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Acclaim to make $30m in revenue from free to play games this year June 24, 2008

Posted by jeremyliew in business models, freemium, games, games 2.0, gaming, virtual goods.
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Howard Marks spoke at Paris GDC today, and Worlds in Motion has a writeup, including quotes from Marks about key stats for Acclaim’s free to play games:

For example, profitability is often measured through average revenue per user (ARPU). “Most of the time ARPU is $30-$40 a month,” said Marks. “A month! Not just one time.”

“The next thing is percentage of uniques,” he continued, defining “uniques” as players who spend money on a given game. “We’ve found in Asia, in Korea, we’ve found that 10% of people will spend money! I think it’s great! In the United States it’s less, more like 5-10%. But we’re getting there.”

The average lifetime for a player in the free-to-play space is 3-4 months per game, less than what is generally expected for a more traditional subscription MMO.

That statistic leads to churn rate, which describes player loss per month. “It turns out you lose a lot,” admitted Marks. “You should be prepared to say, ‘I only brought in 100,000 players this month, but only 10,000 stayed.’ That’s okay! That’s okay. Some of them will come back, and you can always get more.”

He also says (according to Worlds In Motion) that Acclaim will make $30m in revenues this year and break even on their core games business, but is investing heavily in R&D. Those are great numbers, and certainly place Acclaim to the front of the pack for free to play publishers in the West.

Comments»

1. Bret - June 24, 2008

I’m curious to know what the percentage breakdown between Acclaim’s U.S. and Asian audience. It’s a important distinction to make if you’re trying to gauge the success of downloadable free2play MMOs within the U.S. market. Looking to traffic to the acclaim.com, it looks like that are currently averaging about 150,000 US visitors a month since the beginning of the year. (http://www.quantcast.com/acclaim.com/traffic). With 10% retention a month(as suggested by Howard Marks), that’s 15,000 users that you’re holding onto. Then you can monetize about 5-10% of them (also as suggested by Marks), so 1,500 users a month buying stuff. Average lifetime of user: 4 months (also according to Marks).

$30 revenue since the beginning of the year. So $6 million a month for five months.

Each US player would have to spent $4000 a month to get to 30 million.

Even assuming that each month those 1500 people were joined by 1500 new people, with a 4 month lifetime that is 6000 paying players a month.

So each US player would have to spend $1000 a month.

If we apply the average ARPU of $30-40 to only paying players, we get 6000 players yielding $18,000 to $24,000.

If we apply average ARPU of $30-40 to the 15,000 retained users (thus taking into account users who are monetized through ads), it comes to $600,000 a month.

Assuming the greater number, the U.S. revenue was $3,000,000, or 10% of total revenues. However that’s a stretch.

Any way you look at it, the majority of their revenue is not coming from the US. Or is my math horribly wrong?

2. jeremyliew - June 25, 2008

Bret,

I don’t know the details of Acclaim’s business but I’d make a couple of observations:

1. Marks says $30m in revenue “this year” which i suspect means in 2008, not YTD. Assuming growth in the business, the monthly revenue now is probably closer to $1.5-2m than $6m.
2. Quantcast traffic estimates are not always reliable
3. Acclaim says that they are taking free to play games to the US and Europe; most of their games are originally from Asia where there are already publishers who often have been publishing for a while there.
4. Games are clients; not played on the website (just downloaded from there) so website traffic may not be an accurate indicator of monthly players
5. 90% churn in month one and 3-4 months average lifetime for a player are probably consistent stats given cohorts often show high infant mortality and then reduce to very low monthly churn levels

3. Bret - June 26, 2008

Fair enough. 1. You’re probably about 2008 rather than YTD, but even if you adjust the numbers down to 1.5-2 million a month, the numbers still seem to indicate that the majority of revenue comes from outside the US. 2. As for quantcast/compete: agreed. 3. That was my impression of their business as well, but Howard Marks’ comments confused me a bit on that point.
4. My thought was that new players would have to go to the site to download the client so that it would be a decent indicator of new players.
5. Agreed.

Perhaps they’re getting more traction in the European market.

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

[…] Acclaim to make $30m in revenue from free to play games this year @ Lightspeed Venture Partners […]


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