrent and premium (paid) accounts has declined.

10. jeremyliew - June 10, 2008

@ Rationalist – fair point. Perhaps the analysis should say revenue per account rather than revenue per user. That would imply that revenue per user was even higher.

11. Steven Davis - June 10, 2008

Jeremy –

Nice numbers, of course, the key is costs, not just sales. Many of the Free-to-Play MMOs run very lean operations with minimal staff and light data center operations. It might be more interesting to look at revenue per server (not shard) per month (or maybe MB per month) as this might more gracefully capture the business model differences. This would also allow comparisons between the free-to-play and subscription games. Also, casual games, which typically require less staff support have an operational advantage over support intensive MMOs.

After all, one of the longstanding criticisms of Second Life was its limited ability to scale and hold numbers of users in a single area. The ARPU kind of loses that important piece of information.

Another Second Life question is related to the redemption of Lindens as Linden Lab should only be credited with revenues on the spread between purchases and sales, not just sales.

12. How many of your MMOG’s monthly users can you get to pay? « Lightspeed Venture Partners Blog - June 11, 2008

[...] gaming, mmorpg, subscription, virtual goods, virtual worlds. trackback I recently concluded that good MMOGs can expect $1-2 per user per month from a free to play model, with Second Life as an outlier at almost $10 per user per [...]

13. MMO Clerks » How Casual MMOGs Are Making Money [Money Money Money] - June 14, 2008

[...] Successful MMOGs can see $1-2 in monthly ARPU [Lightspeed via Worlds In Motion] [...]

14. Virtual Paris 2007 » Mes liens du 13 juin 2008 au 16 juin 2008 - June 16, 2008

[...] Successful MMOGs can see $1-2 in monthly ARPU « Lightspeed Venture Partners Blog – [...]

15. MMO Clerks » “Free-To-Play” model pulls in a dollar per user in the west - June 16, 2008

[...] Lightspeed, a venture capital firm, recently did a few calculations to come up with the figures of how much revenue is generated by a single user in today’s most successful free-to-play, microtransaction supported MMOs. What they came up with is a pretty interesting look at how much a “successful” MMO will make. For example, Habbo Hotel pulls in around $1.30 on average for each of their active users per month, while RuneScape pulls in 84 cents per active user per month. [...]

16. Game Tycoon»Blog Archive » Articles of Interest - June 17, 2008

[...] Liew posts an estimate that most successful free to play MMOGs will generate $1 to $2 monthly ARPU. Some commenters dispute that, claiming up to $5. As always, the truth is probably somewhere in [...]

17. Jessica Mulligan - June 17, 2008

RE: SL, last October at the Virtual Worlds Forum in London, it became fairly obvious that Linden was getting some significant side business from third parties ‘white labeling’ SL to corporations, GOs and NGOs. Companies such as Rivers Run Red are setting up corporate spaces for some pretty big names.

18. A buck a month | Slevi - June 20, 2008

[...] this is exactly what the maths behind it shows, an estimated 84 cents per runescape player having 1 million members out of 6 million monthly [...]

19. Fresh Look At IMVU, Mini-MMO With Big Numbers - GigaOM - June 24, 2008

[...] Cary Rosenzweig said. That works out to about $1.66 a month per active user. By VC Jeremy Liew’s estimate, market leaders Habbo Hotel and Club Penguin are earning $1.30 and $1.62 monthly average revenue [...]

20. Inside Social Games » Blog Archive » What ARPU Can MMOs Hope For? - Tracking the convergence of games and social networks - July 14, 2008

[...] Liew, Managing Director over at Lightspeed VP and thought leader in the space, did some excellent analysis recently on monthly ARPUs that several successful MMOs are experiencing. His [...]

21. Gaming versus gambling ARPUs | Futuristic Play by @Andrew_Chen - September 6, 2008

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22. Top Gamer Blog » Archive » Austin GDC Wrap-Up: The Top Ten Lessons - September 20, 2008

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23. מתנפחים - November 24, 2008

good job number 8! (-:

24. Home metaverse opened for Sony PS3 - December 14, 2008

[...] more than a million dollars of micro-revenue per month. Last June, Lightspeed Venture Partners estimated that free-to-play MMOs draw between one and two dollars per user per [...]

25. touchstonegames - December 20, 2008

Note that Club Penguin charges for their longer memberships $58/year and $30/6months. So $6 per user per month is an overestimate. Another way to calculate: $40 mil revenue when sold divided by 2.6mil users = $1.28 per users.

26. Freemium business model case study: AdultFriendFinder ARPU, churn, and conversion rates | Futuristic Play by @Andrew_Chen - December 29, 2008

[...] can compare this to Free-to-play games and Casual MMOGs via these blog posts from Jeremy Liew and Nabeel Hyatt, although you should note that their definition of ARPU is calculated from actives [...]

27. ARPUs in social networks and social games: An acronym that needs scrutiny « Live Gamer - April 8, 2009

[...] Jeremy Liew from Lightspeed Ventures estimates ARPU for Jagex’s MMO Runescape (freemium game) as $0.84/month/user. In contrast, all user monetization in Runescape hits Jagex’s top line as they have no third party apps. [...]

28. Farm Town: an Under-the-radar Facebook Social Gaming Success Story in the Making | Paradivision Inc. - May 6, 2009

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29. virtual critic - June 16, 2009

Second Life is not a game or MMOG, but rather a virtual world. Some of the other examples are casual or social oriented. The title is a bit misleading…Where are the other successful MMOGs and how do their metrics change the ARPU here? The title should be “casual MMOs and virtual worlds”.

What kind of ARPU does World of Warcraft or Eve Online have? They are successful, no?

30. Ethan Beardsley » Freemium kid/teen virtual world worth $3.2B in 2009 ? - July 14, 2009

[...] I’ve seen some good recent analysis on the size of the kids’ virtual world and casual MMO size which focuses on Average Revenue [...]

31. girlteam - September 11, 2009

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32. Selling MMOs « MMO Tidbits - September 18, 2009

[...] for the casual end of the market. Jeremy Liew of Lightspeed suggests $1-$2/month/customer (see “Successful MMOGs can see$102 in monthly ARPU”). His analysis was based on Second Life, Club Penguin, Habbo Hotel and Runescape. Puzzle Pirates [...]

33. מתנפחים - October 7, 2009

Thailand is één van die beroemde en onvergetelijke landen die van het voorrecht van traditie en enorme cultuur genieten. Sobald Sie mit Ihrem Plan getan werden, !!!!!!!!! nach der Konsultierung Ihres Reisef�hrers

34. Monetizing Virtual Worlds « Digital Brand Marketing - October 26, 2009
35. Ryan Wilbur - November 30, 2009

This is one of my favorite browser based MMO’s. It is call WWMAD (World Wide Mutual Assured Destruction.) It’s free-to-play and only takes a couple of minutes to check on your progress (or try and demolish someone :).) Tons of research, building, and other options. Loads of ships to choose from for the best defense and attack. It has beginner-protection so you can get off to a good start before you have to worry about being attacked. Resources are a biggie in the begining so you can start cranking out your ships for attack. It’s also browser-based so you can sit down at any computer with any opperating system to play. Please take a look at it and I hope you have as much fun playing it as I do. Also, you get big bonuses for refering your friends :). Enjoy! And let me know what you think of it. Ryan

Here is the link to the game:

36. Ryan Wilbur - November 30, 2009

I guess you have to click on my name to go to the site :(. the forum rejected my post with the URL in the post. But clicking on my name at the top will let you play.

37. Online Business Metrics « Blog | Vindicia Soapbox - February 18, 2010
38. Paul Evans - June 17, 2010

this is a very informative post.. i enjoyed reading it.

39. How to create a profitable Freemium startup spreadsheet model included! | Andrew Chen @andrewchen « Listofy - July 9, 2011

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40. How do virtual worlds make money, how big is the market, and how much do they make? | newsfromthegoose - July 19, 2011
41. HyeongSeok Kim (@HyeongS_Kim) - August 9, 2011

As many others suggested, actual ARPU for MAU of free-to-play download online games is much higher than those numbers written above. 1-2 USD ARPU is too low for that genre. Proper F2P download games usually yields more than double of that.

42. ARPUs in social networks and social games: An acronym that needs scrutiny | VERN - September 29, 2011

[...] [5] Jeremy Liew, Light Speed Ventures, 6/9/08 http://lsvp.wordpress.com/2008/06/09/successful-mmogs-can-see-1-2-in-monthly-arpu/ [...]

43. Revenue data and other metrics of virtual asset sales market | VERN - September 29, 2011

[...] Succesful MMOGs can see $1-2 in monthly ARPU @ Lightspeed Venture Partners [...]


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