iOS game developers aim their harpoons at money-bloated whales
Developers use in-app purchases to fleece deep-pocketed gamers that spend hundreds or thousands of dollars a month
Eye on Apple
By Jim Lynch, CIO
Have I told you lately how much I detest free to play games? I truly loathe seeing them in the iOS app store and I never download them. I’d much rather pay for the game outright and then be able to play it without having to buy in-app purchases.
But recently I ran into a thread on Reddit that had some very interesting posts and links that indicated that free to play games are designed to hook deep-pocketed gamers known as whales with tons of in-app purchases.
The thread started out with a rant by someone who has also had enough of in-app purchases in iOS games, and then other redditors chimed in with some very interesting thoughts. I’ll share my thoughts about the iOS gaming whales below, but here’s a sample of the comments in the thread:
Newdefinition: ”The vast majority of money spent on the iTunes (or Google) app store is spent on games, and the overwhelming majority of the money spent on games is spent on in-app purchases. And only a tiny percentage of people who play a game will ever make an in app purchase, and most people with a smartphone download less than 1 app per month.
That means that when apple generate $12b in app store revenue in 2014 that over $8 billion of that came from in-app-purchases to win free games. And that most of that came from probably 15 million or so people worldwide (although no one will release actual statistics, that’s a guess at 5% of active iPhones, it’s probably close to 3 million at 1% of active users).
That means that the average of those paying customers was spending over $60 per month on average – to win free games. And given the way the distribution of these kinds of customers usually skew, there’s probably a million or so people who are spending hundreds of dollars a month, and are responsible for most of the money generated on the app store.
That’s why there are $100 in app purchases, it would simply take too long to sell things $1 at a time.”
Deltapro: ”When are micro-transactions no longer micro-transactions? $150?! Thats insane and it’s clearly a market making money hand over fist off of people with an addiction to mobile games.”
Azurathen”All it takes is a small percentage of golden whales to make the effort worth it.”
AdmiralFrosty: ”That’s what’s going on. It’s a terrible business model, really. They’re betting everything on trying to hook that small population of people who will empty their 401k accounts on a cheap mobile game. If you’re not one of the few big titles out there, it doesn’t work.”
Foulpudding: ”The economics at play are that only a small percentage of the players pay anything at all… most players pay nothing. Zero.
But of the small percentage (from 1-4%) many prefer to pay large amounts of money to get as much in game advantage as they can without grinding to earn or otherwise win it. To a surprisingly large number of players, paying $150 is nothing and they will buy that several times. Those few players drive the profit of most games. (though $10-20.00 several times is probably closer to how most pay.)
My company is finishing a game now and struggled with the choice of making it a paid game vs a “free to play” game. We originally wanted to make it paid, but that would mean that we just had no chance of success. Hell, I busted my ass trying to get a prerelease version to perform as a .99 download and got nowhere, I literally could not buy a (good) cup of coffee with the organic sales I made. (less than a couple bucks during the test) – Before you say “your game must suck” – most initial sales are based on perception of the app store icon and screenshots and those were rock solid. (the game is fun too, but you won’t know that before you buy if it’s paid.)
Sad thing is that nobody really buys games any more, they expect everything to be free… And as a result, almost all developers now only make free to play games. The only way to change the overwhelming trend towards “micro transactions” is to start buying games for full price again even before you know they are any good. i.e. YOU have to make it more profitable to put a price tag up front.”
Tehfogo: ”The “whales” as they are called in most of these F2P games are massive spenders. Those players will drop several hundred a day on these games, it’s pretty ridiculous when your company stays afloat from that top 1% of the paying playerbase, but I guess that’s what works well now.”
Goatfodder: ”A fool and his money are soon parted.”
Before I read that Reddit thread, I had never heard of a “whale” but apparently they are the bread and butter of many iOS game developers. These are folks who will download a game for free and then blow huge wads of cash by buying in-app purchases to buff up their gaming experience.
I cannot imagine wasting a ton of money on in-app purchases for an iOS game. At what point does it become an addiction with some of these gamers? Then again, it’s their money so they can spend it any way they want. And if somebody wants to blow thousands of dollars on Candy Crush then that’s their choice.
The developers of these games must chuckle when they see some iOS gamer racking up hundreds or thousands of dollars worth of in-app purchase charges just to improve their chances of beating a game or outshining other players for ego purposes.
If you think I’m kidding about the influence of whales on iOS game development, check out this article from Recode:
…app testing firm Swrve found that in January, half of free-to-play games’ in-app purchases came from 0.15 percent of players. Only 1.5 percent of players of games in the Swrve network spent any money at all.
Some game companies talk openly about the fact that they have whales, but others shy away from discussing them publicly. It costs money to develop and keep a game running, just like those fancy decorations and free drinks at a casino; whales, like gambling addicts, subsidize fun for everyone else.
At a conference I attended last year, a representative of a gaming company — who declined to be named or interviewed for a story — claimed that his firm had worked with a Japanese game company with one player who spent about $10,000 per month on in-app purchases. The company, he said, had assigned an employee to cater just to that whale, to ensure that she was always satisfied with the game and therefore likely to keep coming back.
For all the chatter about this game or that game getting millions of downloads, the story of the business of mobile games is still happening in the top-grossing charts. And that story is: Games for the many, paid for by the few.
Ten thousand dollars a month on in-app game purchases? Wow! That is one whale that could give Moby Dick a run for his money! But I’m sure the game developers were quite happy to tailor their game to the whale’s preferences and needs. And who could blame them for that kind of money? Sheesh.
I’ll still pass on free to play iOS games
I guess that the whales will do what they do, no matter what I say about it. But I’ll pass on installing any of these free to play games on my iPhone 6s or iPad Air 2. To me such games indicate a seriously screwed up business model in the iOS app store. I feel like I never know what the true cost of such a game is going to be for me if I install it.
This is why I have moved most of my gaming over to the Nintendo 3DS XL. At least there I can buy a game for $29.99 or whatever on Nintendo’s eshop and get the entire game, without having to buy anything else to make the game worth playing in the first place.
What happens when iOS game developers run out of whales?
Right now the whales may be sustaining iOS game developers, but how long will that last? There are only so many whales playing so many games. What about the rest of the games on iOS? If the whales don’t play them, how do they make enough money to be profitable? I can’t imagine the current free to play business model surviving over a long period of time given the limited number of whales in the iOS gaming ocean.
Maybe I’m wrong about all this and I’m just an old fuddyduddy who comes from a time when gamers could pay for a game and get the entire thing, without being nickel and dimed with in-app purchases by developers. But I wonder how many other gamers have stopped bothering with iOS games because of the free to play business model? I sure hope there are enough whales swimming around out there to make up the difference for iOS game developers.
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