Like a lot of games, you’re probably struggling to find paying customers. There are more F2P games than ever, which makes it hard to attract players willing to spend money. You have a passion to design great games, but you also need a sustainable business.
The popular school of thought is to maximize revenue by capitalizing on a game’s “whales” - big spenders with deep pockets. Considering only 5% of players make in-game purchases and the top 1% of mobile players account for 58% of free-to-play game revenue, that isn’t a terrible strategy. Some companies have become so obsessed with extracting revenue from their slim pool of whales that they forget about their other players.
(Quick aside: The term “Whales” comes from competitive gambling, specifically poker. It referred to players who would wager a lot of money. It’s been co-opted by any business who attracts big spenders.)
In this article, I’m going to show you why whale hunting can be a bad idea, and what you should do instead to increase your revenue and turn your game into a healthy and sustainable business.
The Challenge of Whale Hunting
The problem with catering to whales is that there aren’t that many of them. You’ll expose yourself to catastrophe if you rely on them too much. All it takes is a new game with a hot concept or an innovative feature to tear them (and their bank accounts) away from your game.
Since there aren’t many whales, you have to be competitive to acquire them too. Finding them may bump up your Customer Acquisition Cost much higher than you can sustain.
Besides, it doesn’t feel very good to squeeze as much cash as possible out of a small number of people. You and your team may have some ethical reservations about this kind of model, especially when you start referring to your whales by name around your office. “Did you see MisterPyro42xx broke $2,500 today?” Bleh.
A game that relies on whales is fragile, which is why many games have turned their attention to dolphins and minnows. Dolphins, of course, are the medium spenders and minnows are once-every-so-often-maybe-during-an-event spenders. The beautiful part here is that you focus on creating and serving more customers, rather than on driving more and more revenue from a tiny sliver of your game’s audience.
How do you turn more free players into payers? By focusing on your Conversion Rate.
Conversion Rate is a critical metric for free-to-play games. Yet for some reason it’s not mentioned as often as, retention or ARPPU.
What is Conversion Rate?
Your Conversion Rate measures the percentage of users who make a first-time purchase out of the total pool of users during a given period. Simply put, if 8 of your 200 users have made a purchase last month, that month’s Conversion Rate was 4%. (Hopefully you have more than 200 users, but we’re just using simple numbers here.)
Most games measure their Conversion Rate over a 30-day or 90-day period. A monthly rate is useful to make decisions, but investors generally look at your financial results on a quarterly basis, so it’s good to have that number on hand too.
It’s also useful to measure your Daily Conversion Rate, which is the number of first time purchases in a day divided by your Daily Active Users. You can map it against whatever promotions or content you have going on at the time. If, for instance, you had a 24 hour flash sale, you would want to compare the sale’s Conversion Rate against the rest of the month.
Conversion Rate, without context, isn’t actionable. It doesn’t give you any information regarding how to drive it up. For that, you have to experiment to find your growth levers (activities that drive your Conversion Rate).
So while your Conversion Rate is a critical metric to understand, it’s just one of the many data points your game should track.
Why Does Conversion Rate Matter?
Like I mentioned earlier, a higher Conversion Rate means a healthier game and a more stable business.
The first in-app purchase is always the hardest, for you and the player. Once a player makes their first purchase, they find it easier to make subsequent purchases. A successful transaction (where they receive some value and you don’t use their payment information fraudulently) eases players’ fears.
Think of it like trying a new restaurant. You want to try it, but what if the food sucks? What if the service is terrible? It could be a waste of money! But once you get through the first visit and everything goes fine, dining there more often is a lot easier.
Plus, a higher conversion rate spreads your revenue across more players. Instead of relying on that small group of whales, you can build a much larger customer base. It can also increase retention (if you don’t use paywalls or tight pinches) because the player is invested in the experience.
This balancing is already happening in F2P games. In 2018, revenue comes from a larger portion of the player base than in 2017 and 2016.
Image: deltadna.com
Fortnite is an excellent example of a game that achieved success by monetizing their entire player base, not just their whales. In a survey by LendEDU, nearly 69% of players report having purchased in-game content. 37% of players revealed it’s the first game they’ve ever spent money on.
The average Fortnite user spends $84.67. That is remarkably high considering how many players the game has. They buy outfits, emotes, harvesting tools, dance moves, and other cosmetics. In May 2018, Fortnite earned more than $300 million.
Image: lendedu.com
What’s a Good Conversion Rate?
This is one of those questions I can only answer with a frustrating “It depends.”
It’s nearly impossible to compare games, unless one of them is a clone of the other and they compete for the exact same audience. If you really want to benchmark your Conversion Rate, compare your game to other games in the same genre.
Generally speaking, 2% is about normal. 5% is considered an extremely good Conversion Rate. If 5% of your users become customers, your business should be healthy. But that doesn’t mean you have to hit 5%. Plenty of games do just fine with Conversion Rates of 1% or 2%.
King, the makers of Candy Crush Saga, says 70% of their players complete the game without ever spending a dime. That means 30% of their players spend something, which is a staggeringly high Conversion Rate.
Like I said earlier, however, Conversion Rate is important, but it requires some context. The developer you met at the bar who bragged about his “massive Conversion Rate” didn’t tell you the whole story.
To understand the meaning behind your Conversion Rate, you have to know how much those paying customers purchase. You might have a 20% Conversion Rate, but if those payers only spend 99 cents once per month (or whatever interval you’re measuring), your business may still struggle.
Build a Foundation
It’s pretty simple: The bigger the conversion rate, the healthier the game. If you focus on turning more players into payers (rather than extracting cash from your whales), you’ll create a solid foundation of customers to carry your game forward.
Struggling to monetize your game? Set up a call with us and we will plan a custom monetization roadmap for you. Contact us.
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