The Evolution of Spending in Freemium Games

The games industry has been defined by a few select games. Angry Birds, Temple Run, Draw Something, and Candy Crush Saga. Four games that have blown up the charts, were played by millions of players and are known to general public. Games that are the first downloaded by new smartphone users and who continue to do well on the charts (Draw Something exempted). These games seem to place a clear trajectory on mass adopted games and their effective on the public being comfortable with freemium.

Angry Birds was the first major pre-freemium successes. Angry Birds was $1 and came with a ton of value with continuous updates which provided over 200 levels. I remember playing it, before I was biased by being in the gaming industry, and was amazed by how much value it provided.

Temple Run came next, also at a $1 price point, but quickly switched to freemium. The currency gives you cool powerups that you can also get by playing on your own. Similar economics to games like Mega Jump, Subway Surfer, Despicable Me.

Draw Something, IMO, was the first major success to get users comfortable with spending $1-5. You had a limited number of colors to work with and it was difficult to do much with it. For $2 you can get enough coins to upgrade your colors and draw much better. It was an easy buy for a lot of people. Especially when they saw their friend had more colors, justifying them to buy it themselves.

In designing freemium games, one of the most important game designs is getting the user to spend the first dollar. Once they spend the first dollar, they’re more comfortable to spend more. This is great in getting 5% of your users to spend money. Think about it in the industry overall and it makes a lot of sense. Because of games like Farmville, there’s a negative stigma on spending money on games. Farmville caught a lot of negative press on people spending thousands of money on in app purchases — creating a hive mentality of “I’d never spend money in a game.” You can see how much of a stigma there is by asking people how much they spend in a certain game and their embarrassment by it, even if it’s a small amount. Draw Something got users to spend their “first dollar”.

Since Draw Something, there hadn’t been a big hit until Candy Crush Saga. Candy Crush Saga got a lot of people addicted. With the energy mechanic they had (5 lives, with a new life every 30 minutes), people couldn’t binge play as they went further. King capitalized on this, and people spent $ binge playing. A $1 here and there doesn’t seem like much, but it adds up. When I did a survey of how much friend spent (friends outside of the tech world), I got ranges from $20-$200. Most spent only on lives and didn’t realize how much it added up. From seeing how little the $40-50 items are advertised in the game, they’re most likely not purchased often. Candy Crush got people comfortable with spending a couple dollars or so a week — and you can see that in Candy Crush’s estimated revenues of $3M a day.

Clash of Clans and Simpson’s Tapped Out among others have helped with this as well. Though, through smaller audiences — they haven’t gained massive audiences like Candy Crush has (1/2 Billion+ downloads). Users can spend money to build the most impressive towns or clans and show it off to their friends (just look at the towns on the leaderboards!). They cater to niches, as the ones mentioned earlier cater to the masses.

If you look at the east-Asian games market, freemium is the norm. The games are much more aggressive than the games we know and the % of users who convert are much higher. As the Western world finds its balance, the industry will resemble the Japanese market in freemium adoption, eventually.

Like all things, we’ll eventually fall inside of a natural state of balance, and what we’re experiencing right now are the two sides of the pendulum swing, between EA’s hyper-aggressive monetization in Dungeon Keeper, and the relatively hands-off approach that other developers like NimbleBit take in their free to play titles. — Drew Crawford, Sealed Abstract

The question is, what’s going to be the next big game to get comfortable with users spending more and take freemium games to the next level?