Price and revenue is no longer a function merely of product and market. It’s also the function of the means by which a company extrudes value from its product. In a time when all of us a are getting increasingly used to experiencing (seemingly) for free, using (seemingly) for free and getting (seemingly) for free, the difference between failure and success can rest entirely on the chosen path to monetization.

That it almost doesn’t matter what you sell only how you monetize it is certainly a relevant mantra in the digital games industry. With play and entertainment being so hard to value in monetary terms, a successful monetization strategy can mean the difference between earning a lot from a game that delivers more mouse clicking practice than it does entertainment and earning squat from a game that produces engaging gameplay and rewarding experiences for hours on end.

One has to get it right. And in order to get it right, one must carefully craft play and pay experiences tailored for the targeted player type and in tune with the game’s DNA. This, in turn, requires an in-depth understanding of how each gameplay mechanic and each monetization technique affects different types of players.

For the development of our new poker game, monetization has always been one of the primary challenges. From day one it’s been a key variable in the product design process and in our marketing strategy. As we draw closer to implementing what we believe is a functional model for us, we thought it might be fun to share some of the considerations the led us to where we are.

First, a quick description of the game to set the stage.

The game is based on traditional poker but features more strategic and tactical gameplay elements. It’s a tournament game that cannot, really, in any practical sense, be brought offline. So it is and will remain a digital game. It targets people with typical hardcore gamer/real money poker player characteristics – a problem-solving personality, an inquisitive mindset, a commanding desire to win and an urge to challenge themselves and others.

In essence we see three ways in which we can monetize our game:

1. Enable play for real money and collect rake/ fees

2. Introduce some kind of free-to-play monetization

3. Capitalize on the value of the player database

RAKE IS FOR THE AFTER PARTY

In theory, playing our game for real money is not only possible – it is designed for it. It’s (even) more of a skill game than traditional online poker, but it is still possible for anyone with a fair grip on it to win. You get sucked out on. You make bad bluffs that end up winning anyway. Your opponent gets aces when you get kings. This is a vital if we are to offer it as a gambling game. Too much skill and too few people will feel comfortable enough about their chances to put money behind.
In reality however, rake/fees are in the future for us. Gambling content is hard to innovate. For people to wager money on something usually requires a high degree of familiarity. Just look at how NL Hold’em dominates the action in online cards rooms or the prevalence of games that are mere tweaks of existing games like blackjack on casino floors the world over.

If you don’t know it, you don’t bet on it.

So before we start having illusions about raking in millions, we need to get the game out, popularize it and by doing so hopefully create demand for real money play.

THE NO TRICKS F2P TRICK

The logical model for us to start with is  free-to-play. And that model alone can generate massive revenues. On facebook. On mobil. On independent platforms. Zynga Poker, at peak, generated roughly $220,000,000 a year in revenues for Zynga. IGT reported $54,000,000 in Doubledown turnover for the second quarter this year and for Eilers Research recently estimated Caesar’s Interactive Entertainment’s combined  revenues  from their various social games during the same period at $56,900,000. King’s free-to-play behemoth Candy Crush Saga is said to pull in a bit over $500,000 a day.
Clearly, we should just replicate their model and order up some Porches!
Unfortunately, it’s not that simple.

For our identified target audience, not paying to play games like Candy Crush Saga can become a meta game in itself. It makes total sense for them not to pay. Due to how many social games are designed and monetized using “progress gates” for example, not paying is not just a matter of saving money, but a question of mastery. Progress gates, essentially, are points in a game where advancing to the next level or unlocking the next batch of content requires a considerably increased effort. The game might suddenly get way harder (or even impossible) to beat unless a player forks up for better gear, powerups or more poker chips. The game’s skill element is intentionally undermined by its monetization. For players who understand the mechanics at play that is counterintuitive. Paying essentially means surrendering to the game. It resembles cheating.
So once you pay, the game might lose its allure.

It’s hard to imagine a dumber business model for our audience. Coercive monetization, as Ramin Shokrizade calls it, would leave us constantly stuck between compromising the integrity of our game and compromising bottom-line profits.

In the case of Candy Crush Saga and Zynga Poker it obviously isn’t a dumb model (whether it is ethical is another question altogether). They’re doing great because they target a casual mainstream audience with a more “relaxed” attitude towards playing. We, however, need to seek inspiration elsewhere. Fortunately free-to-play is not a one trick pony. It’s proven to be a great model even when applied on the truly competitively inclined. If the game is good enough of course.

Here’s a comparison between how social gambling games (poker included) monetize compared to World of Tanks – a free-to-play tactical multiplayer tank busting game developed by Wargaming.

ARPMAU

World of Tanks | $7.58
Social casino games | $1.20 to $2.50

ARPPU

World of Tanks (estimate) | $30
Social casino games Avg | $70
Average for Asian game (for wider reference) | $118

FREE TO PAYING CONVERSION RATES

Est. World of Tanks |25%
Avg. social game in US | 2-4%

ARPMAU = Average Revenue per Monthly Active User
ARPPU = Average Revenue per Paying User

One should not read too much into these figures. The World of Tanks numbers are  atypical. But they serve as evidence that it is perfectly possible to build a sound free-to-play business without attracting a bazillion gajilion players of which only a small minority will pay you. And they also serve as evidence that even hardcore gamers can find a reason to pay if the setup respects its intended audience. It is not surprising that Wargaming has declared that it seeks to distance their games further away from coercive pay-to-win monetization and toward genuine free-to-win monetization.

And that’s the path we’re taking as well. Firstly because of the reasoning above and secondly because of the added upshot that turning to genuine free-to-win also strengthens our legal case for introducing cash prizes on a promotional basis in the game.

WHY LEAVE A GOOD THING?

Our third monetization option is to cash in on the social-to-gambling conversion value of the players we hope to recruit. Somewhere a real money poker game supplier is going to need players. Surely they’d pay for ours. Or?

Poker is a very interesting game to study from a monetization perspective because it’s has just as much in common with pure gambling games as it has with hardcore strategy games. It can capture a very large audience. But it’s not a very homogenous audience. Everyone loves the game, by not for the same reasons nor is everyone driven by the same motivations for playing or seek the same return. Consequently players will not pay for the same things.

Zynga taught us who were in the middle of the early poker boom that. Years of largely unsuccessful attempts to convert resource hogging play money players left us thinking that they were a lost cause. We failed to fully realize that a tweaked version of the game designed to serve slightly different needs and expectations than the ones that triggered our real money players to play would be worth paying for. We tried to convince play money players to behave like us instead of making our product behave like them. Even after Facebook became and established games platform (thus eliminating some of our better excuses) and Zynga Poker blasted onto the scene we failed to capitalize on the opportunity.

Depositing to play and depositing to pay are different experiences.
Lesson learned.

Is the potential of recruiting real money poker players from the ranks of social poker players an illusion or is it as real as an all-in raise to the face?

I have yet to make up my mind. I lack access to data that could verify or dispute all of my theories. But I will say this; I think it depends on factors often neglected when the topic is up for discussion.

I tweeted the following question the other day:

Social poker player most likely to convert to RM poker & why:

a) Whale
b) Paying player that no longer plays
c) Very active non-paying player

I got some great replies both public and privately. Some suggested a fourth alternative.

d) None

Fair enough. Again, I don’t know the answer but I remember the play money lesson and would hate to make the same mistake again. So I think it is vital to try and work out how the opposite migration of players might work.

The age and gender demographics of social poker games (they all follow pretty much the same recipe) and real money poker are very similar according to various sources. I myself am skeptical, but I don’t have any disputing data. Both allegedly serve 75-80% males aged between twenty and thirty (gender maps better than age). But that doesn’t mean the two games attract the same players. That, again, is what the play money lesson taught us.

If I’m playing a social poker game and paying for it, the chances are that I’m really enjoying it.Just because the game uses borderline coercive methods to get me to pay doesn’t mean I don’t find the money I spend well spent. Chances are also that I’m enjoying aspects of the game that  I’ll not actually find in a real money poker game. Different pay and play experience altogether.
It’s only if  one regards social poker as a poor man’s real money poker  that the likelihood of conversion skyrockets.

I could talk all day about this. But I’ll settle for explaining why I, for the sake of stirring things up a bit, like to argue that perhaps player c is the most interesting conversion candidate. It ties this blog together quite nicely.

Clearly player c likes poker. Otherwise why play the game so much? Clearly he/she is also ok with the significant disadvantages that not paying brings. He or she continues to play despite facing an uphill battle.

Ring a bell? Call the real money site nearest you immediately! We have a case of competitive gamer’s syndrome!

Wouldn’t that be great if it actually turned out that social poker scene’s equivalence of a play money player actually had value as a real money convert?
Sadly this remains a theoretical discussion for me. For all I know there may be exactly zero players in the DBs of the larger social poker sites that match this behavior pattern. But I still think the underlying logic is worth discussing.

By hoping to attract players that exactly match the profile of real money players we could potentially have a pretty strong conversion case. But it’s not something we’re betting a dime on.  In general I think most cross-over potential is overrated. Players play and pay for a game because they like that specific game. Regardless of how similar another game might be there are few guarantees (strong triple A franchise games excluded) that he or she will dig that one as well in a manner that increases overall revenues.

ANGLE SHOT ENDINGS

So that’s pretty much what I felt like sharing regarding how to monetize poker in general and our upcoming game in particular.  Aim for a hardcore gamer demographics with free-to-win monetization. If popular, leverage later on by introducing real money play.

At one point this post was twice as long so I might post some additional stuff later.
For now we’re busy working on the the in-game economy we have envisioned and implementing the model we believe in. Whether our game will contain enough intriguing and fair in-app purchases to convince players that have taught themselves to be wary of free-to-play to pony up remains to be seen. Sure, our chosen path means that we may end up releasing a game that many players like but don’t pay for since they don’t have to. But rather that than trying to outplay, bluff or over charge this savvy bunch. I’m pretty sure we’ll be angle shot us out of business on pure reflex if we do.

A follow-up post to be published at a later date will take a similar in-depth look at why we’re designing the game the way we are.