Free to play has become one of the most common mobile game monetization structures. Don’t mistake the “free” in “freemium” to mean you won’t make money though; free to play games are often generating millions more in revenue than some of their premium game counterparts.
That doesn’t mean every freemium game will make money. To be honest, the majority of them don’t. For every success story you hear, there are hundreds if not thousands of other games that didn’t quite get it right.
How do free games make money?
Generally, game developers make money on free games via in-app purchases, offers or advertising.
In-App Purchases or “IAP” is when a user will pay for something within the app itself. IAP is found in any kind of app, even premium ones where the user has already paid. Example: Paying money for in-game currency or to unlock a powerup.
Offers are when the player does something that makes the game developer money, in exchange for something in-game. Examples: Watching a video or signing up for a 30 day trial of some service to get in-game currency.
Advertising is when the game developer makes money by users viewing or engaging with advertisers or partners. These are your traditional banner or interstitial ads, in addition to other types like native ads or product placements. Examples: A real advertisement on a billboard in a racing game, a themed section of a game that promotes another game (and possibly a link), or the game itself themed to promote for another existing IP.
Those aren’t the only ways to make money, but most freemium games use some combination of the above methods, often all of them at once.
Freemium is hard work
Are freemium games a crap shoot? Is it just luck that makes one app successful and another not?
No, there is more to it than that. The top freemium games are carefully constructed to hook the player and encourage behaviors that will make the game developer money. There is a science to good game design, and this science is put to the test every day in the app stores.
You can’t just throw in a banner ad and a couple of in-app purchases and call it a day. Nor is there one (or even a dozen!) formulas for success. There are many ways to succeed, but even more ways to fail.
You might be doing it wrong
Too many freemium games make simple mistakes that create friction points, encourage players to behave “badly”, turn off players from enjoying the game, or just simply aren’t any good.
Instead of trying to dictate how your game should work and/or which mechanics you should use, I will instead tell you some of the many things you should not be doing.
My goal is to explain some common mistakes and misconceptions developers might have about free-to-play design and how to correct them.
“Free-to-play” means being actually “free”
There are lots of different ways to make freemium work and to make money without requiring the user to pay to play. A game isn’t really “free” if you put up a screen after a while that says you must pay to continue. Then it’s a premium game, with a long trial or extensive demo. Freemium games have to actually be free to play for most of your players.
That’s right, the majority of players will never pay for anything within your game. The statistics I’ve heard is that only 0.5-3% of players will ever pay for an in-app purchase.
That’s a pretty small number, 0.5-3%. But that is enough to generate millions in the right games. Those players that are willing and interested in paying in a sense pay for the rest of the group.
If you think about it the other way though, that means over 97% of players will never pay for an in-app purchase.
If the best parts of your game are only for your “paying” players, then that means the majority of your player base will never see it. Likewise if you punish the non-paying players, then you’re punishing over 97% of your player base! That doesn’t sound like a good business decision, now does it?
Paid players need to have as much fun as free one
Likewise, paid players need to enjoy your game as much as the free ones do.
For example, let’s say you have a game that has a part where you can either play for an hour or so, doing the most fun parts of your game, and at the end earn a trophy. Or, you can buy an in-app purchase, and earn the trophy in about 5 minutes.
Well, the paid player got the trophy sooner, but were they really having fun doing it? If the game becomes trivially easy, or you let players skip the best parts because they paid, they aren’t actually going to have any fun. What good is paying for a game if it then ends abruptly after?
Make sure you have enough content to keep your paying players as happy as your free ones.
Can’t rely on just ad revenue
Freemium games monetize most commonly through ads, offers, or in app purchases.
It’s more so the latter, honestly. Ads certainly pay, and they can be totally worth your time if you have enough players. If you have less than 10,000 active users, you aren’t going to see much money at all.
Ad revenue is calculated in “CPM”, which is “Cost Per Mille”. Mille means one thousand in latin, so CPM really means “Cost Per Thousand Impressions” An impression is when a user sees an ad.
Typical CPM I’ve heard is $0.50 to $2. I have not met a developer who was making $2 CPM, I have heard many advertising agencies talk about their clients earning $2-10 CPMs, so I know they’re out there, but every developer I’ve talked to about it has <$1 CPM.
That means that, if you have 1,000 players who each look at two different ads in one day, you can earn somewhere in the range of… $1-3 a day.
Not much, is it?
Now, if you have 100,000 players, who each look at 4-6 ads in a day, you’re starting to talk about enough money to make it worth your time. But if you have or are aiming for less than 50,000 users, ads will probably harm you more than help you.
Price in app purchases correctly
Just because you have an awesome sword for sale that costs $100, doesn’t mean that 0.5-3% of players will buy it. It’s not automatic, you have to actually make good in app purchases that interests many players, even if the majority won’t actually buy it.
Check your competition! Look at games that are similar, or games that you like playing yourself. Note how much they charge for each purchase.
Most have currency purchase options for as low as $1. With that, they can usually buy at least one medium sized to large store purchase. If you offer 1000 coins for a $1, and your cheapest item in your store is 3000 coins, you are in a sense charging $3 for that item.
That is not quite true when you offer a deal for buying coin in bulk. Many games offer a scale that the more coin you buy at once, the cheaper it becomes. For example, 1,000 for $1, 15,000 for $10, or 300,000 for $100. In this example, the “cheapest” you can get coin is 3,000 per dollar, but only for people who buy in $100 blocks will get that deal. So you would still want to price your IAPs using the 1,000 per $1 approximation.
You’re providing a service, not a product
As you make your game, you have to remember that apps are not products, they are services that you’re providing.
You have to keep updating them, you have to keep adding more content. Doesn’t matter how feature complete you are, or how awesome the game is, the moment you stop development is the moment your game stops growing in popularity.
Think about your economy, how much coin will players earn vs. things they can spend coin on? What will you do to get coins out of player’s hands in the long term? If all you offer in your store is customizable skins, players will purchase the one skin they like and horde the rest of their coins. Then as you eventually add new content, you will have to drive prices higher and higher to make sure players have to actually work to earn the new rewards.
This can make the game a much worse for new or casual players, and often can turn them off from the game completely.
Plan your game to last for the long term.
I hope that you’ve learned something about free to play game design. This post is part of 3 week series giving current and aspiring game devs the tools, resources, and advice they need to get started building for Windows. Join me later this week for my next contribution to this series, “You’ve made a game, now what? Marketing and Monetization strategies” where I’ll discuss other monetization methods and best practices for marketing your game without a budget. In the meantime, for other resources to build your app check out AppBuilder.
UPDATE: My second post in the #GameDev blog series “You’ve made a game, now what? Marketing and Monetization strategies” is now online.