The Live Service Layered Cake — Part I

Introduction to Live Service Monetization

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ironSource LevelUp

9 min readApr 3, 2023

This text is the first part of a new series of texts about metagame design and live service monetization of free-to-play games. Stay tuned!

Business Model

Back in the day things were simple. The team makes the game. It gets stamped on CDs or whichever other medium, gets put in a box, and shipped to the stores. The marketing team would plonk a huge amount of money on a promo campaign. Hype would rise until the launch day. People would buy the fixed price for the game and go home happy with their new purchase, to play the hell out of it for 5 minutes or 500 hours. The team would have no clue about how much an average player would play their game, but they would not even care. They would just shrug, count the money and go to make a sequel. Then someone had to come along and invent free-to-play and now we all have to bother with the things like retention and live service.

Free-to-play (F2P) and game-as-a-service (GaaS) business models have some objective advantages over more classical, i.e. premium model of the game business. Two of the most obvious ones are the following.

The game is distributed for free, for the price of 0, thus lowering the threshold for potential players to try it out to a theoretical minimum. In the classical capitalist framework, the competition always puts downward pressure on prices. Competition in video games is extreme, so no wonder that the initial price of the game is set to zero.

On the flip side, from the player’s perspective, this business model allows him to try the game out without making any initial investment save for the time needed to download it. This is reflected in the install bases of most successful F2P games, which routinely dwarf install numbers of even the most successful premium titles.

The other main advantage of this model is that it doesn’t put a cap on the player’s spending. A player might try the game for the cost of 0, but if happy, if entertained by the game he will potentially continue to play and occasionally spend money on something within the game. The player can repeat spending in the game whenever he feels like it, thus the total amount of money he would pay for the experience is not capped by the game’s pricing model.

These advantages are explained in detail in The Curve, an excellent book by Nicholas Lovell.

When launching and running a game as a service, there is a clear hierarchy of priorities.

The first priority should be the engagement of the players. If you get the players to install your game, the game needs to be entertaining for them to stick with it even for a while. Building engagement is within the domain of the core gameplay.

Once you get your players engaged with the game, you should strive to keep them engaged as long as possible in order to give them as much time as possible to decide to spend some money within your game. This is what retention is all about.

Finally, as profit is the ultimate goal of any business, monetization is your ultimate priority. One crucial thing to remember in the monetization of video games is that you must provide value for your players. Contrary to popular and naive opinion, there are no psychological ticks that can manipulate players into spending on your game. Your players are playing to be entertained and they will not be doing so if they do not perceive value in what you are offering! Free-to-play players, in general, are very sophisticated customers. Indeed they are some of the most sophisticated customers in the entire world of entertainment!

It should be noted that, in the text which follows, I do not make a distinction between cases when a player spends real money to purchase something in the game, vs the cases when the player spends hard currency to do the same thing. I treat both of these cases the same as they are ultimately closely coupled, both in the minds of players and from the design perspective. In addition, I will focus solely on monetization through in-app purchases and leave ad-based monetization discussions for another time.

Player retention and monetization are the domain of the live service. It is important to note that the same hierarchy of priorities exhibits itself in the launching of every new game feature or new live service event. For all practical intents and purposes, both new features and live events can be seen as mini-games bolted on top of a platform of your original gameplay experience.

In what follows I will explore the interplay between retention and monetization that I have observed during the several years that I spent working on the successful live service. Do not treat this as a ready-made template. This is just a set of my personal observations. Rather, use it as a starting point in your thinking about the live service.

Two Kinds of Monetization

When talking about the monetization of particular features, I like to make a distinction between direct and indirect monetization.

The first of these, direct monetization is monetization in a narrow sense. Quite often this is the type of monetization that PMs have in mind when they talk about the topic. This type of monetization occurs whenever a player decides to spend his money in exchange directly within your feature. The player might be paying to unlock a feature, skip waiting time, buy some resources or a gacha box, etc. Usually, in this kind of monetization, we expect the player to spend either real-life money or something directly proportional to it, for example, hard currency.

A premium pass is a typical example of a directly monetizing feature. A player spends a fixed amount of money to gain access to the premium reward track of the season pass.

Other features will not have such direct monetization opportunities, i.e. they do not offer anything that the player can directly purchase. Rather, they might motivate the player to spend his money elsewhere within your game. This is indirect monetization.

For example, you might have a limited-time event that offers as rewards attractive new content that won’t be accessible once the event ends. To unlock these rewards the player needs to play the core of your game and earn special event points. The game does not offer a direct way to purchase the missing event points, but the player has a chance to spend his money buying whichever items and resources that might help him be more efficient at playing the core and grinding the event points to get the reward he is after.

Although indirect such a monetization strategy can be at least as powerful if not more powerful than direct monetization. In addition, it has the advantage that it usually seems less greedy and more fair. In general, this strategy, if built well, can provide the opportunity to figure out the optimal ways to invest their money to achieve their goals within the game. Optimizing the spending pattern becomes a part of the game’s learning curve! The very act of spending money thus becomes rewarding in itself. This is a very powerful emotion.

Consequently, both strategies should have their place in a well-managed live service.

Live Service

I like to use a particular metaphor when discussing the live service strategy of any game. Ideally, a live service metagame should have a structure of a layered cake. Each distinct layer of the cake should be somehow built on top of the existing layers. All layers of the service should support each other and be geared toward the two primary objectives, player retention, and monetization.

As your game progresses and evolves and, more importantly, as your audience and your knowledge about the motivations and behavior patterns of your audience grows, you should be able to add new layers to your metagame. Each new layer should have its own particular purpose and a reason for existence.

Contrary to popular opinion, in my experience, you do not actually need to have all the layers of your cake ready and implemented at the moment of global launching your game. There is a tendency of many game teams to try to have the complete feature set neatly implemented, tested out, and optimized during the initial soft launch period.

In reality, this can even be counterproductive. Above all this requires both time and manpower to execute, making the team spread out its, always scarce resources over a very wide front. Furthermore, before actually launching your game to the global audience you are essentially operating on a set of assumptions. Things that on paper seem essential often end up being overtaken by other stuff once the game has launched.

Finally, business is all about growth. Your game needs to be able to stand on its legs, i.e. be profitable with a minimal set of features. If you have a concept that requires you to throw everything and a kitchen sink on it to make it marginally competitive is a sure sign of trouble up ahead. If you have already used all the tricks in the book to break even, how will you grow and scale up your business?

Instead, what you shout strive towards by the time of the soft launch are the following three things:

A solid platform, with engaging core gameplay that can support the ever-growing live service metagame.
Minimal set of metagame features that support running a live service for an initial couple of months. My yardstick is around one to three months, depending on the type of game, but these numbers can be widely different.
A clearly defined road map of metagame features that you would like to have in operation at the end of the first year of the live service. You should also be willing and ready to alter this roadmap and reprioritize the features within it according to the data that you will be gathering as you launch your game.

There are recent cases that can serve as an illustration of my points. Last year’s indie hit, Among Us is an example of a game whose success caught its makers by surprise. The game definitely launched with a minimal set of features to make it very successful but it seems, at least from the outside, that the guys at Inner Sloth didn’t have a plan prepared for running a live service, as shown by their dwindling numbers.

On the other hand, Zynga’s FarmVille 3 launched with a full set of features after a prolonged soft launch time only to stagger in front of the global audience.

Finally, the steady and relentless rise of Township by Playrix represents a testimony to the power of the gradual development of a live service.

Conclusions

Free-to-play (F2P) and game-as-a-service (GaaS) models have advantages over traditional premium models, as they lower the threshold for players to try a game and allow unlimited spending.
In F2P models, engagement is the priority, followed by retention and then monetization.
Monetization can be direct or indirect. Direct monetization is when a player spends money directly on a feature, such as buying resources or a premium pass. Indirect monetization motivates players to spend money elsewhere in the game.
The goal of monetization is to provide value to the player, as sophisticated players will not spend if they do not perceive value.
The hierarchy of priorities applies to launching new game features and live service events as well.
Monetization can be direct (within a feature) or indirect (motivating players to spend money elsewhere in the game).
Indirect monetization can be just as powerful and less greedy than direct monetization.
A well-managed live service strategy should have a layered cake structure with each layer supporting player retention and monetization objectives.
Having all layers of the cake ready at the game’s global launch is unnecessary.
The soft launch should focus on a solid platform, engaging core gameplay, and a minimal set of metagame features that support running a live service for a couple of months.
Have a clearly defined roadmap of metagame features to add in the first year and be willing to alter the roadmap according to data.