Don't Call Them Whales: Free-to-Play Spenders & Virtual Value GDC 2015
-
Upload
emilygreer -
Category
Data & Analytics
-
view
10.676 -
download
2
Transcript of Don't Call Them Whales: Free-to-Play Spenders & Virtual Value GDC 2015
I’m the CEO & Co-‐founder of Kongregate. If you’re not familiar with Kongregate, we’re a pla=orm for browser games on the web – think YouTube for games -‐-‐ supported by both ad revenue and in-‐app purchases. We get a ton of games, around 1300 new games a month, 95,000 total across preLy much every genre you can imagine. That gives us a lot of opportunity to do interesMng research, which I love because I’m a big data geek, as you’ll see in this talk. Most of it is web data, but about 18 months ago we expanded to mobile, where we’ve now published 15 games, again across a variety of genres. That’s nothing like the depth of our web data, but we’ve had more than 35M installs and quite a few games in the top grossing chart so there’s quite a lot that’s interesMng there, too. I’ll be using both in this talk.
1
I’m the CEO & Co-‐founder of Kongregate. If you’re not familiar with Kongregate, we’re a pla=orm for browser games on the web – think YouTube for games -‐-‐ supported by both ad revenue and in-‐app purchases. We get a ton of games, around 1300 new games a month, 95,000 total across preLy much every genre you can imagine. That gives us a lot of opportunity to do interesMng research, which I love because I’m a big data geek, as you’ll see in this talk. Most of it is web data, but about 18 months ago we expanded to mobile, where we’ve now published 15 games, again across a variety of genres. That’s nothing like the depth of our web data, but we’ve had more than 35M installs and quite a few games in the top grossing chart so there’s quite a lot that’s interesMng there, too. I’ll be using both in this talk.
2
In the 6 years since Kongregate.com launched support for in-game purchase of virtual goods about 2.1% of accounts active in that time frame have bought something. Those 2.1% of accounts have driven 75% of all of our revenue in that time, and the % has been increasing.
3
Average lifeMme spend across all buyers is $117, but the median is under $10. The 54% of buyers who have spent less than $10 represent only 1% of our revenue. 72% of our virtual goods revenue on kongregate.com has come from the 4% of buyers who have spend $500+, 4% of 2%, so 0.1% of our players brought in about half the revenue.
4
This is the breakout of revenue by spender category for the top 8 grossing games on Kongregate.com in 2014. 6 of the 8 top games get at least 70% of their revenue or more from buyers who’ve spent more than $500 in that game lifetime, and all 8 get a clear majority of their revenue from people who’ve spent $100 or more.
5
Our top grossing mobile games are not quite as extreme, in part because most of them have not been out as long, and in part because of the game selecMon – individual games look similar between web & mobile. With the excepMon of one game the vast majority of revenue comes from those spending $100+.
6
Swrve reported that in January 2014 across all the free-‐to-‐play apps using their services 1.5% of players bought, and that from that 1.5% 50% of all the revenue came from the top spending decile – so half the revenue came from 0.15% of players. And this is with the majority of games surveyed not having price points over $20!
7
And yet it makes us really uncomfortable. Whenever I menMon that our top spenders have spent $50-‐80k people nearly always react with a mix of awe and horror, and when people start criMcizing the ethics of free-‐to-‐play they always jump on the amount top spenders spend. And it’s not just ethical concerns – people worry that f2p games are too financially dependent on a few people, so much so that Zynga listed it as a risk in its IPO prospectus.
8
So let’s take a look at who is buying. This chart shows the ARPU, or average revenue per user, on kongregate.com by the age of the user. Young users spend very liLle on average, with spend rising gradually through college age then rapidly increasing ader they graduate, peaking in middle age when disposable income is highest. The sharp dips at 25 and 35 are likely driven by people who don’t want to give their true birth date on registraMon pueng in January 1 1980 and 1990 birthdays. People pueng in fake birthdays is also driving those older ages down, too, as our registraMon form anchors at 1940 and everything age 57-‐72 is immediately visible.
9
Decomposing ARPU between the % of players who buy something and the average revenue per paying user helps show what’s going on. The youngest players generally don’t have a way of paying – no credit cards or paypal accounts – but the % of players buyer rises very rapidly with age and independence, plateauing through 30s before starMng to decline in the 40s, perhaps because that’s the first generaMon that grew up with video games. The increase in ARPPU, though, increases much more gradually, and peaks in the late 40s and early 50s. Again ignore most of the data from 57 up – that’s distorted by our registraMon process and the fact that there aren’t many real players in those age groups. What is clear, though, is that spending grows first with the ability to pay and then with the means to pay.
10
ARPPU growth mirrors growth of disposable income by age.
11
This chart shows our top 20 spenders on Kongregate.com from youngest (24) to oldest (68). Both the average and median age is 40. The older big spenders all come from the US and Western Europe, while the few younger spenders come from more assorted countries. Our customer service team has talked to most of these buyers via phone and email, both as part of verifying that they are fraudulent and assisMng them with various in-‐game issues and say that they are very polite and reasonable people, many of whom own their own businesses, or are doctors, CPAs, engineers, or similar. The columns show how much their spending breaks out by different games, and though most big spenders spend in mulMple games their spend is generally concentrated in one, maybe two games. Only in relaMvely rare cases is a player a serial big spender, spending significant amounts in game ader game.
12
Spenders are the most active players – even before they spend. And the big spenders are the MOST active. This chart show the # of sessions by active users over time for Tyrant Unleashed, a CCG by Synapse Games that we’ve published on mobile. It’s broken out by the category of the spend the player eventually reaches, and you can see that from the start the biggest spenders are incredibly active at around 20 sessions per day, 3-4x more active than active non-spenders and 2x more active than lesser spenders.
13
The majority of people who play Tyrant Unleashed a long time do end up spending. But non-spenders aren’t driven out even in a high-spend game: more than 1/3 of active elder players have not spent.
14
A lot of spenders spend quickly – 18% on the first day and half make their first purchase in the first week of playing. But if they keep playing there is a lot of gradual conversion. Nearly 30% spend for the first time after playing the game for at least a month, and some people make their first purchase as late as a year in. Bigger spenders do convert a little faster, but there’s not a huge difference.
15
Steady investment over time for most bands of buyers, with the highest decile the most steady.
16
You can see the lower deciles better by removing the top 2, but there’s steady investment there as well. The only ones who do not increase much over time are the bottom 2 deciles, people who’ve spent $20 or less.
17
Now to beLer understand the individual dynamics let’s take a detailed look at just one big spender
18
PvP is the single biggest driver of spend, cosmeMc items get preLy short shrid.
19
20
21
Figure skaMng: gamified for over 60 years.
22
I definitely haven’t even hit my max spend – I’m actually parMcipaMng in relaMvely few compeMMons because I have to travel so much already for Kongregate. And while I’m naturally on the thridy side I’m HAPPY to spend the money I do. I love skaMng enough that a 10% increase in my skills is sMll a good deal at 10x the cost. When I make this comparison people will dismiss it as being fundamentally different because skating is exercise, I can resell my skates if I stop, etc. Skating is good for my health, but you can see her that all of my spend is going towards competition and skill progression – the same things that fuel spend in game. Nothing that’s listed here has any resale value –even the equipment is really services like skate sharpening and my locker.
23
And people spend a lot on their hobbies
24
So how did I get to the point where I spent thousands of dollars a year? The answer is gradually. I started in the fall of 2004 and was picking up steam/spend through June 2006 when we started Kongregate, at which point I cut way back until the end of 08 because I didn’t have either money or time, then returned to the trend line. Spend jumped in 2010 when I invested in custom skates (should last 3 years or so) and then in 2011 I started competing locally. & joined the synchronized skating team. It made a big jump again last year when I traveled to compete at my first adult nationals, and it’s likely to go up from there this year as I’m starting to work with a second coach on choreography, and I’m likely to go back to the Dorothy Hammil fantasy camp, which I attended as a gift last year. I could picture myself spending $20k in one year fairly easily if I compete at both nationals and the big international competition in Oberstdorf, Germany. Up-and-coming young skaters can spend $50-$75k annually on the sport, and it’s well into 6-figures for olympic-level competitors, though they usually get support and sponsorships. While the choices that I’m making here may be a little unusual, they have bee gradual, thoughtful investments put to something that I love. I’d rather spend my money on skating than almost anything else.
25
So I’m lucky enough to have a lot of disposable income to put towards skaMng, especially as I don’t have kids. But that’s not true of all skaters, nor all gamers. Here’s a friend that I skate with on Facebook posMng about her decision to forego compeMng at adult naMonals while her husband is out of work. She’s prioriMzing her budget for mortgage, etc first, then a trip to her nephew’s wedding. Several other people chime in with similar decision-‐making not to do it. They are making raMonal, though=ul decisions. Now is every skater or gamer making their spending decisions totally raMonally and within their budget? No. There’s always a spectrum of human behavior in any group, and people trying to fit unmet emoMonal needs in unhealthy ways. But we don’t blame department stores for the occasional compulsive shopper, and we shouldn’t blame games for the occasional compulsive spender, either.
26
The music industry is in many ways similar to free-‐to-‐play, especially from the arMst’s point of view. Radio, Streaming, and Piracy get their music exposure to hopefully mass audiences with very liLle revenue to them, in the hopes that a small % of which who will go on to actually buy a physical or digital copy of their music to keep. An even smaller % will buy Mckets to see the band live, perhaps even traveling to see them. And as revenue from music sales have declined over the last few years musicians have started geeng creaMve, creaMng VIP experiences for their most avid fans.
27
Millions of people may hear an arMst songs, but their revenue is concentrated in the small % who spend $20-‐$500 to go to concerts and buy merchandise. And even within that it’s concentrated on the repeat concert goers, who are likely also to be the people buying VIP packages – here’s one for U2 that is $1500 for a Mcket, hotel room, premium access to merchandise (where you can spend again) and the possibility of being close to the band.
28
The split between Pro and Basic members is not a public number, but you can esMmate that the Pro members, spending $500+ annually and likely less than 10% of GameStop customers, represent 40-‐50% of total revenue. And that’s just what they spend at Gamestop.
29
So uncomfortable that many people jump to mental illness and malfeasance by the game as the explanaMon.
30
Before free-‐to-‐play the knowledge of who the big spenders were in the game world was a) much more dispersed among different sources and b) in the hands of retailers and other distributors. And unMl recently the retailers themselves probably had very liLle picture of it. I worked in data analysis and markeMng for several retail companies before starMng Kongregate and while we had full customer pictures for anything sold online or through catalogs we had liLle but anonymous transacMon data from the stores. An individual store manager might have a good sense of who the big customers were and what they spent, but it took loyalty programs for retailers to be able to understand customer paLerns at a corporate level. And in any case retailers are more comfortable with concentraMon of spend because that is normal whatever you sell. My story about a billionaire and his boat
31
Another reason is that spend is more concentrated, and the biggest spenders are spending more. This table shows off the dynamics of the mobile & web markets, starMng with a base case of a paid mobile app. These are all made up but I think reasonably plausible as above median but way below the real successes. In the current mobile market it’s hard to get much of anyone to buy a game, there’s too much free content. When you go free installs can explode but conversion goes down (and lives within a relaMvely narrow range) so what ends up maLering is whether players keep playing, and keep spending, and drive the average amount spent up. And that’s why free-‐to-‐play is generaMng more revenue than paid: it’s not because more people are geeng into your game and having a chance to convert, though I think that’s what people commonly think. The total # of people buying is almost certainly lower, as the more casually interested will not pay unless compelled to. It’s because the most invested players, who in a paid world spent the same as someone more casually invested, is now uncapped. So some people who would have spent before enjoy the game for free, and the most invested spend much more than they would have, essenMally subsidizing a free experience for everybody else.
32
Console games have beLer graphics and more content to play through, but the average player only plays a small porMon of the content. CompleMon rates on even the top games tend to be 30%. While some mobile and PC games are quite short – like Monument Valley – the delta in play Mmes is likely much less than the delta in price. Now these numbers are rough, but the market size of each of these games marches roughly in step with the average sales price of a game, though in theory mobile & PC should be much bigger than console games because the devices you play on are more broadly distributed.
33
The reason that average price has such a big impact on the size of the market is that demand for games is inelasMc, ie that when price drops, the total amount sold increases, but not enough to make up for the drop in price
34
So I know you’re like, no way is demand for games inelasMc. If that were true, why do PC game developers make so much more money on Steam Sales and Humble Bundles? That’s because of increased promoMon & a sense that they are geeng a “good deal”. If you dropped the price of the game permanently and without any addiMonal promoMon your sales wouldn’t increase, they’d drop. Steam sales help draw more people in to play PC games, which increases the sales for that category overall, and exposed consumers to a lot broader range of games and developers, which I think is good for the industry, but it’s probably mostly cannibalizing revenue that would otherwise have gone to console.
35
Pricing studies have shown that we make our decisions based on our perceived sense of value rather than price, and interesMngly price in itself is a signal of value to most of us. We assume that if the price being charged is higher it MUST be beLer, which is why we assume expensive wine is beLer and brand-‐name drugs beLer than the store-‐brand.
36
hLps://vine.co/v/hxrzVeMjhFi We’re all familiar with the terrible race to the boLom on paid game pricing that happened on iOS a few years back. There was no retailer or pla=orm who cared about the total sales to organize and control price wars, and the going price for games was quickly pushed down to $0.99. Games you can play for many hours are priced at or below a cup of coffee, or a renMng a movie that lasts 90 minutes. A few games can come in at higher prices, like Minecrad or Final Fantasy TacMcs, when their value has been anchored high on another pla=orm. And prices are slowly creeping up a bit. But for paid games to be viable for more developers prices need to rise a lot, among other things so that sale events can be more meaningful. A $0.99 drop may be 50% on a $1.99 game, but it’s not going to get a lot of people excited.
37
In a free to play game, nobody can sell a good that’s useful except you, which makes the game a liLle monopoly, though an insecure one since players can leave at any Mme. There’s no point price shopping packages of gold between game, the other games items have no meaning in the game you’re playing. The more compelling and engaging the game, the more that players care about their status and progress, the higher value the goods in the game.
38
Which gets me to the next reason affecMng our percepMon of big spenders, which is that we don’t value virtual goods. Our brains easily pin value on physical objects – part of the reason console games have been able to conMnue to anchor their value high relaMve to digital versions is that disk, even though the distribuMon of that disk is a Mny % of the cost. Even out of context physical goods are always perceived as having value, but out of the context of playing the game virtual items have no meaning to people, and therefore it’s almost impossible for us to assign a value.
39
I think a large part of the success of Skylanders is that it bridges the gap between physical and virtual value, allowing a parent to buy something concrete and real to them, while giving the kid the virtual item that they value more than a staMc toy.
40
Spending $5-‐$10k on specialized PC Gaming rigs that improve your skills and enhance your compeMMveness is not really that different from spending money for in-‐game items that doe the same. But I bet you all find it a lot easier to contemplate. While it might not be how you would choose to spend your money you are more likely to walk into this room and say “wow” than “what were you thinking”. But for the person spending in-‐game the items have context and value equal to these, and just because that experience isn’t yours doesn’t make it less valid.
41
Or even other forms of entertainment. A few weeks ago I was looking for a comprehensive history of games back to ancient Mme and was surprised to find there wasn’t one. Most universiMes have enMre departments devoted to studying literature, film, and theater with virtually nothing about games, even though we have spent as much or more Mme playing games, both now and historically. Games are a waste of Mme, games are for kids, etc., etc. It’s not hard for me to talk about my obsession with figure skaMng with non-‐skaters, people generally think it quirky but kind of charming that I care so much about something a liLle strange. Caring about sports, even unusual sports, is broadly accepted. But if it were a game I was talking about I think I’d be more defensive, especially with non-‐gamers.
42
The bias against games is so insidious that even within the industry we’ve internalized it enough that we quesMon someone with means spending tens of thousands of $s on a game, especially when you combine it with the low value we place on mobile and PC games and especially virtual goods. And so people jump to explanaMons like “mental illness” or “evil games manipulaMng players” when the real explanaMon is that they are raMonal, wealthy people who are dedicated fans invesMng in a parMcular game.
43
And Hobbyists are earned by good gameplay and customer service, not caught by tricks or manipulaMon. To call them whales is to dehumanize them, to talk of catching them suggests they’re blundering into your net, rather than choosing to spend their Mme and money in a game. And if we as developers don’t respect our players and the value of what we create, who will?
44
45