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Making Money Off of Free Games
Using Micro-transactions to Monetize Free MMOs in Russia
may only work once, players
do not hesitate to buy them
due to their low cost.
• Rare and Unique Items are
very popular among players
who are really involved in
the game and want to look
different from other players.
These items include either
one-of-a kind or extremely
rare and powerful items that can only
be acquired by purchase. As a result,
acquiring such items can give paying
players a major edge over their nonpaying
competition.
How did the practice of selling ingame
items for actual currency get
started in Russia?
The first Russian browser-based MMO game
was developed and launched in 1999 by a
group of programmers who did it for fun
with no intention of gaining any profit. The
game became very popular and for quite
a long time it could be played absolutely
for free. At one point the players suggested
that the game administration should
sell different items and abilities to those
who were willing to buy them. Ironically,
then, the idea of monetizing what was
previously free came from the players
themselves rather than from money-hungry
entrepreneurs.
Eight years have passed since those early
days and today we can say that in Russia
the micro-transaction system has proven to
be the most successful payment model for
MMOGs, and the situation is unlikely to
change in the next three-to-five years. For
the next few years, free-to-play games are
likely to occupy the largest share of Russia’s
MMO game market.
What are the possible reasons for
the success of the micro-transaction
model in Russia?
It has been said that the majority of
Russians don’t plan their purchases.
Moreover, Russians on average don’t
like to pay for anything if they are not
Some Statistics on IT Territory’s MMO Games
Percentage of the players who
make in-game purchases…
Average amount that a player who makes
in-game purchases spends per month…
sure that they will use it. Russians have a
similar attitude towards games: They are
unwilling to put down money on a game
they haven’t even played yet or are not
sure about. At the same time, Russians
can be quite emotional and prone to
making spontaneous purchases. Generally
if Russians feel the desire to purchase
something and the price seems reasonable
they will make the purchase without
hesitation. The micro-transaction system
works well in many countries but thanks to
the Russian mentality it has proven to be
even more successful in Russia than in any
other country.
Will the micro-transaction system
work for multiplayer casual games?
All the transaction tendencies that have
so far been discussed are true for both
hardcore MMOGs and casual multiplayer
games. Though currently there are not
many casual multiplayer games on Russia’s
market, the micro-transaction system
is most likely to work as well for them
as it does for MMORPG’s. For example
the micro-transaction system has been
successfully used as the main payment
method in many online multiplayer casual
games in Korea and China.
IT Territory was the first company on
Russia’s game market to launch a browserbased
multiplayer online casual game
called The Bugs in 2005 (http://zhuki.mail.
ru/ ). It’s a game in which you become the
coach of a team of cute little bugs: They
take part in different types of races and
swimming competitions and pursue unique
quests. In return you have to feed them,
heal them if they get injured, train them,
etc. With the money you get when your
10%–30%
$30 USD
Average amount of one payment $1–$5 USD
*Based on IT Territory research
bugs win competitions (or
with real-life currency) you
can purchase food, medical
kits, clothing and other
equipment for your bugs.
Is the conversion rate
better in trial-to-purchase
or free-to-play
models?
Today the trial-to-purchase model is quite
popular in the casual game markets of
Europe and North America. On average
out of every 100 downloads only one or two
users actually purchase the games. In our
experience, by contrast, up to 30% of those
who play free-to-play games will make some
sort of micro-transaction purchase.
Summary
• Almost all Russian free-to-play games
utilize the micro-transaction system.
• The micro-transaction system is a method
of making profit by offering in-game
items at minimal prices in free-to-play
games.
• People enjoy this model because it allows
them to try the game for free and then
to progress through it faster by making
low-cost purchases of items.
• Based on its usage in MMO games, the
micro-transaction model is likely to work
well for casual multiplayer games in
Russia.
• The conversion rate of free-to-play games
is much higher than that of trial-topurchase
download games.
Alisa Chumachenko is Marketing Director for IT
Territory and V.P. of Business Development for IT
Territory Casual. Alisa has worked for IT Territory
since it was founded in 2004. Focusing her main
efforts on business development she has a profound
knowledge of the Russian game industry,
distribution, licensing, and online advertising.
She has also played a very active role in the
development of the casual game branch of IT
Territory. Alisa can be reached at alisa.chumachenko@casualconnect.org
Remember Time Limits?
What We Learned From In-game Advertising in 2007
Last year was the best year ever for
the casual games industry, and we are
predicting this year to be even better
yet. Across the board, revenue, reach,
and usage went up in 2007. One of the
emerging themes of the year, and a
big driver of revenue growth for most
companies, was in-game advertising in one
form or another. The year taught us a lot
about the opportunities and challenges we
face as we work to integrate this model into
casual games.
The concept of in-game advertising seems
to attract an increasing amount of press,
with the overwhelming majority of the
attention focusing on console games.
Microsoft said at CES in January that it has
shipped 17.7 million Xbox consoles to date
and signed up 10 million members of Xbox
Live Arcade. That is great, but with millions
of games played each day on the PC, the
console market really represents only a
fraction of the reach available to in-game
advertisers.
Different forms of in-game advertising
are now available and everyone seems to
be participating in one way or another.
WildTangent has a unique and seemingly
scalable product with WildCoins.
RealNetworks has a rapidly growing
in-game streaming video ad product
producing strong video-related ad metrics.
(Full disclosure: I helped build it.) MSN,
Pogo, and Shockwave have produced
quite a few games that have advertisers’
products embedded directly in the game-
play. Additionally, Sandlot Games is
experimenting with branded avatars and
alternate payment methods.
So why does in-game advertising work?
At Real, we have found that users play
ad-enabled games much longer than 60
minutes when given the option.What’s
more, advertisers are seeing a competitive
ROI and game developers are sharing in
the incremental revenue. This alignment of
incentives and results is powerful indeed.
At scale, you start to see revenue in the
range of $1.00 per download compared to
Chris Houtzer
$0.30 with pure transactional models. Give
the users the choice and they will play more
frequently and for longer periods of time.
In-game advertising has taught us that
there are greener pastures outside of our
conventional 60-minute downloadable
world. As the web becomes more social
and user-centric, the casual games industry
must follow (and preferably lead!). We
need to look beyond time limits and strive
for maximum engagement of our users.
If we do this successfully and do not turn
users away with limits, new business models
will definitely emerge. Figuring out ways to
break down our conventional monetization
walls will create bigger opportunities ahead
for everyone.
Here is to a more open and user-centric 2008!
Chris Houtzer is Senior Director, New Media,
RealNetworks
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