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Low conversion in free-to-play is a feature, not a bug

By on May 21, 2014
FlickrCC image by Claudia Regina
FlickrCC image by Claudia Regina
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This guest post from Eric Seufert was originally published on his blog Mobile Dev Memo.


An article excoriating the supposed plague that is free-to-play made the rounds recently, citing engagement statistics from Swrve’s April report in support of an argument asserting that, because average engagement rates for free-to-play games are low, and the percentage of players that pay anything within free-to-play games is very low, consumers clearly don’t enjoy free-to-play games. From the article:

Recent data shows 20 percent of mobile games get opened once and never again. 66 percent have never played beyond the first 24 hours and indeed most purchases happen in the first week of play. Amazingly only around two to three percent of gamers pay anything at all for games, and even more hair-raising is the fact that 50 percent of all revenue comes from just 0.2 percent of players.

This is a statistically insignificant amount of happy gamers and nothing that gives you a basis to make claims about “what people want”. I think it just as likely that mobile’s orgy of casual titles is due to simple bandwagon-ism or, in other words, not knowing what people want.

The problem with this line of reasoning is that ratio metrics (and, more broadly, industry benchmarks) are meaningless for free-to-play games absent the context of the entire metrics portfolio or knowledge of the game’s marketing mix (ratio metrics are obviously important from the perspective of the developer, but presented individually to outsiders — eg. game X’s conversion rate is Y% — they reveal nothing about a game’s overall performance). The calculus behind beginning the development of a game under the freemium model (and the decision should take place that early) revolves around aggregate numbers: total addressable market, total daily active users, total daily revenue, etc.

Ratio metrics become relevant as the total addressable market decreases as a result of changes to the premise of the game (ie. if the game has 20% fewer users, but they’re more targetable with marketing and monetize 30% higher…), but these changes are optimizations and should take place only after the core mechanics and format of the game have been established. The fundamental decision of whether or not to pursue free-to-play shouldn’t entertain concerns over conversion rates; by definition, conversion is low in freemium.

Abstracting this argument away from games and onto consumer technology in general, freemium isn’t meant for niche products: it’s a business model designed to benefit from scale, network effects, price differentiation, and varying levels of consumer enthusiasm, with the confluence of these factors producing more aggregate revenue than if the product had adopted an up-front price. Conversion rates for freemium consumer technology products are low across the board:

  • In its IPO filing, Skype indicated that only 6% of its users had ever purchased premium talk credit;

No freemium software developer releases a product expecting high conversion rates; low conversion in freemium is a feature, not a bug. The goal of a freemium product is to drive more aggregate revenues through a much larger user base than could be achieved through a paid download / install pricing strategy. This is facilitated by high virality, a small but highly-engaged minority of users that is willing and happy to spend large amounts of money on the product, or both.

Even if one accepts the notion that the 66% of players that don’t return to free-to-play games after Day 1 didn’t like those games, it’s impossible to claim that they were offended or angered by them. More likely, those games simply didn’t match the tastes of the affected players; do people suffer longstanding negative emotions when they don’t like the taste of a free sample at the supermarket?

Contrast this with users who paid to download games they ultimately didn’t like (it’s impossible to estimate the number of players for whom this holds true, but it’s certainly more than 0%): they probably did experience anger, or at least regret, which means they took negative emotions away from the exchange.

Why would the potential to arouse those negative emotions — waste, bitterness, disappointment — be preferable to presenting a player with the opportunity to make an informed decision over the games on which they spend their time?

About Eric Seufert

Eric Seufert is the Head of Marketing at Wooga (http://wooga.com), the Berlin-based mobile gaming company. He is also the author of Freemium Economics, a practical guide to implementing and instrumenting the freemium business model in software, and the owner of Mobile Dev Memo (http://mobiledevmemo.com).
  • Martin Annander

    It might be naive, but I think, if a product comes out that just makes sense to people. Let’s say a Super Mario for the touch platform. Like Angry Birds was, in a sense. Then people will be more willing to pay for it.

    Not everyone can chase the same profits. But my own experiences definitely agree with your sentiment, unfortunately. It might just take a much better game than we managed to make. 🙂

  • I think premium is a very difficult place to be: you get one shot at success, your biggest fans can’t give you any more money, and it is hard to be a viral hit because you have a paywall. That is not a “business-first” mentality: it is more a fundamental truth driven by consumer preferences for free stuff over paywalled stuff.

    In my opinion, of course.

  • Martin Annander

    And I’d completely agree with that argument. Me-too games exist on every platform. My only real problem, personally, is that way too many developers and publishers (speaking only of people I’ve personally met) are chasing the money rather than chasing good games. In my opinion.

    I love f2p. I love premium, too. I just think there’s a business-first sort of mentality that’s hurting the potential for more innovative mobile game experiences.

  • Ah. Well in that case, I just disagree.

    Eric argues above that the low conversion rate of F2P games is a feature, not a bug. It enables massive audiences. Otherwise we would argue that free-to-air television is incredibly unpopular or fails to satisfy its audience because no-one pays for it.

    I would argue that F2P:
    – has a massive audience
    – many of whom play the games for months on end
    – a small proportion of whom spend any money
    – but which overall makes much more money on mobile/tablet than pay upfront apps.

    I completely agree that no-one needs more Clash of Clans or Candy Crush clones. But I would argue that no-one needs another special forces shooter or FIFA game too.

  • Martin Annander

    I might be wrong, of course. But my understanding of the admittedly vitriolic argumentation is that these 3% are satisfied. The trick has to be how to reach a wider audience and to do that with more than just monetisation in mind and without homogenising how games are sold before the medium has a chance to mature.

    That’s what I’m bringing with me, anyway. 🙂

  • I don’t think that is Barry’s point actually. Even the games he is positive about have low conversion rates. I think he just doesn’t like F2P.

    And while I admire his writing, and his passion, I think history is not on his side.

  • Martin Annander

    Personally, I think you completely miss the point. It’s not about whether free-to-play is a bad model. It’s about how many up-and-coming developers and publishing power houses consider it the ONLY model. As is said in the article:

    “It’s fair to say one reason mobile gaming is dying on its arse for developers is because the idea that one billion gamers want to play variations of Candy-Clash-Saga a thousand times is fucking insane. We’ve got the stats. It’s 3 percent at best. So we’ve nailed that, time to try something else.”