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Why people pay for virtual goods

By on March 18, 2010

I was at the Games Gone Wild event in London yesterday (good attendees, format needs work).

I heard a fundamental misconception about virtual goods and entertainment purchases repeated a couple of times.

“Consumers who enjoy playing free to play games will purchase virtual goods because they are used to paying for entertainment. And that’s what we offer them.”

This is not true.

Consumers do not play a game, decide that they are enjoying it and therefore decide to buy a virtual good. And if that’s what you think, you are going to struggle to design games with viral mechanics and compulsion loops that monetise well.

It’s not a big secret

Virtual goods only work in social settings: online games, virtual worlds, social games. And the compulsion that makes a player purchase a virtual good are the same as the compulsions that make us buy goods in the real world:

  • We want to stand out.
  • We want to get ahead
  • We want to belong
  • We want to flirt

Understand this, and you have got the first principle of the difference between a traditional AAA game design and the designs needed to make a successful virtual goods business.

Dress up, or look scruffy

I often ask clients this question:

“When you are at home, with no-one watching you, do you:
a) dress up in your best trendy clothes; or
b) hang out in an old T-shirt and a tracksuit (or whatever your equivalent is)

No-one has ever answered (a).

I then point out that the same is true online. If no-one else can see what you are wearing, why will you spend money on it?

This, in essence, is why Oblivion’s horse armour flopped so badly.

Many designers say “but we’ve always included wearables in our reward structure for single player games. Why don’t they work in online worlds?”

The answer lies in the difference between “rewards” and “purchases”. For a player to feel the need to purchase something, they have to get a feeling, an experience, a social benefit from it. They need:

  • to feel more powerful (i.e. have better weapons, level up faster)
  • to fit in (like the one million people who bought a Santa Hat in Kart Rider in the run up to Christmas 2007)
  • to stand out (like anyone buying a unique set of clothes for their avatar)
  • or a combination (like a guild all kitting themselves out in purple clothes so everyone recognises them).

(see Free to play gamers will pay for power-ups and self-expression, but not for new content for more on this topic).

Players do not buy virtual goods for the goods themselves. They don’t buy them for entertainment value.

They buy them for self-expression. For status. For all the same reasons that you buy branded clothes in the shops.

Harness this, and you will have a massively successful business. Fail to understand this, and you will be creating horse armour until doomsday.

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: