🫰 Monetization

Updated at 2016-01-03 16:07

Monetization is the process of generating money with a product. Monetization model is obvious most of the time e.g. you pay $5 from a sandwich. But sometimes it may be a bit more complex e.g. how Facebook generates money by showing ads to users. Related to pricing and marketing.

Use a cash flow chart. Cash flow charts are used to show where money is going. They are not plans for budget, they are for supporting future decisions.

Week Balance At Start Income (Underestimate) Monthly Basic Projects Extra Work Expense (Overestimate) Rent Electricity Water Internet Salaries Cashbox Cash Flow Balance

Monetization Models

Freemium: Offer a free product or service. Lure some of those free users to paying customers by offering extra services. Gain bigger user base through referrals and those new users might start paying. Examples: GitHub.

Usage-based: Offer a free product or service. If usage exceeds a limit, it costs money. Examples: Dropbox, Amazon Web Services.

Trial: Offer a free product or service. After a trial period, you need to start paying. Examples: PhpStorm, Cornerstone.

Advertisements: Offer a free product or service. Show advertisements. Optionally learn as much as you can from the user and show targeted advertisements. Examples: Google, Facebook, Angry Birds.

Crowdfunding: Asking support from individuals to create the product. Never rely solely on crowdfunding for products that you have planned on using or have already used resources on. You can consider making a crowdfunding campaign for each product but you should have a real monetization model planned. More about this in crowdfunding notes.

You should create crowdfunding supporter tiers in following fashion: - 1$ support tier with close to nothing rewards e.g. name in a support list. - 25$ good first tier of first mailed reward. - 100$ is first tier of real contribution.

Credit Card Model: Offer a free service for consumers. Charge fee from merchants so they get publicity. Examples: Facebook, Yelp.

Sponsorship: Offer a free product or service. If it helps government or major organization, ask them for money. Examples: Khan Academy.

Donations: Offer a free product or service. Ask donations from the users. Examples: Wikipedia, WordPress plugins.

Freebie Marketing: Offer a free or low priced product or service. Then also offer a complementary good. Examples: Razors and blades, Printers and inks.

Open Source: Offer a free product or service. Sell support, consulting, training, customization and installation. Examples: Vaadin, most Open Source software.

Cross-selling: Offer a free product or service. Use it to promote related products or services that cost money. Examples: financial websites offer premium analysis reports.

Branding: Offer a free and good product or service. Promote your brand through it. People will buy related brand products.

Sell-It-Forward: Offer a free product or service. Get large user base. Sell the service forward. Examples: Freebase, Powerset.

Game Monetization Models

Digital Retail: Customer gives money, you give the game.

Advertisements: Offer the game for free. Show advertisements in the game and you get money from companies.

Free-to-play: Offer the game for free. There is an option to spend real money in the game.

Free-to-Play Monetization

Most free-to-play games use basic psychology to get people paying for the games. I personally see them more as scams and hustles than real games, although profitable never the less. There are good free-to-play games, but the players should be excited to spend the money, not feel like they are forced to spend the money. But here are the basic principles that make a profitable free-to-play game.

It starts with the name. The most valuable free-to-play games always have childish names as they target younger players. When you have not earned your money yourself, you are more tempted to spend it.

Premium Currency: Hide relationship between real money and actions inside the game. Usually made with some kind of premium currency or resource. Buying premium currency should be possible inside the game.

A card game has diamond that you can use to buy new cards. 25 diamonds costs $5. 99 diamonds costs $9. 399 costs $19.

Timing is important. A request to spend money should be done after cognitively tiring experiences. After already investing time, money or effort into the game, the likehood of paying few extra dollars is higher.

Pay-to-Win Model: You must hide that fact that the game is really pay-to-win or it will be seen as a game of "who has the most money". Normal approach is that first parts of the game are totally skill based but later you must spend money complete tasks. But the transition must be subtle.

Candy Crush Saga starts as easy first and difficulty goes up little by little. At one point, the game becomes unbeatable without resources brought from the store.

Reward Block: Giving player a reward that they want but then later stating they cannot access it without spending money.

Dota 2 matches give chests to players that contain cosmetic items. But players cannot open those chests without buying a key for few dollars.

Reward Removal: Giving player a reward that they want but then later threatening to take it away from them if they do not spend money. Building attachment to a thing before we know the price.

Puzzle and Dragons has dungeons. Each dungeon has a number of waves, after each wave you told that you received an item into your backpack. The final wave is a boss fight that is harder than it should be. If player is killed on the final battle, a message is shown that player loses all the previous rewards and stamina if they do not spend one dollar to retry.

Dragon Tamer game has eggs that take few days to hatch. You can have a finite number of eggs in your vault. You gain eggs after each mission, but they will be takes from you if you do not increase the inventory space with real money.

Hard Progress Gates: Telling the player that they must spend money to progress further in the game. The least efficient technique.

City Builder game has a population cap for each city. You can raise that cap by spending money.

Candy Crush Saga has a river. The game is a skill game before that but becomes really hard after the river. Unbeatable without buying any resources. Crossing the river costs tiny amount of real money but is an evaluation point. Which players are payers and which are not.

Soft Progress Gates: Offering the player a way to progress faster in the game.

Clash of Clans has building time when improving your village. Players can spend money to complete them instantly.

Soft Boost: A resource you buy with money and spend in the game.

You can buy XP boosts in League of Legends that temporarily increase how much experience you gain after each match.

Hard Boost: A resource you buy with money and gives you permanent boost in the game.

You can buy a random rare creature in Puzzle and Dragons for $5 each.

Friend Leaderboard: Create friend leaderboard so people start to compete. People spend more money in the state of heightened competitiveness. Boosting self-esteem by winning games while not recognizing that the game is really about who has the most money, not about skill.

Whale is a term for gamers that spend a lot of money to free-to-play games. 1% of the players (Whales) generate over 50% of the revenue, 9% of the rest (Dolphins) generate 50% and 90% (Minnow) never pay anything. These terms come from gambling circles.

Whales spend their money only on one or two apps each month. Even though whales exist in all game genres, from MMOs to puzzles, they focus their passion for a game or two at a time.

Every customer has value, even if they don't provide revenue now.

  • Potential whales
  • Potential influencer
  • Eyeballs for ads

What whales want:

  • A way of self-expression
  • Want to trade money for time
  • Feel powerful inside the game
  • Status e.g. by rankings, collections or achievements
  • Best price-to-value ratio