FreeToPlay.biz The Business and Design of Free-To-Play Games

22Jul/091

Designing, Balancing, and Managing Virtual Economies – CC09

Panel discussion led by Chris Early. Throwing up raw notes because that's better than nothing. Please excuse spelling mistakes. This was a great panel... lots of good advice and some numbers too. Worth a read through the raw notes.

Panelists:

  • Daniel James, Three Rings CEO
  • Min Kim, Nexon VP of Mktg Nexon America
  • Lisa Rutherford, Two Fish
  • Andrew Sheppard, Hi 5
  • Craig Sherman, Gaia Online

Nexon

  • $29.3M in 2007 in virtual items sold in NA
  • Driven by new content but also by new payment platforms

Gaia

  • 8M uniques/month
  • PCU 100K every afternoon
  • 2 diff currencies
  • soft currency is attention-based currency - secondary market for this has over 100K completed auctions per day for virtual currencies and goods

Two Fish

  • Virtual economy data platform provider
  • collects data from within game worlds, then feeds it into analytics db
  • Allows you to optimize user experience
  • Has about 20 customers
  • Helps to set up economies, balances sources and syncs, tweak

3 Rings

  • $4M/year in rev for PP
  • Whirled has similar economy with 3rd economy allowing for UGC creators to cash out

Hi5

  • 63M users
  • Open social supporter
  • 40 currencies, 70 langs, 60 payment methods
  • 10x size of myspace games is their game site

Two Fish

  • When starting, understand what your goals are and what you're monetizing
  • approach design from bottom up - asking where company wants users to spend and earn

Gaia

  • did not manage economy when they started
  • want ppl to earn quickly for initial wow experience
  • down the line, someone who has been playing for months and months get really rich - what is left for them to buy?
  • need to manage these disparities correctly from the beginning
  • company has one full time economist balancing it

Nexon

  • 1999 or 2000, company stumbled on microtrans
  • tons of ppl in beta for quiz game
  • turned on charge switch and everyone left
  • switched to f2p
  • heuristic process
  • recommends learning from playing and purchasing items and deconstructing what they've figured out
  • a lot of it is a function - time = vanity, etc

3 Rings

  • don't screw up
  • mudflation - overinflation of currency is easy to introduce if you are not being rigorous about sources of attention currency
  • need to have some level of instrumentation... need to pay attention and be set to react when something goes awry
  • it is a discipline that is tough to master

Early (Moderator)

  • Most games are a command economy - decisions about game economy made by a govt or central body, not market forces. Do you give the market any control ?

Nexon

  • Nexon controls all re game economy
  • ppl think of biz models first
  • most important is to think of what game ppl wnat to play... high levels of engagement
  • ppl playing your game casually... playing it 5 times, etc... unlikely to play
  • need to get higher enggement times

Gaia

  • in these conferences, you'll see two answers for how to run these games
  • socnet are driven by viral loop or manufactured virality
  • core brand or long term user base coming to a destination site
  • we are in the latter category see a close tie to making an awesome product and getting a higher level of monetization
  • others are more focused on pushing people into a monetization model early on

Hi5

  • 3 different levers:
  • engagement
  • monetization
  • virality
  • with a hard currency, has to be a command economy

Early (Moderator)

  • what are the leading indicators you measure and what do you do with them

Two Fish

  • looking at macro flows. in and out of economy, both real and virtual money
  • measure how quickly they are coming in and out of game
  • are women having money coming through their accounts quicker or slower than men?
  • look at what they pend on on... retail optimzation methods... correlated against demographics and pricing and how pricing changes over time
  • a lot of data and charts but you have a repsonsibly to be benevolent

Nexon

  • how people are flowing in
  • how they are churning out
  • unique users per month
  • ARPU for that month
  • pay rate based on subs they have
  • economy balances itself... quickly they are going to determine if they want to pay for your game... in some ways the players dictate how you charge for your game

2 Fish

  • difference between people paying and what happens within game
  • within game world itself, thinking about what you are giving your users... you want them to have an economy they feel is balanced

Nexon

  • we do not tie attention and real money currencies together

2 Fish

  • some ppl do tie those two currencies together

Gaia

  • best measure of what you're doing right is
  • retention analysis
  • length of time spent
  • ultimate measure is customer retention

3 Rings

  • any metrics are useful for testing hypotheses, but if you're wrong you need a new one
  • how much cash are people holding?
  • going to be a tension between hoarding and what you need them to do, which is spend so they need more money
  • really interesting metric
  • puzzle pirates is a command economy - cash prices fixed by us
  • in world, player creators price certain items
  • I would like to take back that control... users don't do a good job
  • players tend to price too cheaply
  • we will likely have to seize control of pricing from the users as they are acquiring things to easily

Early (Moderator)

  • wealth management has come up as a topic - are there things you can do that aren't massively disruptive?

3 Rings

  • incredible opp to take fantastic amounts of wealth and turn it into a one-time exclusive item
  • when we shut down alpha server we challenged people to throw Pieces of 8 into a hole... winning group got their name on top of a list

Gaia

  • we wanted to redo our amazon-like stores within the site, so we created a fiction inside Gaia that stores were getting shut down because of recession... asked users to help donate to help build higher quality stores... we created a concept of leaderboards... where largest donating teams got their names in lights... they felt as though they were getting status within the site

Nexon

  • you want your players to spend all the money they have so they need to get another payment card, etc
  • you should offer your players lots of diff ways to spend their money
  • players are not buying 1 item at a time... they are batching... buying $10 of virtual currency at a time... so you need lots of options for purchase so people don't have money just sitting there

Early (Moderator)

  • do you measure inflation? have an index?

Hi5

  • no, we don't... we have 40 currencies... every country has its own purchasing power for a user
  • a lot of people when they are thinking in metrics talk in ratios... very dangerous to measure app performance in ratios... tells you nothing about success... one could be making $1, one could be making $1M
  • need to look at overall

Early (Moderator)

  • why have multiple currency types, why not just 1?

Nexon

  • if you want one currency, you probably lose control
  • if you can't control it, the players might not need you anymore

3 Rings

  • very risky to have just 1 currency
  • Linden has just 1 currency... from the outside it is terrifing
  • they say they are a country - maanged like a central bank
  • second life is not a game, so they don't have the same compulsion loop
  • stripping out that game aspect means they can probaby get away with 1 currency
  • whenever you have a faucet that is your real money currency - espcially if it is uncapped - you can wake up and find it hacked or duped and you have to press reset
  • dupe bug for soft currency or farming method is bad, but you don't need to find it in 30 mins... where you would with hard currency dupe bug

Nexon

  • take a couple items and make them purchasable by soft and hard currencies... most players will work hard to purchase with soft currency

3 Rings

  • the ppl who do take credit card out are buying the time and attention of the people who don't

2 Fish

  • in general, dual currency is what we recommend

Early (Moderator)

  • you hinted at exchange between soft and hard currency... where is the legal liability... regulations

Gaia

  • we need to be clear... if you can get your money out, then it is a big issue
  • SL has a currency where you can invest your time and get it out in real dollars
  • as soon as you do that, you can run into regulation issues, but more primarily, people will try to game the sytem... bots, farming, etc
  • if you are going to go down that path, plan on having half your dev team working on managing exploits for the next few years
  • you have then become the best target for money laundering
  • we chose not to do that... greatly simplifies life... branding decision as well - is your site a place where you can spend time and earn money? a career? or is it a fun experience where you put in your money but don't expect to get it out

2 Fish

  • working with two companies that are in the skill based gaming sector... getting money out
  • we use a double entry ledger system... duping is harder
  • huge fraud risks
  • comes down to modeling behaviour... looking for abnormalities

Gaia

  • if you want to let money out of your system, you need to do games of skill not chance

Early (Moderator)

  • how do you price things?

2 Fish

  • i love pricing... counterintuitive in some places
  • barrier pricing... i.e. everybody wants one of the cooler cars
  • initial thought is that cars should be expensive
  • but really they should be cheaper as they are a barrier item
  • once they have a new car they can spend more on customizing it
  • think about what kind of behaviours you want and price to encourage that

Nexon

  • we actually do sell cars for $10
  • we sold 120,000 cars for $10 apiece
  • agrees re: barrier
  • but barrier for ppl in game is not 10c, but $10 for initial payment... so you need enough items to justify that
  • if you have 100 ppl playing game, what % are going to pay and how much
  • what items can you create to get to a $15 ARPU

Gaia

  • we do exactly that re: modeling an ARPU
  • interplay between getting ARPU up vs getting percent of people who pay up
  • clearly they should be complementary
  • but fascinating thing is that we are not really clear on which one matters more, we go with what is easy
  • getting dollars per player up is always easier
  • people who want to pay are willing to pay a lot of money
  • relatively easy to find small % of ppl who pay and pay
  • more interesting thing is how to get a higher percent of ppl to pay
  • that has more ramifications on long term business health
  • barrier is getting the money into the game via cc or payment card

Hi5

  • we work with developers on pricing
  • if you don't test a variety of price points initially... you are liking to optimize around a suboptimal price point
  • also important to take into account how much money is being spent per minute of engagement
  • if you do allow exchange of soft and hard currencies, need to ensure the price is not punitive - with one dev, we halved it from $5 per half hour to $2.50 and doubled their ARPU

Gaia

  • ways to avoid hitting the 1% chargeback
  • not allowing you to purchase on day 1
  • maxing the amount ppl can spend in a month
  • making sure ppl can't pull money out

3 Rings

  • we hit chargeback problems ... we hadn't switched on address verification... turned it on and problem went away
  • WoW has big chargeback isseus as people farm on stolen CCs

Gaia

  • median user age is 18
  • under age 18 I would be looking at sub models
  • bad if you have to ask mom each time you want to spend another dollar

3 Rings

  • habbo hack for under 18 microtrans - $4.95 club habbo sub that gives you virtual currency... allowance from folks... can also buy more currency
  • hoping users get comfortable with that and give more money

Nexon

  • betting on teen market
  • kids are fickle... in and out quickly
  • once club penguin kids grow up, they will spend money on virtual economies.. right now their parents are saying no to premium subs