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Gaming business models: Freemium beats advertising July 7, 2009

Posted by jeremyliew in advertising, business models, flash, game design, games.
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Dan Cook has a great post about business models for flash game developers over at Lost Garden. He says:

Ads are a really crappy revenue source
For a recent game my friend Andre released, 2 million unique users yields around $650 from MochiAds.  This yields an Average Revenue Per User (ARPU) of only $0.000325 per user. Even when you back in the money that sponsors will pay, I still only get an ARPU of $0.0028 per user. In comparison, a MMO like Puzzle Pirates makes about $0.21 per user that reaches the landing page (and $4.20 per user that registers)
What this tells me is that other business models involving selling games on the Internet are several orders of magnitude more effective at making money from an equivalent number of customers. When your means of making money is 1/100th as efficient as money making techniques used by other developers, maybe you’ve found one big reason why developers starve when they make Flash games.

His solution?

Ask for the money

When game developers ask for money, they are usually pleasantly surprised.  Their customers give them money; in some cases, substantial amounts. I witnessed this early in my career making shareware games at Epic in the 90s and I’m seeing the same basic principles are in play with high end Flash games. Fantastic Contraption, for example, pulled in low 6 figures after only a few months on the market. That’s about 100x better than a typical flash game and in-line with many shareware or downloadable titles.

I think his conclusion is right not just for Flash game developers, but for all sorts of game developers, including MMOGs, iPhone games etc. dan runs through some steps that game developers should take to maximize their chances of being able to make a living from designing games, specific ideas about what to charge for, and responses to common objections to getting users to pay. For new or aspiring game designers, it is  worth reading the whole thing.

Comments»

1. jardenberg kommenterar – 2009-07-09 — jardenberg unedited - July 8, 2009

[…] Gaming business models: Freemium beats advertising […]

2. punctuative! by Matt Winn » Succeeding Beyond Free - July 13, 2009

[…] As sidebar, game designer Dan Cook recently wrote a lengthy call-to-action to online flash game developers – it’s a huge space (Mochi Media, a single network of online flash games reportedly attracted nearly 100 million users in April) but not being effectively monetized.  In his post, Dan lays out a number of ways to “ask for money” from the user (something most games don’t do), all good examples of adjuncts to free and many of which can translate into social networking or other forms of online publishing [hat tip to Jeremy Liew]: […]

3. Matthew Warneford - August 7, 2009

I’ve been working on a series of posts exploring the metrics that drive the revenues in casual virtual worlds. We go through a similar exercise helping our partners build out the business plans and ROI for developing on our world platform.

After going through this process for a couple of partners we’ve stopped modeling the advertising revenue. As you say in the post, the ARPUs don’t come close – plus, I think players can resent paying for a service and also being exposed to advertising.

These posts might be useful for anyone exploring the space and wanting to understand the costs of acquiring players, ARPUs, effect of market size, etc.

First post here: http://dubitplatform.com/blog/2009/7/26/calculate-how-much-your-virtual-world-can-afford-to-spend-ac.html

I’m planning to release the model developed throughout the series. I’m hoping it will be useful to world and game owners.

Matt


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