Flash Microtransactions: This Changes Everything

i don’t often peer into my crystal ball to predict trends, for fear of looking like a complete nerd. Remember that time i said Jesus was coming at 4PM on a Tuesday, and we all hung out at that bus stop for, like, five hours, until Pete got the munchies and did a Taco Bell run, and the rest of us went to help him carry the drinks and we totally missed Jesus cuz my prediction was off by half a day? i’m more careful now.

Jesus

Jesus: sorry he missed us. (Way to go, Pete)

But i’ve been to Casual Connect, and i have seen the future of online gaming, and it’s microtransactions. Go ahead and close the browser now, if you like. You haven’t seen what i’ve seen, man. i was there. And although many of you are probably skeptical about a system that’ll have you paying twenty-five cents to a preteen for a badly-drawn sword jpeg, i’m here to posit that there’s a side of this you may not have considered. And if you’re a casual downloadable portal owner, i’ll tell you why you should be shaking in your hitherto cash-stuffed boots.

A Quick Primer

First, some terms and definitions.

  • Flash game A video game created with a tool called Adobe Flash. These games are playable in the browser using the ubiquitous Flash Player plugin, the second-to-latest iteration of which has a >90% install base.
  • Casual game A piece of interactive entertainment marketed outside the “core” video game demographic. Casual games typically have smaller development budgets, and break up the gameplay experience into more easily digestible chunks, setting them apart from more demanding “enthusiast” game titles
  • Casual downloadable game These titles can be created with any tool, but are typically written in the C++ language by “real” programmers. File sizes are usually much larger than Flash game file sizes, and the games are often not playable in the browser. “Casual downloadable” can also describe the monetization method for these games.
  • Portal A website that hosts games from a number of different developers. Some portals deal exclusively in casual downloadable games, while others solely have collections of Flash games. One of the most successful portals (at present) is Big Fish Games, which hosts both.
  • Demo A handicapped version of a game for the purpose of convincing the player to purchase the full version. Demos can be time-limited (play for up to an hour free), or feature-limited (play with only Character X, or play only the first five levels). Demos can either exist within the larger game file, or they can be entirely separate files.
  • Try and Buy (or Try-Before-You-Buy) A monetization model where the player samples the demo version of a game, and is enticed to pay a one-time fee to purchase the full version. Demos or trial versions can be downloadable, but more and more, developers are creating Flash demos that can be played in the browser.
  • Subscription A monetization model where the player pays a regular (often monthly) fee for the privilege of playing the game, or to have access to features that free players cannot experience
  • Free-to-play A game model where a significant selection of gameplay – even the entire game – does not cost the player any money. Some Free-to-play games are ad-supported, while others use subscriptions and microtransactions to fund further development. Still others are completely free to play with no strings attached for the player.
  • Microtransactions A monetization model where the player buys incremental upgrades to the game experience that can cost as low as pennies, or even fractions of pennies.

Penny

Give it a year and we’ll be splitting atoms.

Thanks But No Thanks

Before i went to Casual Connect 09, i had it in for Flash microtransactions. i had heard the announcement that Mochi Media was in closed beta on a microtransaction system for Flash games, and i just rolled my eyes, imagining the horrendous state of affairs that would erupt when the army of basement-dwelling Flash teens, fat from their $1000 sponsorship deals on games like Set Your Grandma on Fire and Zombie Asskicker 4: the Killening, started charging five and ten cents a pop for in-game items like “cartoonish weapon of implausible proportions” and “extra health”. No thanks.

And i knew that the microtransaction press was going to be packed with success stories about how Joe Coder made fifty million dollars in two weeks selling special in-game hats for his game, Ninja Kittens. But as soon as i give it a try, i’ll net thirty cents in a year’s worth of schlepping. No thanks.

And i knew that associating games with one-cent transactions would eventually drive down the value of absolutely everything, to the point where a developer charging five cents instead of one cent for a virtual crocheted tank cozy would be tarred and feathered by the broke-ass (but entitled) players rallying around these games. No thanks.

No Way Jose

Roughly translated from the original Spanish, this sign reads “I do not wish to comply, Joseph.”

But let me put a more optimistic spin on things. Let’s take a look at where we are now, and where we could be very, very soon.

The Story So Far

Right now, i very much doubt i can make money on my original Flash games. i took an admittedly mediocre game from our library and ran it through the ad injection model in the Pulitzer prize-winning series Pimp My Game (which did not actually win a Pulitzer prize, so i’m thinking of withdrawing that press release). The game’s made about $90 in a year.

Two By Two

Ninety dollars? Pfft. This gem’s worth at LEAST $117.53 + tx.

So i looked across the fence where the grass is clearly greener, and i saw the casual downloadable market. These people were charging actual, real-live dollars for their games. The developers were getting a share of actual cash money that numbered in the more-than-90’s, and i wanted a piece. But i recognized that the development times were longer, the budgets were bigger, and the risk was greater. That’s when we started work on Kahoots™, our fun crime-themed puzzle game.

Kahoots™

i can’t wait for this game to come out!

Kahoots is a further (longer, riskier, more expensive) step in our quest to establish a baseline for development. i’ve been hunting this mythical baseline for two years now: it’s the average amount of money that i can make from an online game. Establishing a baseline will enable us to work within a reasonable budget, and then, hopefully, we can turn a reasonable profit.

i wasn’t one to leave my free-to-play Flash roots buried, so we got cracking on Interrupting Cow Trivia a few months ago. ICT is yet another experiment in game monetization. The development costs are still large, but the model is different. ICT will show an ad to the player before he jumps into a game room. The free player can answer X questions before being booted back out to the lobby, where he’ll have to watch another ad to re-join. Free players will also be limited to certain trivia content packs, which will be unlocked in regular rotation. For example, the Music Trivia pack will be free to play on Mondays and Saturdays. (That’s a little trick i borrowed from Three Rings of Puzzle Pirates fame. Thanks, OOO!)

Paid Interruping Cow Trivia players won’t see any ads, and they can play from any trivia pack any day of the week. They’ll also have advance access to new trivia packs. As we build more features into the game, we’ll cook up further carrots-on-sticks to incent free players. So be sure to give the game a shot while it’s in alpha and completely free!

Interrupting Cow Trivia Title Screen

ICT is going to get a whole lot more awesomazing in the coming months!

PLEASE Make Money from my Efforts! PLEEEEEASE!!!

Going into the Casual Connect conference, i knew i needed a way to charge people money to play Interrupting Cow Trivia, and to purchase Kahoots on our own site. i knew that this was a good idea, because we would get a larger cut of the profits than if we sent Kahoots to a casual downloadable portal. i haven’t partnered with one of these guys yet, but rumour has it that the split is around 65/35 in favour of the portal. This is somewhat upsetting. The portals haven’t spent a single dime on the development of Kahoots™, and offering a completed, quality game for sale on their site is a zero risk proposition, yet somehow i still have do do a song and dance for them to convince them the game is great, all for the privilege of giving them the lion’s share of the proceeds.

But they have the lion’s share of the traffic, right? Big Fish Games is essentially Wal Mart, and if you don’t sell there, you don’t sell anywhere. (Or so i thought – more on that in a bit.) One big problem these days is that a few months ago, Amazon got into the casual games business and started charging $9.99 for its wares, down from the status quo of $20. This sparked a price war that saw Big Fish reduce its prices to $7.99, with a $2.99 price point for their special toolbar promotion.

Big Fish Games 2.99 deal

Who gave that f*cking fish a paintbrush?? He’ll ruin us all!

So who knows where prices will end up? My prediction is that they’ll sink down to the App Store dumps, where everything will be at 99 cents, and a number of casual downloadable devs will go bankrupt because they’ll be a month from releasing their latest big-budget opus. That, or they won’t be able to adjust quickly enough to the Flash way of doing things, where we can bang out a complete game in under a week (see our game Bloat., and fear us.)

The Transaction Faction

So knowing i’d need to charge people on my site, i started meeting with the droves of online transaction companies at the show. These are the companies who have already done the legwork to enable credit card, debit card, pay-by-phone, SMS, cheque, money order, secret password, cost-per-action and wooden nickel transactions to your visitors seemlessly, in exchange for a cut and a few cents on the dollar. The VISA bill says “You were charged $x by Untold Entertainment for Kahoots”. Nice.

But i quickly learned that it would be very difficult, as a small developer, to have a relationship with these guys. GlobalCollect, for example, charges a monthly user fee of around $700. Plimus charges a big set-up fee, and takes a sizable chunk of the proceeds based on the volume of cash you move through their system. The price comes down according to volume. They asked me how many sales i intended to make. i shrugged and said “Dunno. Million … ish.” i have no idea. i’ve never done it before. If Kahoots sells five copies, i’ll be pleased with putting smiles on the faces of five people. (while my homeless family shivers in a makeshift cave made from egg crates and refrigerator boxes in a forgotten alleyway somewhere in Toronto)

It was whispered to me at the conference that if i had engineering chops, i could get an authorize.net account with an SSL certificate and roll my own payment solution. i don’t have engineering chops, unfortunately. And anyway, it’s the kind of thing where i’d like to see how it works out before i sit down and figure out exactly what to build to save myself some money.

And all the while, i saw companies like HeyZap, MochiMedia and GamerSafe, all offering Flash-integrated online wallets for virtual cash, glad-handing the conference delegates and preaching the gospel of Flash game microtransactions. (i’m not actually sure GamerSafe was there phyiscally, but they were there in spirit)

And that’s when i had a brainwave.

Pinky and the Brain

This is gonna be good.

“Micro” is a Possibility, Not a Requirement

A microtransaction system is great because it allows for tiny transactions. The player is more likely to spend tiny amounts of money, but tiny amounts of money add up to significant amounts of money. If you’ve ever bought more than seven vials of heroin in a single afternoon to drown out the pain of your failed existence, you’ll know how those singular transactions start to really add up. And then developers can pull all kinds of nonsense like in Tencent QQ in Korea, where they went hog-wild pioneering this stuff. In Korea’s Cyworld, you can dress up your room, or buy things to send to your friend, but those things – those VIRTUAL ITEMS – expire. You give your friend some wallpaper that has a two-week time limit on it. Insane.

But here’s (finally) my point: a microtransaction system enables you to charge tiny amounts of money, but it doesn’t require you to. There’s no reason why i can’t decide on, say, a $7.99 price point for Kahoots (as Big Fish Games would), and then charge that to my players as a one-time fee at the end of the demo. Correct me if i’m wrong, providers, but i can do that – right?

Right?

And if i can do THAT, let’s look at how a Flash system stacks up against the casual downloadable market:

Casual Downloadable Games

  • (Potentially) large exe download
  • Play on desktop
  • Trial type is limited (for example, i believe Big Fish forces your game into a 1-hour trial. What if that’s not the best trial type for my game?)
  • Deal must be negotiated separately with individual portals/publishers via dog-and-pony show convincing them the game will sell well

Flash Games

  • (Potentially) much smaller download, with opportunity for progressive download (files are pulled into the game as needed, and can be loaded in the background while player does other stuff)
  • Play in the browser with a plugin that >90% of people are running
  • Trial type is whatever the heck i want it to be
  • No deals to negotiate – just use a service like Flash Game Distribution to fire that sucker out the Internet cannon

And i’d love to have someone chip in some data on this, but my hunch is that the amount of traffic going to the oodles of Flash game portals trumps the traffic going to the casual downloadable portals. i could be wrong there. Who’s got numbers for daddy?

Fear the Coming Flood, Fish

So if you’re Big Fish Games right now, you oughta see this coming. And if you didn’t, you do now. And you might re-consider your current strategy of offering $400 to Flash developers for unlimited licenses of their games.

But … if you’re Big Fish, you also offer a distinct advantage over the oodles of portals (say that with a strange British accent and it almost rhymes). The whole reason why Big Fish Games built up that audience in the first place is that it built a brand. Building a brand was one of the cornerstone take-aways at the Casual Connect conference. Big Fish Games built a great site with an excellent customer experience. They were consistent, like McDonald’s. They defined their target hockey mom demographic, and tailored the Big Fish experience to that type of customer. They only stocked games that they knew would sell well to that customer. And then, they raked in mountains of dough and jumped in them like piles of fall leaves, giggling wildly.

Steam did the same thing. They built from an established brand, so the going was a little easier from a customer loyalty point-of-view. But they try to stock games that appeal to their audience, first-person shooter fans. Everything on Steam is dark and gritty and shooty, and they’re doing very well. Lately, some colleagues and i have thought that Steam would be very well-served to create a parallel girly portal on their service, plastered with pink unicorns and fairies and vaginas and stuff.

Vagina Diagram

Man, that site is sooooo girly

Start Building

So if you’re still reading this, and you haven’t already picked an under-served audience and drawn up a sitemap for your new Flash game portal, you need to get on that pronto. GamerSafe is already pledging a 10% cut of microtransaction proceeds to portals, and MochiMedia has hinted that they’ll do something similar. And if enough Flash devs figure out that in addition to nickel-and-diming people for hats n’ guns, you can also sell your games for a one-off price just like the big boys do on casual downloadable portals, there could be a lot of cash floating around the Internatz by this time next year.

i’d just like to grab a little of that cash to tuck away for a rainy day. The rest, i’ll shred up and use to wallpaper my private jet like a supersonic piñata. ¡Olé!

Scrooge McDuck

17 thoughts on “Flash Microtransactions: This Changes Everything

  1. Jos Yule

    Hey, great article. I do have a practical question about the whole buying a flash game thing tho. Are our customers going to be leery about spending money on something that only exists on a website? For instance, paying a buck for a virtual thing, but 8 bucks is into the range where I want to be sure I get to keep the thing I’m paying for. I guess this is academic until tried, but it came into my head while reading…

    Reply
    1. Ryan

      Thanks, Jos. It blows my mind that we’re living in a world where $8 seems like a lot of money for a game. i’m used to regularly paying $69.95. $8 is cheeseburger money at Wendy’s.

      i just dropped $10 on Fantastic Contraption, sight unseen, because of all the amazing press it’s been getting (and because Colin dropped by yesterday. It’s all about that personal connection, right?) i didn’t *get* anything but a receipt. But i know that i can log in at the site from any computer and play with the features i paid money for.

      One of the more interesting insights to come out of Casual Connect was during Mike Peronto’s talk (Mike is with WildTangent). He said we’re seeing the end of an era where customers need to “have the box”. At WildTangent, they have a virtual wallet system. Customers can choose to spend their currency either buying a game, or just renting it. Which one do you think is more popular?

      The answer: on WildTangent’s site, customers prefer to rent games instead of buying them at a ratio of 3:1.

      Reply
  2. Mark

    I think some people are getting used to buying entertainment online and not getting to keep a file at all. I’d imagine people are heading away from keeping things on their personal computer as well. There is all this talk about cloud computing…

    Reply
  3. Phil Peron

    (I’ve just refreshed the page and see that Jos started the ball rolling on the price-point concern but since I’ve already written all this, here it goes…)

    Whoa! I had this epiphany yesterday! Why can’t the in-game microtransaction be the game itself?! Like the first 3 levels? Great! Play the rest for… $$$. Some of the feedback I received (I think it was from you, Jos :)) really made me consider the following however…

    Is $4.99/$9.99/$14.99 considered “micro”?

    My impression is that $4.99 is on the high-end of micropayments. Thus, I can imagine that this will initially be met with some resistance. If we don’t push back, we end up (as you mention) in an App Store basement of sorts, selling off our titles for 99 cents. Building quality products is a given but I can’t help but think there’s some element of trust that needs to be constructed so models like you’re proposing simply “are”. Maybe it’s just a matter of time and effort. Or branding. Building your reputation with the consumers.

    Another thing I’d like to mention is how I see this having a positive affect on game design. It’s one thing to start work on a game knowing you’ll be selling features piecemeal but quite another to be freed from such restrictions to focus on creating something _fun_. Not that you can’t achieve both but I gather from my own limited experience that it’s much easier and liberating to think in terms of restricting game content via a “demo mode” than chopping everything up into items to sell on a rack. Game balance and tweaking the fun-factor is hard enough.

    However this shakes out, I’m with you. It’s been exciting watching this money business unfold.

    Reply
  4. Helene Vallee

    You know, fellas… it’s spot easy to make your game into a .air and then it’s a downloadable game. Sweet shortcut on the desktop and all. Actually, there’s a lot more potential there I’d love to chat about.

    As always, love reading your blabber, Ryan. I always laugh out loud. With you. Really.

    Reply
    1. Ryan

      Helene – let’s chat! i know how easy it is to crank out AIR stuff, but there are some distinct disadvantages:

      1. There’s an extra plug-in download. i haven’t looked up the AIR penetration rates, but i doubt they’ve made a dent.
      2. If my purchase is tied to my site membership, i know i can log in from any computer and access my game progress. AIR apps are tied to one computer. (This need not be the case, but it’s the default behaviour) i don’t know if this is appealing to anyone else, but i flit from machine to machine very often.
      3. If the player is playing a game in the browser, you can incent him to play other stuff using shiny objects and offers. Again, you can also do this with your AIR app, but it’s not as straightforward.
      4. i’m going out on a limb with this one, but i imagine that AIR apps may lead to more customer service woes. What happens when the player uninstalls the game and wants to install it again? Where can they re-download? If there are problems installing/uninstalling the AIR framework itself, are you going to hear about the complaints? For some reason, i get the sense that people are more likely to gripe at you about something sitting on their desktop over something sitting in the browser. The player’s perception may be that the cloud belongs to you, but the desktop – the computer – belongs to the player. And ain’t nothin’ gonna mess up my desktop.

      But mebbe ima crazypants?

      Reply
  5. Colm Larkin

    Well sure; you don’t have to use micro-transactions JUST for cumulative 10-cent purchases that make your game heroine’s bikini ever smaller. Do that AND have a $10 big purchase!
    The whole point of microtransactions is to make it SEEM cheap to buy just one thing, but exceedingly easy to get sucked in a spend way more than you normally would if you really like the game. Look into the (many) published figures online about microtransaction spends (3 rings in particular have been excellent at sharing this info on puzzle pirates) – a small % of their players spend, but those that do spend a ludicrous amount. That’s the point!

    Well executed example time:
    http://www.kongregate.com/games/urbansquall/battalion-arena
    Just released in public beta; it’s a great tactics game using the Kongregate ‘kreds’ microtransaction currency. They let you buy silly stuff like hats for 50c, booster packs of special items for $1-3, and premium/elite accounts for $10/$20.
    Forget the ‘micro’ – it’s all about the ‘transactions’!

    Reply
    1. Ryan

      Colm – yeah, i worry that the word “micro” is limiting the way people may think about using the service. But multiple goodies at multiple price points sounds like a great way to go. It’s just a fair amount of effort to design a game that takes advantage of the system like that.

      Reply
  6. Michael

    Great points! I really hope this happens. I wonder how portals will react, though? Perhaps the existing ones will section pay-for-Flash games into a different area, or ban them altogether. Or maybe we’ll see a new wave of portals that ONLY serve pay-for-Flash games.

    I really like what you said, Helene, as well. Paolo was talking about AIR games over on his blog today, and I agree that getting a standalone version of a game would work as an incentive to buy, in some cases.

    Reply
    1. Ryan

      Michael – very interesting that you mention banning. Sure, Gamersafe and Mochi are already pledging a cut to the portals, but Gamersafe is saying 10%. That’s a far cry from the cash vacuum that places like Big Fish are used to. i doubt they’ll be comfy seeing the bulk of proceeds going elsewhere.

      Countdown to Big Fish offering its own microstransaction system …

      Reply
  7. Bob Ippolito

    The smallest transaction the Mochi Coins API even supports is $0.25, you’re not allowed to price anything lower (unless it’s free). Currently we support transactions up to $50.00 in size, but that limit is largely artificial and we can raise that if you have a good reason (let us know!).

    With regard to AIR or regular ‘ol Flash Projector downloads you should still be able to use the Mochi Coins API or whatever else in order to facilitate both browser and download. Sometimes people like the download version better, because the performance is improved (Windosill does this[1]).

    Somehow we already have a game using the name Kahoots[2], which confused me a bit until I looked at your link :)

    FWIW we don’t use the word “microtransactions” to talk about MochiCoins, usually we just say virtual currency.

    [1] http://www.mochimedia.com/games/windosill_v4/
    [2] http://www.mochimedia.com/games/kahoots_v1/

    Reply
    1. Ryan

      Bob – thanks for clarifying. Smart to say “virtual currency” instead of “microtransactions”.

      The whole deal with the Kahoots name thing is a bizarre story – essentially two different teams in two parts of the world, developing at the exact same time with no knowledge of each other. And with modeling clay, to boot. Insane. And by the time one of us discovered a conflict, both teams were too deep into production to do anything about it.

      One thing i will say, though, is that the word “Kahoots” is far more integral to our game about conspiring criminals than it is to a game about adorable creatures. Creatures can safely be called “fuzzwubbits” or “nonny ding-dongs” or whatever. While HoneySlug has produced a fun, unique-looking game, there’s no real *thematic* reason why it has to use that title.

      PS How do you get past the bird in Windowsill? Do you have to pay 25 cents? ;)

      Reply
    1. Ryan

      Mr. Nokill – Spell of Play still has sort of that grity, slapdash underground feel to it, replete with South Park message board avatars and a black background. i can see why Big Fish Games appeals to a different audience. It’s very clean, very organized, and very white.

      Reply
  8. Porter

    I think microtransactions are definitely working there way into the gaming industry all around, and they’re well welcomed by me. The issue isn’t MT’s, but the developers abusing the implementation of them. Developers keep handicapping games to earn a few extra bucks, rather than adding EXTRA content to a game that happy fans will buy; it’s kind of counter-productive. I just wrote an article on microtransactions myself, check it out if you get the time. http://blog.princeporter.com/microtransactions-need-persistence/

    Reply

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