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Mid-Core Success Part 4: Monetization
by Michail Katkoff on 11/22/13 02:29:00 pm   Expert Blogs   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.


I left monetization as the last piece in the mid-core success series simply because I see monetization as a result of a well-functioning core loopstrong retention and meaningful social mechanics. Thus you won't find best tricks and tips on how to get people to spend in this final post of the mid-core series. Instead, I'll present monetization as a flow of all 3 of the success parts introduced in previous posts.

Formula for Monetization

On a high level, the formula for monetization is actually pretty simple: DAU (Daily Active Users) x Conversion (% of payers) x ARPPU (Avg. Revenue Per Paying User). Even though there are three key variables in the formula, we tend to focus on only the two latter ones with the discussion revolving around whales, price points, DARPU, amount of payers and all those little 'tricks' developers employ to incentivize players to pay and pay more.

Personally, I have a different approach. I honestly believe that in order to achieve that desired financial result you have to simply forget all those monetization features. Instead of monetization you should concentrate on retention, game economy and social mechanics.

I believe that demand for players to convert is created by slowing down the rate of progress in line with time spent playing a game. Social mechanics are vital in monetization because they make players compare their progress to others’ and thus tend to create a social obligation to keep up. 

Players are primed to spend when their progression slows down over time and they
are constantly comparing their progress through social interaction inside the game. 

The Monetization Don’ts

There are two commonly used approaches I suggest avoiding when it comes to monetization. First is the concept of in-game items, which players can only get by spending real money. Second is the concept of in-game sales.

1. Premium Items

Adding in-game items, which are sold only for hard currency, is the most-used way to create a pay-to-win game. By adding these super powerful items and offering them only to players who are willing to spend real money on the game, you’re essentially discriminating against the non-paying players, aka. the majority of a player base. 

If there’s absolutely no way to earn these powerful premium items, the players who have them will be seen more or less as cheaters when they rack up wins. And who wants to play against ‘cheaters’? Also, who wants to win when everyone around him knows he paid to get the W?  

Zynga's Respawnables encourages player to purchase premium weapons, which
players can get only with hard currency. These premium weapons eliminate all the 
need to progress and unlock new weapons thus killing the core loop. 

2. Sales

The problem with constantly running in-game sales is that they significantly change players' purchasing habits. Sure, you'll get those nice sales spikes when the sale is running, but once the sale is over, your numbers will drop way below the levels where they started. In other words, you'll teach your players to purchase only during sales and avoid making purchases at other times.

Product Managers, who like to run sales, tend to underline that they are selling virtual items (at least that's what I used to say a few years back), which is essentially an infinite resource. But virtual items have value and that value is progress. So running sales actually allows engaged players to progress faster and thus increases the demand for more content.

Game of Wars by Machine Zone is notorious with their pushy sales. They run so many sales that 
I'm actually unsure if you can purchase something that's not on sale.

Don't get me wrong though. I'm not totally against sales. Personally, I like to do two kinds of sales. First are sales aimed at players who haven't yet converted. Encouraging these players to make their first purchase, then stopping offering sales to them after the purchase is made is a sound approach. The second is seasonal sales. Halloween, Black Friday, New Year etc. Seasonal sales won't affect a player’s purchasing habits, as the season communicates clearly the uniqueness of a sale. 

Treat Monetization as a Flow

In my mind, sustained monetization is a result achieved through excellent game design, balanced game economy, engaging social mechanics and a fresh approach. 

Personally, I like to look at monetization as flow. It all starts when player begins the game, by creating the impression that this is a cool new game, full of action and entertainment. It's a game players haven't played before.

After wowing the player and getting her to come back, it's time to get to work. Make sure player enjoys playing the game. Gradually show all those interesting features that make the game experience so much better, and most importantly, create demand for the player to progress.

When your players want to progress, it's time to get those social mechanics in. Make sure that players can collaborate in a way that benefits both players. Also, make sure that the collaboration between players happens in an environment where both of them can show off.  

When your players are wowed from the get-go… When your players are enjoying your game and want to progress… When your players collaborate and show off their progress… Then you have a mid-core success. 

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Peter Eisenmann
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Thanks for this interesting series, Michail!
Let me add my thoughts on premium items. In a PvP environment, I cannot think of a way to remove the "stigma" of those. Even if you were not forced to buy them with real cash, but could also gain them by grinding for an extreme amount if time. (They are not called premium items then, right? Let's keep the name for now.)
If a player is competing against someone armed with such a weapon, in their mind they are either "cheaters" or total nerds who have no life, as no normal player would spend nearly enough time in the game to get them. Both of those "stigmas" are not desireable.

Maybe one approach would be to make the shop system randomized, like in a collectible card game. You are spending a dollar, or 1000 in-game-points, on 3 random items.
So, no one can tell if you if you got this rare gun out of pure luck, or by buying a hundred item packs/playing for 1000 hours.

John Trauger
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9 times out of 10, as a player I despise paying for a *chance* of getting what I want. I want to pay for what I want to get.

This frustration grows in direct proportion to the perceived value of the item. When I want a BFG 9000, I want to buy a BFG 9000.

I don't want to buy a random roll that could get me BFG 9000 but also hands me a crap-ton of pistols and shotguns that I can't even sell at the in-game market for enough to be worth the listing fees because everybody gets a crap-ton of this stuff on the way to hitting the BFG 9000 jackpot.

The correct answer is: Don't sell combat advantage. You cannot avoid annoying your playerbase.

Peter Eisenmann
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Well, the sucess of CCG (online and offline) would say a lot of people actually enjoy not knowing exactly what they will get. If it is a core part of the game experience instead of an afterthought, it can be really fun. It can be frustrating as well, but what game doesn't have its frustrating moments?

Ben Newbon
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Though popular and profitable in many games randomised purchases are highly unethical and can lead to horrible cases of addiction (effectively gambling addiction) whether with hard or soft currency. The psychology behind this kind of monetisation is teeteringly close to exploitation and the industry would do well to steer clear if it doesn't want to become classed as no better than slot machines or casinos.

Daniel Boy
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Wild Ones is a great example how to implement premium items:

Kevin Racape
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Hi Michail, thanks for the article.

I'd like to jump on the sales subject. Sales is not a best practice on itself. Sales is just a part of an efficient content release strategy. Revenue spike is the happy-ending of you frequently reengaging your community with new content. You usually set sales on the content getting obsolete. An efficient content release strategy is the best practice.

"Game of Wars by Machine Zone is notorious with their pushy sales. They run so many sales that
I'm actually unsure if you can purchase something that's not on sale."

Who cares if they spend? What if Machine Zone built their pricing balance on sales prices (that we would call regular prices)? In other word, why not displaying a "Sales" tag if it makes payers out of players? ;-)

Best regards,