Insights on Free-to-Play Games: Key Learnings from 4 Years and 300 Games

1. 4 Years, 300 Games: What We’ve Learned About Free-2-Play Casual Connect Europe 2013 Emily Greer, Co-Founder & COO $$$$$$$

2. Brief History of Kongregate Launched in 2007 as developer-friendly, open platform for free web games • Only source of revenue was advertising • Almost all games single-player & Flash • Level & achievement system attracted core, male audience

3. The New New Thing We’d heard about something called “microtransactions” that were a huge source of revenue for web games in Asia Not many games had tried them in the US, but virtual worlds like Second Life, Gaia Online, Habbo & IMVU were doing well with them

4. What Were We Thinking? • Transactions will mostly be <$1, therefore • Payment processing costs are a big deal • Incenting larger purchases will be valuable • Stored credit cards and existing balances will be a powerful way to reduce friction • Players will be buying cosmetic items, gifts, power-ups & content • Multiplayer/social elements are crucial • US/English speaking much more valuable than any other market

5. Let’s build a platform! • Because of the transactions costs & friction we should build a site-wide currency for our developers to use • There’s no point to creating a currency if there aren’t games to use it

6. The Blind Leading the Blind • Funded 6 games, focusing on synchronous multiplayer & unique gameplay • Monetization elements tacked on, shied away from pay-to-win elements: • Cosmetic Items (Dinowaurs & Remnants of Skystone) • VIP subscriptions with more content (Skystone, Battalion) • Some power-ups & currency (Zening, Skystone, Battalion)

7. Launch to Failure Our currency “kreds” launched in November 2008 “Premium” games launched gradually over the next 6-9 months with decent ratings but minimal sales

8. Open Sesame First FB Game 1st Asian MMO 1st MMO

9. 4 Years, 300 Games

10. “Transactions will be really small, <$1”

11. What Were We Thinking? Revisited • Transactions were going to be really small, <$1 mostly, therefore  LOL! • Payment processing costs will be a big deal  Only on mobile • Incenting larger purchases will be valuable  Still very true. Testing has shown that bonusing larger purchases raises revenue by 14%, increases buyers who spend $100+ by 25%

12. You Always Need More Storage • Stored credit cards and existing balances will be a powerful way to reduce friction  Also very true LTV on non-stored credit card buyers: $66, 3.6 trx LTV on stored credit card buyers: $195, 7.8 trx In general the higher the friction of the payment type, the lower the value of the buyer:

13. “Players will buy cosmetic items, gifts, power-ups & content” Almost all sales (95%?) are for items that affect gameplay • ~70% purchases are for permanent items and upgrades, about 30% go to consumables like energy • Cosmetic items have minimal sales, but cool-looking items sell better than more ordinary ones • Gifting behavior is quite light with our 85% male audience • Content sells somewhat in single-player games, but sells best mixed with a package that includes skill points or another power-up.

14. “Multiplayer/social elements are crucial” Yes! But it still doesn’t look like we expected it to. In the early games we funded we focused on synchronous multiplayer, both PvP and co-op PVE. That was a mistake.

15. ARPU & ARPPU

16. “Multiplayer/social elements are crucial” What about PVP vs PVE? Both! Guilds make everything better – all top games have them. Guild wars & guild leaderboards are very powerful.

17. Multiplayer is very important, but it’s not the most crucial element. Turns out the single most important aspect of a game is strong RPG/character progression.

18. So what genres work best? Some of the best sub-genres: Some of the weakest sub-genres:

19. “US/English speaking much more valuable than any other market” Broadly true – 65% of our revenue comes from English-speaking countries. Individual smaller markets outperform the US, however, especially Northern & Western Europe

20. Keep Going, Keep Learning We struggled for nearly a year (two including development) before we saw any success. Your first game isn’t likely to do well either. Free-2-play is hard, and many important elements are counterintuitive. But once the elements come together the improvement is exponential

21. Die Ende • To learn more/find links to other talks visit developers.kongregate.com • Topics include: • retention • big spenders • item pricing • promotion management • more • For web games contact us at apps@kongregate.com • If you’re interested in mobile publishing it’s mobile@kongregate.com • Follow me on Twitter: EmilyG