After Pokemon Go was released in the US, it
took less than a day before it was making more money than all the other apps in both
Apple’s and Google’s app stores. “It’s already earned $14 million in revenue
since launching last Wednesday — not even a full week.”
But users didn’t have to pay a cent for the game. All that money was coming from optional
purchases people were making as they played. This is the world of Freemium apps — a business
model that, in the past few years, has largely wiped out the market for paid games.
Now game designers have to monetize the gameplay and one way to do that is by applying some
fundamental lessons of behavioral psychology. The first thing these games do is set up a
virtual currency so that it doesn’t feel like you’re spending real currency, even
though you are. This is a variation on something we’ve known
for decades – which is that people find it harder to spend money when they’re paying
in cash than if they’re using a card. “So when you pay cash for something, you
see it leave your hands and you get a very immediate sense of how much your cash reserves have
dropped, how much your wealth has dropped.” Games add yet another layer. You pay for lollipop
boosters with gold bars and you pay for gold bars with your credit card, which is already
distanced from actual payment. And then on top of that, they don’t make
the exchange rate simple. It’s not 50 gems for 50 cents.
“They’re always something weird like 1 dollar will get you 12 purple diamonds, and
that sort of off kilter exchange rate is the same thing you see with people spending — tourists
spending money that they’re not familiar with in foreign countries.”
If incense costs 80 pokecoins and a batch of 550 pokecoins costs $4.99, how much real
money does incense cost? Yeah i don’t know either.
So you’re spending money that doesn’t seem real and it only takes a second because
the app store already has your credit card. The whole payment process is designed to be
painless. Other parts of the game, however, are designed
to be painful. A key finding of behavioral research is that
people tend to experience unexpected losses more intensely than comparable gains. That
can inform the timing of purchase prompts. In Puzzle & Dragons, players progress through
a dungeon before facing a boss, and if they die, they stand to lose all the rewards they
just earned. That’s when they’re presented with the option to save their coins and their
points by spending magic stones, which you can by in the store with real money.
Other developers actively embed inconvenience into the games, so that you can purchase convenience.
In Clash of Clans and Game of War, everything you try to build has wait times that get progressively
longer but are skippable, for a price. “So they build incentives to remove pain
points into the games and then if they want that, then they have the incentives to insert
pain points into the game.” Ultimately though, only a tiny percentage
of players actually become payers. And a small percentage of payers are those so-called “whales”
— people who will pay hundreds, sometimes thousands of dollars in the app.
The marketing firm Swrve estimates that about half of the revenue for mobile games is coming
from less than a half of a percent of all players.
Which means that for some of these games, non-paying users, which is most people, are
essentially pouring time into a game designed to hit the pain points of a small, susceptible
group of players. If you’re really having fun, that’s fine.
But it might be worth rewarding games that find another way. As of now, the monetization
in Pokemon Go is unobtrusive, it’s kind of tucked away. And that lack of manipulation
is a pretty good reason to buy some lure modules and some incense. One argument in favor of free-to-play games
and in-app purchases is that they give developers a reason to keep updating the games. And they’re
collecting tons of data in order to inform those updates — things like where you get
stuck, where you close the game, which features are most popular. All that data can help them
keep making a game that you want to keep playing. But it also means that they can tweak the
prices based on individual profiles and behavior. If it seems like you’re about to quit, hey
here’s a discount. Or if you’re the type of person who will spend a lot of money, maybe
they bump up the prices a bit. They can even look at how fancy your phone is and what country
you live in and set the prices accordingly. According to one survey, 40% of game developers
said they were setting different prices for different players. But the survey was anonymous
and it’s pretty hard to tell which games those are.