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

By on February 8, 2010
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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:

“On a free to play game, it’s really about usage. Once you’ve got a customer, they could theoretically stay with you forever and pay you forever. You’ve changed your monetization from being in the chart to maintaining a relationship with a customer. That also means you get to think differently about the way you design, about how the games get into people’s hands, how you treat your customers.”

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:

"We have a large number of DAUs (Daily Active Users) in our system, and if you think about free to play games, roughly on any given day, 2 percent pay you money."

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.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com