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Opinion: Morality in a Big Data, Frictionless Payment, Free-to-Play Mobile Gaming World

Opinion: Morality in a Big Data, Frictionless Payment, Free-to-Play Mobile Gaming World
This article is the product of a speech given at the F2P Summit in London on Thursday 18 April 2013.

Yet, its genesis comes from several years of debate concerning the rise of the free-to-play business model within mobile games, both within the confines of Pocket Gamer, and as a jobbing reporter in the wider industry.

Obviously, the views expressed are a personal consideration on the subject at hand and should not be taken as Pocket Gamer (or indeed Steel Media) policy.

Equally, given the time constraints (both of preparation and delivery), this article/talk is nothing more or less than an introduction to the subject of morality in mobile games.

As an academic might say, more research is required

Slide 1: Guns don't kill people

As we all know, Guns don't kill people.

Slide 2: American fathers do...

American fathers with guns and pretty daughters kill people.

Slide 3: But this is not a gun

What?

Slide 4: Ceci n'est pas une pipe

Belgian surrealist Rene Magritte painted this image in 1928.

"The famous pipe. How people reproached me for it! And yet, could you stuff my pipe? No, it's just a representation, is it not? So if I had written on my picture "This is a pipe," I'd have been lying" said Magritte.

The painting is called The Treachery of Images. It reminds us that representation - how we link the physical and the virtual - has always been a fluid cultural exchange.

Slide 5: This is not a chest of gems

From one surrealist image to another. Once again, we're faced with a representation that links the physical (as much as real money is physical) to the virtual.

Maybe we could call this The Confusion of the Virtual.

Slide 6: Confirm your in app purchase

"Confirm your in-app purchase."

If we break this statement down, there's a clear subtext. We are not being offered an equal choice.

The statement isn't "Confirm your in app purchase?" There is no question mark at the end of the initial statement, only in the secondary statement...

"Do you want to buy one chest of gems for £69.99?"

Yet, the menu's default action is to buy. The Cancel button is whited out. The Buy button is not, because the point of Apple's in-app purchase prompt is to encourage people to confirm their in-app purchase - in this case for £69.99.

And, of course, in my slide, the Buy button is glowing yellow, because I too want to make a point. We're back to The Treachery of Images.

But, more significantly, Apple's in-app purchase system contains its own treachery. Maybe, that's a little strong, but it certainly contains its own morality.

Slide 7: White men don't take the bus

Another aside. Many years ago, I studied the history of science and technology. One of its most significant aspects is how the creation of any technology locks in certain usage patterns.

Sometimes this can be an overt decision, sometimes it's the result of unintended consequences.

An interesting example is how city planner Robert Moses, when developing Long Island as a fashionable location for the wealthy in the 1930s, built 204 bridges that were too low for buses and trucks to travel under.

Later critics (notably Langdon Winner in his essay 'Do Artifacts Have Politics?') complained this was active segregation against the poor, non-car owning majority (i.e. black) residents of New York.

Although a counter argument was provided by Bernward Joerges in his essay 'Do Politics Have Artefacts?'

Whoever was 'right', what we do know is Robert Moses didn't take the bus. He wasn't interested in buses. He didn't even drive. He travelled in a limo.

That's my first lesson for game designers. Not, do you play your own games? Do you pay you own games?

Slide 8: Guns are not designed like this

Maybe we need to be more precise when it comes to statements such as 'Guns don't kill people?' What we can say is 'Guns are not designed like this' [see slide].

Similarly, guns are not libertarian pieces of technology that good people can use to protect themselves from bad people. They're not inherently evil either. But guns are not neutral. They are not without moral direction.

Guns are designed to contain an explosion that will result in a piece of metal exiting the barrel at the speed of sound. They are designed so you can anticipate the trajectory of that piece of metal. They are also designed to repeat that process, over and over again.

Slide 9: Guns are designed

Guns are designed to kill things that are alive.

It's something also reinforced in basic gun training. Policemen and soldiers are trained to shoot to kill. You aim at the chest and try to put as many pieces of metal in it as possible. The head shot is a figment of the video game designer's imagination (but that's another talk).

Slide 10: Designed for purchase

In that context, then, we can say that Apple's in-app purchase system is designed to be an easy-to-use payment system for the purchase of virtual goods.

Slide 11: Morality in a Big Data, Frictionless Payment, F2P Mobile Gaming World

Introduction over. I first wanted to look at what we might call some hard moral questions before starting more generally on my talk, which is entitled Morality in a Big Data, Frictionless Payment, F2P Mobile Gaming World.

Thankfully, the moral questions here are more subtle and less life-threatening, which I think makes them more interesting (not to mention the better implications for my personal safety).

I'm not going to delve into the details of Big Data and Frictionless Payments, but when it comes to the Mobile Gaming World, I think we all understand that over the past 2 years, the mobile games industry has been revolutionised by the rise of a business model that enables players to spend as much money as they want.

Slide 12: New versus Old

From the industry's point of view, it's easiest to see the change in terms of revenue. The red box is the old model of finding the optimal number of players who will pay a certain price for your game.

You can move the box anywhere along the curve, but there's only one maximum area (maximum revenue) and you can see how much cash you're leaving on the table, in terms of the white areas under the curve.

With free-to-play games, you get to access the entire area under the curve, however, and what's also significant is that both in terms of the number of players and the maximum amount a tiny number of them will pay, the curve dots out to infinity.

It's not really infinite, but given certain titles have been downloaded over 300 million times, and some individuals have spent tens of thousands of dollars in a game, for our purposes, we can assume it's almost infinite.

This has resulted in the industry focusing its attention on attracting as many of these players as possible and encouraging them to pay as much as possible.

It's quite a different approach to trying to attract as many players as possible at the highest price point - which was the previous business model. We're now focusing on the graph's extremes - those dotted lines - not the position of the curve relative to the axis, its fatness.

But we haven't really mentioned morality yet, so let's consider how we talk about this new business model.

We don't talk about 'players', we talk about 'users'. Daily active users, not daily active players. Average revenue per user, not average revenue per player.

Slide 13: Enter the whale

And perhaps most damning, we talk about 'whales'.

Not invented but partly popularised by Nicholas Lovell (we love Nicholas, but he did used to be an investment banker), we've borrowed the term 'whale' from the gambling industry.

These high rollers are highly prized, and casinos will provide them with free limos, free use of the best hotel suites, extended credit and no doubt, other illegal encouragements to keep playing.

Yet, according to John Eidsmoe, in his book Legalized Gambling: America's Bad Bet, whales only provide a small fraction of casino profits and are clearly likely to become problem gamblers over time.

Slide 14: Enter the killer

But, such is the focus on high rollers in mobile games that we now have a hierarchy of whales, ranging from those dolphins who spend $5-$25 per month, to $25-$50 per month whales, with those spending more than $50 per month labeled by one market intelligence company as killer whales.

Unlike real killer whales, these aren't apex predators, though. They are our apex prey. As if to underline this, one of our writers has recently labelled them 'morons'.

Slide 15: Fail whale

You don't have to be an etymologist to understand that the words we use eventually have an impact on our perceptions and actions. Now, I'm not saying using the term 'whale' is equivalent to 'bitches' or 'faggots', but it's clearly not positive.

And to be fair to Nicholas, he has since been popularising the replacement term - 'true fan'.

He says "A True Fan loves what you do", while a whale spends money because that's what they do, in some cases because they have poor impulse control.

And thankfully the term 'whale' isn't being used as much as it used to be, although that's not to say the thinking behind it isn't ingrained in the way the industry works. 

Slide 16: Back to the future

One alarming move in this context is how some companies are fully embracing the whale, and following the term back to its source.

When Apple was reluctantly forced to enable real-money gambling on the UK App Store in late 2012, it was publicly-traded companies such as Zynga and Glu Mobile which were in the vanguard.

It's not just them, however. The likes of SGN and Digital Chocolate - both of which have recently undergone restructuring - have also been involved, as has social gaming giant Big Fish.

Similarly, soft money casino games - poker, slots, bingo - have been riding high in top grossing charts for years: a trend that triggered major acquisitions as real-money companies starting buying them up. Compare DeNA buying ngmoco for $400 million in 2011 with IGT spending $500 million on DoubleDown in 2012.

Slide 17: The house is loaded

Yet whether we're talking about real-money or soft-money gambling, most developers will steer clear of such blatant monetisation. After all, it's wrapped up in lots of legislation that can change almost instantly. It's also a very competitive sector that requires high levels of marketing and in many cases the upside is either low margin or restricted.

Like a gun, it's not inherently evil, but it is designed for purpose. That's why the roulette wheel has 36 slots but pays out at 35-to-1.

Slide 18: Baby on board

At this point, I think it's important to explain neither I am talking about moves such as the Office of Fair Trading's investigation into "potentially misleading or commercially aggressive practices" towards children in free-to-play games.

This is not to say that government regulation isn't important. As we've seen in Japan, which banned a specific monetisation mechanic and has imposed hard limits on the amount of money minors can spend per month, it can have a substantial impact.

For example, GREE saw its quarterly revenues drop 5 percent - or around $25 million - on the back of such legislation in mid-2012.

Frankly I'd be amazed if any western government could force through such measures, though, and as we saw when this issue first arose in 2011 with children spending their parents' money in Capcom's Smurfs' Village, Apple was quick to change the way the App Store worked, while developers became aware of the sort of warnings they needed to put in place.

To that extent, 'Smurfberries-Gate' was a growing pain; a lesson well learned by the industry, although the education of parents with respect to setting up secondary iTunes accounts and using the iOS Restrictions menu is ongoing, and likely will remain so.

Slide 19: Fist of fun

So if I'm not talking about the morality of gambling or taking money from children, what am I talking about?

Let's talk about the hardcore backlash...

Ever since free-to-play gaming came to mobile, there's been a lively debate from hardcore gamers. These are the sort of people who are happy to spend $180 on the Call of Duty: Black Ops II care package but are morally offended that a mobile game contains the option to spend £69.99 on a chest of virtual gems.

After all, with the limited edition console game, they get night vision goggles and an aerial drone.

Of course, these people don't understand the free-to-play revenue curve; nor even if they've stopped buying DVDs and switched to a Netflix subscription, have they thought deeply about the value of virtual goods.

Slide 20: It's about time

Yet for their ignorance of the industry, this group do understand games, at least as they used to be played. And here they have a strong argument concerning the impact of the free-to-play business model on game design.

Whereas paid games were designed to train the player in some sort of skill, aided with increasing attributes and more powerful items, free-to-play games are too often designed around resource restrictions (typically based on time).

There is little in the way of skill progression. Instead progress is controlled by timed game sessions that can only unlocked via some form of payment.

Slide 21: The cross-eyed barbarian

A recent example. I've been playing Clash of Clans off-and-on since August and have spent about £60 in total.

I find myself faced with a dilemma. I can create enough elixir to upgrade a building, but in order to do so I have to upgrade my town hall, which will cost 2 million coins. I don't play regularly enough to grind that amount of resources, so the easy option is to spend £6.99 to instantly access the upgrade, although it will still take 8 days to take effect. (Of course, I can also pay to do this immediately.)

Of course, this is not a moral dilemma. It's a financial one, and not a big one at that. Would this situation been different if the required purchase for progression was £69.99 though?

I think it would be, both for the developer and for players. In this talk, I'm mainly looking at the impact of morality on developers, but there is also an aspect of morality for players too. (Perhaps another talk.)

Still, given that developer Supercell is generating $2.4 million daily from Clash of Clans and its other game Hay Day, there are clearly plenty of people who are enjoying the experience.

Actually, as Clash of Clans is the only game I've spent this amount of time and money playing, I'd highlight its success as an exemplar. In terms of the hardcore complaint, I think it provides enough of a progressive skill-based element in its base attacking mechanic to stand head-and-shoulders above almost all other F2P mobile games.

Of course, we can do much better, though.

Slide 22: Squeeze the pips

While Clash of Clans is the top grossing game on iOS, many competitors have reversed-engineered its revenue and player base and tell me that developer Supercell isn't monetising its players aggressively enough.

(Of course, they say it isn't monetising its users aggressively enough.)

And this for me is the touchstone of Morality in a Big Data, Frictionless Payment, F2P Mobile Gaming World.

Thanks to big data, developers can track everything that happens within their games. They can tweak monetisation, even to the level of targeting players in specific geographic locations who are half way through the game.

Developers know how aggressively they are monetising their audience, both in terms of their initial game design and how they operate their games.

The temptation for any business is to maximise its revenue. Don't leave money on the table....

Yet, this is a self-imposed condition. Sure, publicly-traded companies are always under the spotlight while those who have taken venture capital have performance targets. Even the smallest company has to hit payroll.

But from what I've been told, two of the most successful companies of the past 12 months are not maximising their revenues. As well as Supercell, Danish developer Kiloo and SYBO announced enormous player numbers for Subway Surfers; something that raised eyebrows because the game isn't comparatively top grossing.

"We focus on player retention," say Kiloo, when asked about this subject.

Even big companies such as DeNA talk more about banking fun than banking cash these days.

"The mark of a good free-to-play game is you don't have to pay to play. It's about engagement," CEO of DeNA West Clive Downie told me.

"Three years ago we might have thought differently, but I think we've learned more than anyone else and we're using it to make compelling content.

The smart money in the market is clearly moving in this direction.

Slide 23: Lower your expectations

What does this mean in practice?

One small but significant thing that all companies can think about is the maximum value they charge for their in-game currency. According to Apple's terms, the maximum is $100, but a surprising number of companies go lower.

Halfbrick's Jetpack Joyride's maximum IAP is $30, while NimbleBit's Nimble Quest's maximum is $10, down from the $40 maximum it charged in Pocket Planes.

Supercell charges the maximum $100 in Clash of Clans while only $40 in the more casual Hay Day.

Of course, this is leaving money on the table, but maybe not as much as you might think. If you have a game that people love, will the friction of having to make two in-app purchases seriously impact the long-term value of a player?

If anyone has any data, I'd love to know.

Slide 24: Need a bigger boat?

But I know what your CFO is thinking. This is a once in a lifetime opportunity to build a company. Next year, we'll all be millionaires, but not if we don't maximise the money that's on the table.

As they say in Jaws, We're gonna need a bigger boat. And if you're hunting a lot of whales, you do need a big boat.

Actually, I think one of the challenges about talking about morality in mobile games is that everyone expects it to be a big subject, perhaps like morality and guns.

It's not. Morality is more about small decisions; the sort of decisions we don't consider involve much moral thought at the time. Over time, these create the framework we use to justify (if not make) larger decisions.

In this context, I think the biggest issue for mobile developers is company size. The bigger your headcount, the more money you raise, the more aggressively you will end up monetising your players.

But, I'm no wall flower. I have no problem with the view of NaturalMotion's Jason Avent that if some of your audience aren't complaining, your monetisation isn't working properly.

"This is how every business operates, You have to reach the point of resistance. You have to judge whether revenue matters to you," he added, at the 2012 F2P Summit.

If nothing else, he knows what he is trying to do.

Equally I don't have an issue with the unnamed Game Insight designer who told me, "You have to wring the money from your players". At least, he said players not users, and he had spent $5,000 in League of Legions, so he knew what he was talking about.

Slide 25: Ceci n’est pas une IAP. This is delight

But, of course, there is another way. A better way.

At GDC a couple of years ago, one of the team behind Words with Friends said something brilliant: "Are your push notifications delightful?"

His point was that even the humble push notification, so often used for hard commercial activity, was an important communications channel with players.

And I think we can extend the idea. When it comes to in-app purchases, the question to ask is not How can we make the compulsion loop so compulsive users will be frustrated enough to pay? (Even though that will work and be efficient.)

No. The question to ask is Do our in-app purchases delight our players?

IAPs shouldn't be about overcoming frustration. IAPs should be about enabling enjoyment.

Slide 26: A flower for every rifle

Because, from what I've seen writing about the games industry for 13 years, most people didn't get into it for the money, and those that did don't stay long.

So if you do want to hang around as a developer, you need true fans, not whales.

Of course, you need to make a profit. But profits won't bring you success. Only passion for your games will bring you success.


Contributing Editor

A Pocket Gamer co-founder, Jon is Contributing Editor at PG.biz which means he acts like a slightly confused uncle who's forgotten where he's left his glasses. As well as letters and cameras, he likes imaginary numbers and legumes.

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jon jordan
For those who are interested, I did decide to drop £6.99 on more Clash of Clans gems. And, now, I'm not expensing the IAP.
Andr Bernhardt
Fantastic slides and very important topic - thanks for the great presentation.
In case you didnt read it - read this: Influence - http://amzn.to/Xex2g3 .