Skip to content

Category: Business

F2p microtransactions and recession

Published by Paolo on 29/06/2022

Experts from all over the World are claiming that a recession will hit hard the games industry in the next few months. I am no expert, but I can clearly feel something is going weird.

What about the Players? Will they prefer to spend $70 for a premium complete game or will they still prefer $5 microtransactions? Will microtransactions be considered a luxury good? We really cannot predict that. Players are very diverse and scattered all over the World, it’s hard to make predictions.

The only thing I can say for sure is that there will be always space for good games. With good games I mean games that engage Players in a meaningful way. “Artisanal touches and magical moments that make up a rich and unique player experience”, as the CEO of this brand new company says here.

During a crisis especially those who struggle to understand how to make good games will struggle. Anyway we should remember that with a crisis always come new opportunity.

Can be the new subscription triad game pass/playstation plus/netflix the saver of the old f2p World?

Better games

Published by Paolo on 22/06/2022

The future of games is made of better games. Did you saw the last Bethesda announcement?

Imagine Bethesda saying something like: “and then you can sell your space ship to other Players. You can earn money by playing our game!”

What would have happened? In my opinion, from one side core Players would have been explicitly against that. Also with ignorance, it doesn’t matter. Why? Because Players want to play a game. They want to invest their money to receive entertainment.

From the other side, that would be still a Bethesda game. And it seems a very well made one. So that, of course, some Player would definitely buy into that. What happens when you can earn money? All the motivation levers inevitably shift towards that. At least for the end game.

Some Player may start just playing and living the story with their character. After they complete the game, then, the game has the opportunity of becoming a revenue stream for them. A job.

Bethesda didn’t do that. They could, of course. But they didn’t. They are true game developers and they have clear their business. The future of games is made of better games, not funny jobs.

Remote processes

Published by Paolo on 20/06/2022

I am very outspoken and I work mostly remotely since 2017. Way before of the pandemic I was providing my game design services to many companies all across Europe. My specialty is game economy and gameplay design for free-to-play. Companies contacted me for three main things:

  1. To set up the vision for some new project of their.
  2. To review and design a new tutorial for their game.
  3. To add more monetization features to their games.

My main tasks are always been to become aware of a certain context, study a specific market and provide concrete solutions. All of that online, by remote.

I remember back in the days when I had to wait for the producer to call me after the internal meeting. I wasn’t allowed to participate to their daily standup because they were too lazy to set up a camera and connect with me.

Then the pandemic came and this is now the new normal. Now most of my work is online, but the processes are still the offline ones. I mean, I didn’t saw relevant updates to the game development practices. And that’s a problem.

Game development has many moments, good and hard ones. Especially the hard ones, when you need to tell the others your truth about something are getting always more complicated. Sometimes you notice that things are just not working out. So you should take the courage and speak with your boss and colleagues about that. You can do it by writing on a “public” slack channel or by contacting the leaders in private and have a virtual face to face with them. Still, with the remote something is missing. You always have that colleague with stays silent most of the time. And most of the time that colleague is one of the smartest. But they don’t talk, so you will never know. And possibly then they quit for a better job. And you remember that you never asked them directly to express themselves during meetings.

Like this there are a lot of stories. Remote work brought good things to the industry, but one thing is clear: games are not getting published in the expected volume.

We should update our processes at some point.

F2P Economics: Diablo Immortal

Published by Paolo on 09/06/2022

In this post I will try to explain the basics of the freemium economics, because without those is impossible to understand why free-to-play games have to rely on strict calculations in order to work and scale properly.

Costs

When you run a business you have costs, a f2p business has many costs that I can resume like this:

  • Installs: number of installs we want to achieve with our acquisition campaigns
  • CPI: cost per install. Each install will cost this
  • %FTD: first time deposit percentage. Basically, the part of Players that decides to invest something into our game
  • Team Members: our team is composed by…
  • Salary/Member: the cost per month of each member
  • Development Months: the number of months before of publish the complete game, ready for live operations.

If you are working right now in f2p you can notice that those numbers are VERY optimistic. Ad the end of this article I will propose something nearer to the reality. Another thing is that every company has its way of naming things, my approximation is just for the sake of explaining.

Cohorts

When you design a free to play game you should be aware of two things:

  1. Vast majority of players (in my example 95%, but again it’s optimistic) never pays a dime
  2. The payers have different spending profiles:
  • Minnows: they are the majority of payers and they invest just a little in your game
  • Dolphins: they are a big chunk of players and they invest a little bit more. Their spending habit is similar to PC/Console players somehow
  • Mermaid: they have a higher acquisitive power, and they decide to invest more over the time in your game
  • Whales: they are the real target of your monetization system. Without them, the f2p business is not sustainable. Here’s why:

You can clearly see that Whales are the vast minority of all payers (players that spend something). But:

With this configuration, you can see the weight on your revenue of whales and mermaids.

Results

In this perfect scenario, those are the results:

  • UA Cost: CPI*Number of Installs. We spent one million dollar just to get people into our game.
  • Team cost: Members * Salary/Member * Development Months. We spent six hundred thousand dollars to develop our game. Development costs are cheap compared to marketing.
  • FTD: we have fifty thousand people paying something
  • Revenue: according to the cohorts, the total revenue is this
  • RPI: revenue per install. Total revenue divided per number of installs.
  • Profit: what we really earn. The total revenue less the costs. In this ideal case, it works!

We don’t want to make games for whales!

Ok, let’s make a game that doesn’t permit whales to pay that much then! We believe that FOMO, pay to win and lootboxes are the evil, so that we put a maximum cap on our spend depth.

The cohort whales, then, disappears. Let’s say we just have mermaids, that will increment their presence among the cohorts:

In this case, the impact on revenue will be HUGE. Still, with the idealistic costs structure it works! we can have a business:

Diablo Resurrection

Lately, a lot of press is writing against the monetization of Diablo Immortal, the last game from Activision Blizzard. They say it’s too agressive, I have a different feeling. To me is not aggressive at all. Let’s study its costs.

The quality of this game is very high. But.. 15Gigas, really???

A game like that from a company like that will have a cost structure more similar to this:

I am completely biased here, please if you have more data let me know

With those cost structure, without targeting whales, the final result will be:

Why publish a failing game, right?

Which is why Diablo Immortal, because of its quality and narrative and everything it gives for free has to target heavily whales. This is for the vast majority of people to have fun. A possible cohort configuration can be:

For the whales to arrive spending ten thousand dollars, the spend depth of Diablo Immortal has to be high. Still, in this way our business barely works:

You work like crazy to earn $200k? I don’t think so.

So, I get that many of you don’t agree with f2p and don’t like this business model. But it exists and if you want to be there you have to do very well your math!

Hope this post helps!

Game design consultants: hire who’s better than you

Published by Paolo on 05/05/2022

Some time ago I tried an experiment. I hired some people to try to teach them my way of making video games. My goal was not to earn money with those games. I wanted to train a couple of assistants because the number of clients of my consultings is increasing.

The experiment did not go as expected. My time is scarce, so I can’t invest it in training people. I quickly realized my choice was pretty dumb. However, I realized something very important.

If we don’t have time, it is better to delegate to those who know more than us. We will thus make a good impression on our clients. We will also learn new techniques.

Making games for the Impact Economy

Published by Paolo on 25/04/2022

Impact Economy, an economic model in which the main purpose for startups, businesses, investors and organisations is not only to maximise profitability, but also to improve their social and environmental impact.

I recently discovered the Ecosia search engine. Ecosia relies on Bing’s ad services and promises to plant trees based on the amount of searches you do on their engine. It installs easily, even on smartphones, and works really well.

The results are the same as those of other engines (I used DuckDuckGo before) and it is really a pleasure to know that you are doing good to nature just by browsing.

I wonder if it is possible to adapt this business to the video game. In fact, there are entire sectors that survive thanks to advertisements. See the hypercasual market.

Imagine being able to join the services that Ecosia relies on to plant trees and contribute by creating video games where, for each ad you view, trees are planted!

It would be beautiful right?

Can Netflix, SONY and Microsoft integrate ad networks in the future?

Published by Paolo on 21/04/2022

Apple and Google have made marketers’ lives more difficult. Today, it is harder for a game to reach the right audience only through ad campaigns on the major networks that offer this service.

Acquiring new players is more expensive and often ad campaings bring people with different motivations to play.

This week’s news is that Netflix is ​​considering introducing ads to its platform. SONY and Microsoft, which are activating their subscription services, are also seriously considering introducing ads to their games.

New ad networks will be created. Someone calls them “content fortresses”. If these companies play their cards right, companies will certainly be pushed to invest in acquisitions directly on these platforms.

The more you know about people’s actions in other products, the easier it is to reach them. The ads that appear to these people will be more meaningful to them. People who enter a game are likely to be more drawn to the core features and mechanics.

Netflix, SONY and Microsoft can score a big win if they play their cards well. As designers, ads are an interesting tool to get better monetization numbers simply improving the reward ratios.

Best companies know when it’s time to kill a game

Published by Paolo on 07/02/2022

It is dangerous to scale a game with questionable product/market fit because of The Traction Treadmill. Sometimes players show up in your game, and a small percentage of them retains.

You may think it’s time to scale. Just add players, instead of improving your game. And this works, for a time. You can grow fast just by doubling ad spend. Or tripling ad spend.

You have 10.000 players, you buy 20.000 more.

Then a large percentage of those players go away and never returns back. You have to replace the percentage you lost plus buy more players to grow. You lose a percentage of players fast, and you have the budget and funding to replace them- but then can’t keep grow on top!

You may want to optimize your campaigns and spend less per Player. But inevitably the problem will reappear at some point. Team’s morale will do down as options become scarce. Increase retention becomes too slow and complex.

That is why is extremely important to polish your product but also understand when you cannot fix it. Also the best companies in the world know when to kill projects.