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What is Kongregate?
Open platform for free browser-based games Flash, Unity, HTML5, Java, etc. ~200 games selling virtual goods Revenue from ads (30%) & virtual goods (70%) 16M monthly uniques, core gamers Acquired by GameStop July 2010
Select Developers
(It does matter for total players, higher rated games get more promotion & word-of-mouth)
So what gives?
Econ 101
In perfect competition the market price is set where demand & supply are equal. Real life example: the stock market
Imperfect Competition
Perfect competition assumes that goods are homogenous, i.e. that theres no difference buying from one supplier or another.
But nobody can sell a good thats useful in your game but you.
The market for in-game goods is separate: players are not price-shopping packages of gold in two different games and deciding which to buy.
But since players can leave your game/market for goods freely your monopoly is insecure. Youre not a cable provider or the like who can charge high prices and provide poor service and the player is stuck. Players should be treated well and will leave if you dont. What it does mean, though, is that you look internally to your game to set prices, not externally.
Now in graphs!
Four of the top five games get the majority of revenue from those spending $500+ Every top ten game gets the majority of revenue from players spending $100+
Type of Player Non-Repeats Repeats (2-9 plays) Regs (10-49 plays) Committed (50+ plays)
$ $ $ $
Retention = Security
The more time a player invests in a game, the more they value their status and progress, the higher the switching costs to another game/hobby become.
Experiment!
Start with prices high as its easier to lower than to raise. Youre also setting the initial impression of value in players minds. You can look to other games for ideas but dont price around $10 just because thats what League of Legends does. Use promotions on individual items to test prices & elasticity but take with a pinch of salt, as people behave differently in the face of deals.
Week 1 Week 4 Week 7 Week 10 Week 13 Week 16 Week 19 Week 22 Week 25 Week 28 Week 31 Week 34 Week 37 Week 40 Week 43
An apology and a make-good led to a partial recovery, but only partial game sales are 30% lower than equivalent games.
Wed see a strong spike in demand but usually we were just moving sales around. The stronger the spike, the bigger the following dip.
Even though buyers responded to the promotion demand wasnt truly elastic. Repeat promotions would become less and less effective and base sales would spiral down as customers waited for discounts.
Same spike on the promotion, but less of a down on future sales most of the gain was from people who would not otherwise have bought, and reactivated buyers were more likely to buy again. So the demand of lapsed buyers was truly elastic.
Even though the value of buyers brought on through promotion was somewhat lower on average, its dwarfed by the gain in 1st time sales and the increase in buyers.
Week 1
Week 3
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Week 21
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Graph of this games sales (along with anecdotal data) suggests yes:
Week 39
Week 41 Week 43 Week 45
Maximizing Promotions
To get the most of out promotions you need to design them very carefully.
Things to focus on: Customer segments have very different price elasticity: target accordingly Transactions are relatively rare: increase their size (bonus for volume buys) Related: increase value rather lowering price (buy one, get one > 50% off)
Elite membership gets you $20 worth of paid currency for $10 plus an extra card. Big value bonuses targeted at non-buyers, mid-level price point, positive elite branding. Results: exceptional conversion to paid, 86% of buyers have bought Elite
Another good example can be found in Fantasy Online by Pixelated Games, an open-world MMO with cute retro graphics.
FO bonuses exclusive items on larger purchases. Items changed regularly, top package includes a monthly special item encouraging committed players to buy every month. Results: Monthly ARPPU jumped 75% the month this was added, and stayed up.
If your base monetization is capped, then events and sales may be less productive.
Remember that the most important thing is to make a fun game that people really care about. Without that theres nothing to leverage.
Finis!
To learn more/find links to other talks visit dev.kongregate.com
Contact us at apps@kongregate.com