I’ve met a lot of fellow free-to-play-game developers recently and talking about games always eventually turns to monetisation. Talking about monetisation inevitably turns to the big successes in the market, including Clash of Clans. I love Clash’s monetisation design, as it’s very simple to understand from the player’s perspective. It doesn’t enforce payment at any point and it’s extremely clever in some of the subtle details that I think are driving the urge to spend money. Here are a few of the details I can’t remember reading about and which people sometimes don’t think are as obvious as I thought they were:

First purchase value proposition

Every single player I’ve talked to, purchases an additional builder as the first purchase. Builders are a massively constrained resource in the game and vital for the game pacing once you’ve built the first couple of buildings. Given builders are persistent goods and speed up the gameplay (thus easing much of a player’s frustration), the value proposition of the builder is amazingly good.

This is in big contrast to how most games currently implement persistent goods. For example, King.com has chosen to price the lollipop hammer in Candy Crush as an expensive item aimed at people who are deeply engaged.

The end result of the design choice for Clash is that new players feel they get real value for the gems spent and the subsequent purchases feel much safer, as the persistent value is projected into subsequent purchases. Of course, early in the game the subsequent purchases are also made to build buildings faster, which persist, so the game very effectively teaches you at every turn that you’re making a good long-term investment with your spending.

Keeping the PvP field level in terms of purchases

While you can spend a lot of money buying buildings that allow the construction of better troops, there’s no way to spend money during a fight to your advantage. This, coupled with the player level matching system, which ensures you’re mostly attacking players with similar capabilities, makes purchasing acceptable, regardless of your cultural background. The conventional wisdom for PvP games is that players in the West dislike free-to-play PvP due to perceived unfairness, while players in the East expect spending to affect gameplay in a significant manner.

With Clash, you can spend a considerable amount of money to level up faster, to get cooler troops and to regenerate your troops faster, but because this doesn’t make you win games, there’s both a feeling of becoming more powerful through spending, but also there is no unfairness in any aspect of the game. Effectively, players spend for a higher position in the ranks.

An alternate PvP monetisation system that’s used in multiple games focuses on just vanity items, which increase your social status but have no actual effect on gameplay. Clash does this as well, but given the restricted amount of land area available in the villages, this doesn’t scale as well as spending on the expendable currency.

Multi-layer monetisation

The core of the game consists of two loops: a building loop for producing and warehousing elixir and gold resources and upgrading production buildings, as well as spending the resources on defences for your village, and a second loop where resources are spent on building troops to attack the other player’s villages to capture resources from them.

During the core gameplay, you are given the option of spending the paid currency to speed up the construction of buildings and you can double the resource production speed temporarily with the paid gems, but the core loop of producing and spending the resources is all done without any need to spend money.

Here lies a very important detail – the game teaches the players to spend significant amounts of the resources produced as part of the core loop, but only the resources you can produce yourself. This feels safe to the player from the monetisation perspective, as you’re burning through money you’ve printed yourself. At no point early on in the game does the player feel the core loop is trying to monetise them, in stark contrast to the mechanics at the end of a failed Match 3 game that allows a player to purchase more moves.

The effect of this is that instead of a player feeling they can’t continue to play due to having run out of gems (since they’re not required by the core loop), the player will eventually feel the desire for more elixir and gold and the fact that those are purchasable using the paid gems becomes a payment detail, rather than the player paining over desiring the paid currency. This layer of diversion does wonders to the acceptability of monetisation and my assumption is that this greatly increases both the retention and monetisation conversion in Clash.

The seesaw, or monetising the near miss

The resource requirements and building time for improvements increase as you progress through the game. Clash does an excellent job at scaling the cost of using gems for speedups, as covered in this Gamasutra article. So, as you play, you need to wait for longer and longer to get what you want, making spending some cash a little more compelling all the time.

But wait, there’s more! Once the PvP game really starts to hit you, a new pattern emerges. Before you can fill your coffers and start building your improvements, someone comes in and steals your resources! So you build more resources and go steal some from another player, but again, once you’ve almost reached your goal, someone breaks in and gets your goods. So it’s a seesaw – you push yourself up but just before reaching the top, the dude on the other end of the plank pushes you down again. Before long, the player realises that it’s a Really Good Idea to purchase the last 20% of the resource needed before you get attacked.

Psychologically, there is a massive difference between the game preventing you from reaching your goal vs the Clash model of your resources being stolen by another player. As a player, I’m being incentivised to spend due to the other player’s actions, not because the game has a mechanic that enforces payments. And instead of being forced to pay, I’m evaluating the risk and deciding based on the risk evaluation if a purchase makes sense.

Mechanically, this is the same as the near-miss technique used to monetise Match 3 games. In well-tuned Match 3 designs, the levels are typically balanced to maximise the amount of plays where the player gets very close to ending the level, to the point where you feel you are missing the end by just one move. Near misses are addictive (for example, read The Psychology of Near Miss) but also an excellent opportunity to monetise the player by selling more moves. Imagine if casinos sold the ability to move the ball one notch after a spin – not viable for gambling, but perfectly usable in other games.

I would additionally argue that the actual PvP attacks and the related feedback systems in Clash of Clans are balanced in a manner that nearly always leave the attacker thinking that if they’d adjusted the troop deployment just a tiny bit, they’d have done better. Which again plays to the near-miss psychology and probably adds massively to the game’s retention.

Recap

• Persistent goods are excellent tools for improving that first purchase conversion.
• PvP does allow for a design where money gives you power while retaining a level playing field.
• Allowing players the theoretical possibility of playing through the entire game where purchases just provide convenience makes your monetisation structure feel great.
• Structures that incentivise spending through player actions are very acceptable from a player perspective, compared to hard spending barriers.

Agree or disagree? Have other points about the design? Please leave a note!

(And before I forget – I’ve recently restarted doing games consulting. Poke me if you need help with your games!)

Do you need to deal with virtual economies in your job, such as selling services or virtual goods online? Here’s a hot tip for you – the Virtual Economists’ excellent Social Games Virtual Goods & Currencies Pricing Report + Data bundle was just discounted to $199 from it’s original $699 price. I thought the original price was good value, but now it’s a steal.

What’s inside? Data from 18 social games across different platforms, crunched into learnings. The titles includes the obvious popular games like Farmville and Travian, but also interesting other titles like Ninja Saga and Ravenskye City. I’ve personally played about two thirds of the games but not to the point of having gotten all the data contained inside, so the report had a few big surprises.

As part of pricing items for Habbo when I was working at Sulake, one of the hot topics was how to price items. You don’t want to offer things too cheap, but then pricing items too high also makes you lose sales. The max price we ever charged for a single item (that I can remember) was 75 credits, or about 11 euros, which a lot of people thought was insanely expensive and generally all the purchasers of the item were deeply engaged big spenders. Looking at the report, the most expensive item in the list costs a whopping 650 euros! Color me shocked.

Another piece I found incredibly useful is analysis and data on the distribution of vanity vs functional items in various titles. Which one works better has been a big discussion point in the industry for years, where people seem to be segregated into the vanity and functional camps of thought. This reflects itself in the titles being analysed, where quite a few are 100% functional item driven (yay Travian) while some are very much driven by decorative vanity items. This itself is useful as a piece of data, but Vili and Eino have gone as far as analyzing the pricing differences between vanity and functional items AND how different games offer you discounts based on volume purchases.

The bundle includes an excel sheet with all the original data for one’s own digging. I’ll have to remember to ask Vili if I can publish any of my own findings here. :) Anyway, go get yourself a copy of the report, so we’ll get more excellent analysis from the guys in the future.

The fact that digital distribution is winning in games is becoming more apparent. Amazon just reported their physical media sales are down for games. Any bets if the next gen consoles include a physical disk drive at all?

Kotaku’s E3 news had an interesting article about Real Racing 2 HD getting support for Airplay streaming in the fall when iOS 5 comes out.

I think this is pretty big.

AFAIK the change that iOS 5 brings along is, a TV connected to an iDevice over AirPlay will become just another screen for iOS apps. It’s not just for streaming videos anymore, it’s now a screen, where you can draw things as if it was the main display on the device.

So what does this mean for consoles? Trouble! For $329, you can get an iPod Touch and an Apple TV, and play easily available, affordable, games on your TV, using a wireless touch-screen controller with sophisticated motion detection and video capabilities.

This is effectively what Wii U promises to do, except it’ll be available in the fall. And probably be cheaper. With cheaper games. And more titles. And an existing, large set of devices out in the market, where most people just need to plunk the $99 for the Apple TV, rather than purchase a whole new console.

Most people won’t even need to purchase multiple controllers, since if you have an iTouch, it’s quite likely your friend has one in his pocket when he comes to visit. And his save games and player profile are in his device as well, so there’s no data portability issues, as with current generation of consoles.

If this wasn’t enough, your games will tweet high scores as well, for maximized virality.

Apple is also expected to update iTouch in early fall with significantly higher graphics performance, and Apple TV to include Full HD support – both perfect for this type of games.

As a game developer, this is going to be SO awesome.

So, Facebook announced they’re making the use of Facebook Credits mandatory.

Starting July 1st, we will require all social game developers on the Facebook canvas platform to process payments through Facebook Credits. All developers keep 70% of the revenue from virtual goods transactions using Facebook Credits. Although we are not requiring developers to use Facebook Credits as their sole in-game currency, we are offering special incentives to those who do (see below for details).

What Facebook is saying explicitly is:

1. Starting July 1st, Facebook Credits must be supported by games, which use the Canvas Page (ie, are embedded inside Facebook)
2. Facebook Credits does not have to be the only virtual currency used in the game
3. There will be special promotions to developers who do use Credits as their sole currency

The statement has been worded quite carefully not to include a word about using third party payments at the same time as using the Credits. Also note the wording of always only discussing the 70% share the developer gets from the credits, and never the 30% commission that Facebook takes as part of the processing.

Facebook has however published a document about the incentives they’re putting into place to get developers fully on board. This document lists the criteria for Facebook considering the Credits integration good enough to earn their full support:

1. Facebook Credits are the game’s premium currency
2. All virtual goods available for purchase with premium currency are priced in Facebook Credits. However, goods can be available through earned currency
3. Items are not priced in local currency or another in-game premium currency

Based on this criteria, I’d assume the use of third party payment processors will be allowed for the time being, but having them present will mean your app will not get any special promotion from Facebook. More on this below.

Now, the speculation regarding Facebook Credits in GDC 2010 was that Facebook’s strategy regarding Credits is roughly as follows:

1. Work a deal with all the big players to drive the adoption
2. Once sufficient mass is already using the credits, make Credits integration mandatory
3. Squeeze the rules of how payment integrations are supposed to work, until Credits are the dominant payment mechanism inside Facebook
4. Disallow the use of third party payment mechanisms for canvas apps altogether

They’ve now made two first steps towards this direction, and the announced incentives are a step into the third.

The counter-argument against Facebook disallowing third party payments has been that US government’s antitrust bodies will not let this happen. While I agree the government would be interested if Facebook did this, I can’t see regulartory bodies interfering given:

1. The rules only govern games, not all apps,
2. Facebook doesn’t have a dominant market position on gaming overall, and
3. The payment mechanisms behind Credits are implemented by third parties, some of which are the ones currently integrated directly by game developers.

So what’s a developer to do? Let’s look at the currently published incentives:

• Partners who use Facebook Credits as their in-game currency can also receive the following:
• Drive new installs and re-engagement through increased access to our distribution channels
• Minimum of 30M impressions on the games dashboard over a month
• Access to new placements and premium ad targeting • Access to exclusive features such as the user’s credits balance
• Beta testing new products throughout the year – early adopters have seen significant
• success in the marketplace
• Get advice and support from Facebook’s games and credits teams

Reading above, I think Facebook is saying that “if you give us a 30% cut of your revenue, we think we can give you back of some of the virality we took away from you earlier”. This might be worth it for some players, and not for some. I’d expect them to announce even more benefits in the future, where the goal of Facebook will be to embrace the games that do use Credits to the point where it’s difficult to operate in the ecosystem without going on board the Credits.

Effectively you have to choose between giving at least 30% of your revenue to Facebook (probably more like 40-50% if you also acquire users through ads) or remaining independent and operating a significantly smaller product than your competition.

The big unknown Facebook hasn’t said anything about is their strategy for allowing Credits to be used on sites that use Facebook Connect. Facebook announcing support for Connect has to be a matter of time, since the total monetization potential of sites is much greater outside of Facebook, than inside their own site. What they probably haven’t figured is, how to squeeze exclusivity deals from developers using Credits on Connect, so how that’ll be done is left to be seen.

Games that operate both as standalone games as well canvas apps are another huge question. This includes Farmville and Habbo. Offering different payment options on the canvas and the destination site might be both unacceptable from Facebook perspective, as well as too much hassle to justify the effort, but if the canvas apps are eventually enforced to go all the way with Credits, a hybrid model of some sorts will have to emerge.

Anyway, I’m eagerly waiting to discuss this with the fellow developers in GDC this year. It’ll be especially interesting to hear Dan’s comment on this, given his GDC talk tagline – How to Survive the Inevitable Enslavement of Developers by Facebook.

Update: Facebook has confirmed they will indeed require that games use Credits exclusively, and not integrate any competing payment mechanism, such as Paypal.

So, Steam for Mac is out. For those who don’t know, Steam is a games distribution platform by Valve, which includes both the actual download / file distribution of the games, and also a complete ecommerce platform and store for selling the games, coupled with a social network for people who play the games using Steam. Last but not least, Steam is also a massive anti-piracy platform, where Valve knows exactly which computers are running games licensed to whom.

The start has been a bit rough given the small amount of games and huge amount of updates that have gone out already, but it’s a good start. And it’s definitely awesome for Mac gaming.

The one detail in the whole shebang I like the most is the Steam Play licensing model, where Valve is trying to push that a player should only need to purchase a game once in order to install and play both on the Mac as well as on Windows. From the player perspective this is just fantastic, so I hope the revenue from these games supports this as a business model.

On the technical side, the games seem to be using a DirectX 9 compatibility layer that maps the DX9 calls to OpenGL. This isn’t working too smoothly yet, but it’s already been improved during the short time Mac Steam’s been public. This should make porting games fairly straightforward, and hence I truly hope that games companies will start to port their games to Steam / Mac, rather than using Transgaming’s Cider. At least in my experience, Cider ports tend to be crashy (for example, I can’t get Eve Online Mac to run at all), and obviously the Cider ports will miss out on the Social Networking features of Steam.

So, iAd. It’s the new Apple advertising network, that allows application developers to put ads inside their apps, in a non-intrusive manner, and get 60% share of the revenues. ‘The demo for the feature was impressive, and I love the way the system works in that the app doesn’t quit on the back, so it’s safe to check out the ad.

Based on this, I was like, great, this is much better than what we have now. Then I started reading how regular consumers are commenting on the network online and realized Apple royally screwed up the launch communication of the feature.

There now seems to be a general misconception among consumers that Apple is changing the iPhone to barrage them with advertising all over the operating system, rather than just within apps in which the app developer has explicitly decided to integrate advertising. The general sentiment in the discussions I read was that this is now the new ultimate reason to not get an iPhone.

“It doesn’t multitask” is dead, welcome “it’s got ads”.

You might have already seen the video with a 2.5 year old using an iPad, but if not, just go check it out.

What was interesting to me in watching the vid is that my daughter (1 year, 11 months) uses the iPhone exactly like the kid in the video. And I really mean exactly – she has exactly the same usage patterns and usability problems. Based on seeing this video and my experience with Kerttu, it’s beginning to dawn on me that most kid app haven’t actually been tested on kids, and that Apple most certainly isn’t testing the iPhone OS on kids.

Some of my findings:

Apps have about 2 seconds to impress a 2 year old. This is not the same as a 2 second attention span – she has no trouble concentrating on an app for an extended period of time if it’s fun. Boring, long-lasting load screen with no music results in immediate kill. Put a nice picture and loading music in an app and you get about 5 more seconds to load the content.

Buttons really do need to look like buttons. Any graphic that doesn’t immediately say it’s touchable is as good as nonexistent.

Non-primary application flows need to have less UI priority than primary flows. This should be a given, but it’s not. Most of the kid apps have non-essential things like high score board and app info buttons placed in the post-game screen more prominently than the primary Play Again button. This means Kerttu kills most games with the home button when a game ends and then re-starts the app to play a new game, as that’s more intuitive than actually pressing the replay button.

iPhone OS multitouch needs improvements. Most namely, the OS needs to start ignoring accidentally resting one’s finger on the side of the screen. What’s happening now is, if your finger rests on the touchscreen, every press on the screen registers as multi-touch, which breaks almost all apps. I’d have assumed it’d be easy to ignore fingers resting on the side by default, and allow apps to explicitly say they want to detect this gesture as well.

iPhone OS really needs a lockdown mode. The existing features for controlling what the device can do are great, but the OS is lacking some primitive things like being able to put deleting apps behind a password. I’m assuming I’ll get K a iPod Touch or iPad at some point, but I’m dreading the amount of app reinstalls I’ll end up having to do. Maybe Apple will see kids as a market segment one day and do something about it, but I’m not holding my breath.

And related to above, I have a suspicion that K will never really want to use a traditional computer in her life. She completely refuses to get how to use a mouse already, and keyboard is something that makes fun noises if you hit it. Except for the space bar in the living room, which she knows pauses the TV so she can go do something else. And talking about TV, K’s expectation is that when you see people in the telly, they can hear you when you talk to them – a result of doing video calls. We’ve had one tantrum happen as a result of K’s aunt being on TV, and not responding to the increasingly agitated greetings from K. :)

Right, it’s been around a week since GDC 2010 and I’m running out of excuses to not post about anything about it, so here’s the easiest bit – slides from my virtual economy talk. Get them here.

There’s a nice writeup about the talk at malvasia bianca so I don’t have to explain most of the slides. Ada Chen also has a writeup.

There’s a comment in Malvasia’s blog that I want to comment. In my presentation, I argued the real world has a bunch of currencies being used actively, including euros, dollars, frequent flyer point systems, grocery store bonus point systems, shares, options and a pension fund. I made an attempt at simplifying the discussion by not calling these economic instruments – which they are. I do agree these are not interchangeable as examples, but from “design perspective” the only practical difference is the level liquidity for any of these types of assets.

Sure, shares give you control, but in practice I’d assume vast majority of today’s shareholders do not have enough shares of any stock they own that this would play any role in their ownership of the share. Any and all bonus point systems that allow you to purchase goods are currencies, even if they’re not fiat money. And from my perspective, my options and pension fund is as good as virtual until I have the money in my account (somewhere in the cloud), which might or might not ever happen.

Hence, there’s a ton of various types of value structures measured in numeric points of one type or another, which we deal with every day in real life, and don’t complain that much about it. So why would having more than one system in a virtual world be a problem?

Seems there’s some trouble brewing at Facebook. I’ve no idea if this is specific to Finland in some way, but Facebook Connect has been going up and down for the past two weeks so I’m failing to authenticate using the feature and AJAX calls on my stream are failing to load.

I’m now trying to add a new email address to my account, and when I click the link on the verification email sent to my new address, register.facebook.com drops the connection on loading the confirmation page. I actually did get the page to load once, but the confirmation failed to be registered.

WatchMouse’s API status claims Facebook’s authentication API has been fairly stable, but I suspect the login API they’re monitoring is not telling the actual truth.

I’ve had other people complain to me about this, so I know it’s not just me.

For all I know, this could of course be some server that’s gone bad in Facebook’s cluster, which they’re using for Finns. If I had to make a guess, this is caused by Facebook rolling out backend tech related to their upcoming changes, and something’s gone wrong.

What this has caused though, is that my trust in Facebook’s ability to maintain a platform stable enough to rely on as a business has been severely damaged. I was on my way to becoming a full time envangelist of the platform, but given my problems as a user, I’m not so sure anymore.