Inside Social Games ran a big interview with Neil Young, CEO of ngMoco, last week. Two things leaped out at me.

If we can’t make a game free to play, we’re going to kill it

Young comes from EA, and you might think he has boxed product DNA in his blood. They’ve had more than ten successful games, all of which have been in the top 25 so far.

But they are now wholeheartedly embracing freemium. As Young puts it:

That’s a big change for a mobile games company. It’s a clear acknowledgement that games are now services, not products. It shows how rapidly the freemium/virtual goods model is developing, and is bad news for bedroom coders thinking that they will still be able to make games and sell them for $0.99.

A lot of consumers will pay

This is how Young puts it:

So we have a helpful benchmark: 2% of users will pay. Plug that into your business model spreadsheets.

But what does it mean?

I’m trying to get my head around that statistic. On the one hand, that’s a 2% conversion rate. But that’s a daily conversion rate. Most people quote a monthly conversion rate. So let’s take a hypothetical example:

• A game has 1 million DAUs
• It probably has 4 million MAUs (the top 10 Facebook apps currently have 4.2x as many MAUs as DAUs – thanks AppData for the raw details)
• Each day, 20,000 people pay ngMoco money
• That’s 600,000 people per month, or 15% of the estimated 4 million MAUs
• Only it’s not, because many of these people will be duplicated (albeit if they are duplicated, they are still spending real money, which will be pushing up the Average Revenue Per User)

So ngMoco has a 2% conversion rate, or a 15% conversion rate, or something inbetween.

Sometimes I hate crunching data. Especially when it doesn’t give me a firm answer.