The “Free to Play” model, or more precisely the “Freemium” was born in 1999 in Korea. Since then, we’ve seen an avalanche of games using this mechanics in one form or another, especially when mobile games started taking a significant piece of the market share.
Curse or Blessing?
It’s not just Android or iOS games that are taking this approach. In fact we can see Freemium games on pretty much any platform, including PC and Consoles. Why? Mostly because they can provide an ongoing revenue with huge potential to outsell even AAA titles on the long run. But… there are things you should know.
The following post appeared on Reddit’s Dota2 forum a couple of hours ago. The author is speaking exactly about the Freemium mechanics used in Dota 2 from his own experience. While it does not directly relate to Android, the post goes in-depth explaining how everything works when a big company stands behind the name and what steps are necessary to properly execute and retain the product on the market over the years.
I am pasting the entire text below, without any intervention, with author’s permission. All credits go to ShimmyZmizz
Dota Plus analysis by an ex-F2P game product manager
I worked in F2P games for 6 years, some as a community manager and some as a product manager. I wanted to share my perspective on Dota Plus because I love talking and thinking about this stuff even though I grew to hate exploitative F2P game monetization:
Pricing and revenue strategy:
(For purposes of this analysis, I’m ignoring the economy of community market purchases or individual cosmetic purchases and just looking at Battle Pass monetization strategy)
F2P revenue is generally made up of a tiny number of heavy spenders (whales), a small number of medium spenders (dolphins), and a large number of light spenders (minnows). For many F2P games, revenue from those few whales makes up the majority of revenue for a game.
For Dota, a whale would be someone who maxed out every battle pass, spending hundreds or thousands of dollars a year. A dolphin would probably be someone who bought every Battle Pass, bought the level 75 TI pass, and bought the Battle Pass Bundle but didn’t spend money on levels otherwise. A minnow would be someone who buys one or two passes a year with no additional levels. Overall whales and dolphins are getting a great deal on Plus pricing, while minnows are seeing a price increase. Sorry minnows, but revenue from dolphins and whales is usually the vast majority of F2P revenue, so designers are going to be targeting dolphins and whales instead of minnows when planning new features.
(EDIT: I made a quick and dirty google doc for people to play around with example numbers: https://docs.google.com/spreadsheets/d/1SHfVVzfDoMA7V1I4n_KkvM8rWUPcGqNUa0bjuanXapw/edit?usp=sharing
If you click File, “Make a copy”, you can edit the variables to roughly simulate in-game purchasing trends to see how much whales can have an impact on revenue.)
This can be exploitative though, and relies on people with addiction problems or other mental issues. This is the root of the whole loot box controversy in games now. As a community manager who spoke to many whales in the games I worked on, I can say for certain that many of them had some serious issues that caused their spending behavior. Watch South Park’s “Freemium Isn’t Free”, everything related to F2P monetization in that episode is sadly very accurate.
(EDIT: For clarification, I don’t believe all whales have addiction problems or mental illnesses. But I do believe that most F2P monetization is created in a way that unfortunately exploits players with these problems. It’s usually not a conscious effort on the part of the developer to say “let’s target gamblers anonymous members”, it’s a byproduct of using only data to drive monetization methods and decisions and not caring to understand who is spending and why as long as the money is coming in.)
Plus is much less exploitative because the most you can spend on it is $3.99 per month. No more posts about people with level 9000 Battle Passes who spent thousands to get them!
(EDIT: One thing I did not consider in this post is the TI prize pool and events. Valve has said Plus is the replacement for Major Battle Passes, so I definitely expect the TI Pass to return this summer for the purposes of generating the prize pool for TI. This will undoubtedly include the typical exploitative gambling mechanics to get the most revenue and the biggest prize pool. The point that remains is that the direction Valve is taking this new monetization feature is definitely less exploitative than their previous efforts and most F2P games.)
One area to watch out for here is whether Valve will add the ability to purchase shards. Right now they can only be earned by completing objectives, which is great for people with gambling issues or similar problems with controlling their spending.
For the average player, the Plus experience will also be improved by the removal of additional purchases. With Battle Passes, Valve had a financial incentive to lock away the best rewards at high levels, forcing those additional purchase options and advertisements on players. (CORRECTION: Major Battle Passes did not allow level purchases) With Plus, Valve has a financial incentive to make it as fun and useful for every subscriber.
This model is a lot easier to maintain too: it’s easier to keep a current player happy with new heroes, cosmetics, and challenges rather than trying to get new players to start playing. And that leads to my next topic…
What Plus Means for the Game’s Lifecycle
Dota isn’t dead or dying, let’s get that out of the way. But it has peaked in popularity. F2P games tend to stick around for a long time after their peak, unless they get completely killed by a new competitor or a sequel.
The typical F2P lifecycle is Acquisition, Monetization, and Retention, in that order:
Acquisition occurs when the game has not peaked in popularity yet, when growing the audience is the most effective way to increase revenue. In this phase the developer is focused on marketing the game to people who haven’t played it and trying to get current players to convince their friends to join in. For Dota, one example of this strategy was releasing and heavily marketing the Free to Play movie to get new players interested.
Monetization occurs when new player growth has slowed and increasing spending for the existing audience is the most effective way to increase revenue. If the average player spends $1 on the game and you can increase that average to $2, you just doubled your revenue. The TI Battle Pass is the most successful example of this strategy in action, but you can look back and see Valve’s experiments with other strategies like gems, crafting, and chests. These features did not appeal to new players, they were only meant to get existing players to spend more money.
Retention occurs when more players are leaving the game than starting to play the game, so the strategy changes to maintaining existing revenue rather than growing revenue. To do this, developers are going to aim to keep current players as happy as possible while locking them in to consistent spending patterns, sacrificing short-term revenue gains for long-term strategy.
So it should be clear now that Plus is Valve’s strategy for the Retention phase of Dota’s lifecycle. Rather than a new feature that gets whales to spend as much as possible in a short time like the TI Battle Pass, Valve is avoiding high but exploitative whale revenue options for a more consistent and longer-term revenue scheme. Offering a discount for 6 month and 12 month subscriptions is part of this strategy: if you buy a 12 month subscription, you’re going to be less likely to quit over the next year because you are committed. If you are paying month to month and an interesting new game comes along, you can avoid the negative feeling of financial loss easily by quitting after your current month is up.
Again, do not interpret this as “Dota is dying”. Retention is usually the longest phase of a game’s lifecycle (unless it gets replaced by a sequel or killed by a superior competitor), and it can be the most fun and rewarding phase for many players. Instead of trying to maximize spending or new player growth, their goal is to keep us happy and keep us playing.
The downside is that it’s unlikely we will see any huge new features launched after this one. Rather than working on new features, it’s likely Valve will focus on improving Plus and supporting the most successful existing features such as new heroes and pro tournaments.
TL:DR: In its current form, Plus is a much less exploitative monetization feature than the TI Battle Pass and indicates that Valve’s current direction with new monetization features is to provide the best experience for current players so they continue playing Dota for years to come.
(EDIT: If you are interested in the P2W discussion, you can find my thoughts on that in this comment: https://www.reddit.com/r/DotA2/comments/83wx5c/dota_plus_analysis_by_an_exf2p_game_product/dvlxgs7/?context=3)
Thanks for reading everyone, would love to answer any questions and I’ll update this post if I got any details wrong due to the newness of this feature.
(EDIT: Made several corrections related to level purchasing being limited to TI Battle Passes)
And if you or someone you know is looking for a Product Manager or Customer Experience/Support Strategy Manager, I’m looking for new job opportunities, PM me!
The blog is up at FunWithFrustration.com
Dota2 related posts