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Social Game DesignMonetization Methods and Mechanics
By Tim Fields Brandon Cotton
Morgan KaufmannCopyright © 2012 Elsevier Inc.
All right reserved.
1.1 The Changing Tide
A few years ago, the war looked like it had been won. Microsoft and Sony had divided the gaming public into two hostile camps. Nintendo's Wii managed to widen the traditional audience of core gamers to include families, expanding the target audience to both younger and older prospective players. Instead of accepting third place behind Sony and Microsoft's superior hardware, Nintendo took simpler game mechanics and cheaper hardware and proved that they could expand gaming into a more mainstream market.
In the meantime, while the three console manufacturers continued to focus on living-room experiences, fans lamented the supposed death of PC gaming. Games like Halo and Call of Duty had moved the traditional first-person shooter (FPS) and action markets towards the consoles, but millions of new players flocked to PC-based online experiences. In particular, 13 million of them happily shelled out $15 a month to Blizzard to play World of Warcraft, and hundreds of thousands more subscribed to a half dozen or so of the less-successful Massively Multiplayer Online (MMO) games. Most of these MMOs danced happily in the wake of early innovators like Ultima Online, Meridian 59, and EverQuest, and even more ancient MUDs, MOOs, and BBS games, forgotten by all but the old sages of game design. The death of PC gaming turned out to have been exaggerated, and the PC remained a viable platform for game development, albeit one that now needed to offer a different type of product with a different business model. The war for the hearts, minds, and—more important—the pocketbooks of gamers seemed likely to settle into a comfortable four-way victory in which console manufacturers competed with one another for an expanding market and PC gamers subscribed to one or two of the big MMOs.
However, a quiet, powerful new force was germinating, heralded by companies like PopCap Games and led by a vanguard of strange, cheap, lo-fi experiences with names like Habbo Hotel and Second Life. Games like Puzzle Pirates and Bejeweled demonstrated that there was room for innovation in smaller, more casual games: games for gamers who didn't have hours each day to devote to their hobby. More and more Flash-based games, built to take advantage of the increasingly high bandwidth of the ever-expanding World Wide Web, appeared on the scene, providing users with quick, cheap experiences just a click away from their favorite website. Yet few of these games made much money or attracted serious notice.
Then, in 2004, a brilliant misfit from Harvard named Mark Zuckerberg turned the geography of the battlefield upside down. A cynical loner, at least according to the award-winning biographical film The Social Network, Mr. Zuckerberg managed to take the principles first illustrated by sites like MySpace and transform them into a global empire that connected us all with first our fellow students, then our social circle, and eventually our long-lost friends, family, their neighbors, and even some pets. In so doing, Facebook manifested a new breed of platform that appealed to a new, much larger and diverse user base, rocketing the world of "gaming" far beyond old console or MMO crowd, and even past the expanded living room audience the Wii commanded. The socially "sticky" elements of the platform made it easier to encourage friends to make connections, join in the fun, and eventually to play the games. Despite having been first imagined as a platform for Harvard University students, Facebook quickly expanded to accommodate other college students, who signed up by the tens of thousands. In 2006, the network was opened to anyone over the age of 13. Within two years, the site had more than 100 million registered users.
Beyond just sending messages to friends and posting pictures, huge numbers of these Facebook users began to use the platform for gaming. More interesting still, many were not people who traditionally spent money on console, hand-held, or MMO PC games. Online social networks made a whole new breed of gamer possible, a gamer who wanted to play in bite-sized chunks, in those brief moments while they were online, checking on their friends or updating their own statuses. Many would never have considered spending $60 on a retail game but seemed quite comfortable parting with $2 or $3 per day to play games like Mafia Wars or Farmville. Facebook didn't change just the demographics of gamers; it changed the economics of gaming.
At the same time, the rapid adoption of smartphones—notably Apple's staggeringly successful iPhone line—gave millions of users a new way to play online games, and a second, even handier mechanism through which they could "connect" with their friends. These devices let users make calls and text, sure, but they also accessed email, connected to the Internet, and allowed the user to purchase "apps" that, due to their low (or no) price and abundance of options, helped the user tailor their smart phone to their unique needs. More like tiny handheld PCs, these devices delivered thousands of games, dressed up like "apps," which could be played on the phones themselves. More important, they swelled the number of users who interacted with Facebook and the number of hours those users spent on Facebook, driving the site to host more than 600 million users by the beginning of 2011. Once "apps" became games, devices like the iPhone began taking huge chunks of market share from traditional handheld gaming devices like the PlayStation Portable (PSP) and the Nintendo DS (NDS). Handheld devices manufacturers have countered this trend by introducing technological gimmicks like stereoscopic 3D (in the case of the Nintendo 3DS), or ever more full-featured interfaces and software suites (as with the PlayStation Vita), but it's unclear whether these efforts will save the market for dedicated handheld gaming devices. Social gaming via full-featured smartphones has proven its power and increasingly appears to be the dominant mobile platform going forward.
By the beginning of 2012, the clearly defined battle lines in the console wars and the massively multiplayer online role-playing game (MMORPG) dominance of PC gaming looks to have become a fractured free-for-all in which upstart companies like Zynga can go from unknown shops to media powerhouses having more than 250 million monthly users (in Zynga's case, a journey that took them fewer than 1,000 days). Most game designers are no longer able to focus on designing their game for just one system. Even console products are now expected to have social tie-ins, both on Facebook and on mobile platforms, in an effort to drive customer awareness and customer engagement.
This book explains how the gaming industry arrived where it is today by giving an overview of the major phases of its evolution. We'll discuss the way in which early games were marketed and monetized. We'll talk about how early BBS games and MUDs evolved into the sophisticated subscription-model-based products that World of Warcraft and its competitors have become. We'll study the rise of free-to-play models in South Korea and China brought about by an effort to circumvent rampant piracy. You'll learn how those games managed to retain their customer base by adopting western designs, but simultaneously fitting into the Internet café culture of rented PCs, where users pay a few renminbi (RMB) per hour to smoke cigarettes and while away the hours on first-person shooters and MMOs. We'll look at how these games ended up paving the way for much of what the West currently understands about microtransaction models (in which users get the client software for free, or at very low cost, and are asked to pay small fees for in-game items, perks, or services). We'll study the different generations of Facebook games in greater depth and devote a little time to looking at some of the other social media networks, both the all-but-forgotten and the up-and-comers. We'll study popular mechanisms for acquiring users, popular dual-currency models, and methods of monetizing users once you get them. We'll look at how to put the right kinds of hooks in your games, gather the right kinds of metrics, and evaluate that information to increase the game's overall stickiness and revenue per user. We'll look at games like Magic the Gathering and how it influenced a generation of online collectible card games, and at other games on platforms ranging from the iPhone to Facebook, to help further illustrate some of our key lessons.
We'll spend time demystifying the alphabet soup of industry terms that have sprouted up around social game design and monetization like brambles around a castle; we'll teach you how to cut through the jargon to reach the treasures that await within. Confused by DAU, MAU, ARPU, PCU, ARPPU, and the rest? By the time you finish reading this book, you won't be. Would you like to know what social game designers mean when they talk about "whales" or "gold sinks"? We'll teach you. Whether you're a game designer trying to beat out Farmville, a studio manager looking to take your company in a new direction, or an investor who wants to better understand the financial opportunities in this brave new space, we'll better prepare you to navigate the maze.
Next, we'll dive deep into the different strategies for monetizing games. This isn't a book about how to make "great" games; this is a book about how to make money through brilliant design, flawless execution, and painstaking iteration. As such, we'll spend a lot of time visiting the different mechanisms for giving users the types of experiences they're willing to pay for. Different approaches can vary in effectiveness for different genres of games, so we'll look at a number of common types of games, both those that treat games as a service and more traditional, one-time purchase products. (If you're still in the console biz, there are ways to further monetize your retail customers ... if you're clever!) We'll talk through episodic content, advertainment, and optional subscription models.
The sale of virtual goods made more than $7.4 billion dollars in 2010. Yeah, that was billion with a "b." So we'll spend a lot of time studying how your game can get a piece of that pie from markets in Europe, North America, Asia, and even in emerging markets like Russia, Brazil, and Turkey. We'll talk about how to combat the illegal sale of virtual goods that you don't want freely traded and how to charge for those you do, either with single, dual, or more complex currency systems. Finally, we'll talk about some of the more interesting balancing issues associated with managing game economies.
Along the way, we'll consult industry thought leaders—those who design and produce the games, run the shops, analyze the metrics, and make the deals that motivate these exciting new sectors of the market. Each of these luminaries will discuss one of the previously mentioned topics in a Q&A interview format.
At the end of this wild ride, you will know the history of game monetization, from the first cartridge-based games sold through retail in 1981 to the most innovative online social game monetization tricks from 2011. You'll have a superb working knowledge of industry terminology, both for retail products and for the new-language jargon of MMO and social game metrics and user-tracking data. You'll have learned how more than 50 different games fit into the tapestry of the marketplace, how the companies that create and publish them have sought to innovate, and which have won (and lost) in this high-stakes business. You'll understand the overlap between console, mobile, handheld, PC, MMO, and social games, and how to evaluate success in each of these market segments. You'll also understand the ways in which the lines can be blurred between these types of products, and what design elements can be harvested from major successes in each area to be applied to other types of games. You'll understand the interplay between Asia and the West and why different types of design features work better in different territories. You'll know about the also-ran social networks that pioneered the model that Facebook currently owns, and you'll be familiar with the newcomers worth watching, both in North America and in emerging markets like Brazil and Turkey. Finally, you'll have been exposed to a dozen or more game design techniques for making your social games attract users; you'll know how to make money from them by providing superior play experiences and how to retain those players so they don't lose interest and go spend their dollars elsewhere. When you're done, we'll point you to a website and (of course) a Facebook page where you can visit with other designers, product managers, and investors interested in continuing this discussion in an online forum so that the conversation can continue to evolve as new trends and new games appear on the scene.
Excerpted from Social Game Design by Tim Fields Brandon Cotton Copyright © 2012 by Elsevier Inc.. Excerpted by permission of Morgan Kaufmann. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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