This is a guest post by Sachin Rekhi, currently an Entrepreneur in Residence at Trinity Ventures. Previously, Sachin co-founded Anywhere.FM, an innovative web music player that was acquired by imeem. At imeem, Sachin led emerging monetization strategies, including introducing imeem’s virtual currency. You can read more from Sachin on his blog or follow him on twitter.
Winners from the Mochis Award Show @ Flash Gaming Summit
What’s often most exciting for me about events like these is hearing different metrics tidbits from the speakers who are knee deep in the space. This conference was no exception, with a variety of different stats shared throughout the day. I’ve summarized some of the highlights below.
Flash Game Distribution & Advertising Market Size
Mochi Media is by far the largest flash games distribution and monetization network. They reported that they are now seeing over 100 million unique users who play games across their network each month, as well as over 1 billion monthly game plays. In addition, Mochi offers MochiAds, an advertising product allowing flash game developers to embed ads into their flash games. In 2008, MochiAds paid out over $1 million to flash game developers. While Mochi is definitely not the only distribution and monetization player in the flash gaming space, it definitely commands a healthy share of the market and thus these numbers can give you a rough sense of magnitude in the space. While the game play stats are impressive, the advertising revenue generated for developers is still modest and definitely suggests the need for alternative revenue sources like micro-transactions and virtual goods.
John Cooney from Armor Games provided some rough stats on the ad revenue difference from in-game ads versus ads around the game on a game portal page. John stated that the ad revenue from portal ads was at least 4x greater than the revenue from in-game ads. John attributed this large difference to a variety of drivers, including the ability to have higher quality multimedia ad units on a portal page, having 3-4 ads per page, as well as simply getting the user to play more games on your portal.
The message was heard loud and clear by flash game developers that it is going to be very difficult for them to make serious money from their games without building their own portal or partnering with existing portals (through revenue share or sponsorship agreements).
Conversion Rate of Active to Paid Players
Both Paul Preece from Casual Collective and Daniel James from Three Rings shared some interesting stats from their own games on conversion rates associated with paid players (players who purchase levels, virtual goods, etc through micro-transactions). Paul said that for their single player games, they see that 2% of their active players have converted to paid players. Keep in mind this stat is for “active players” who come back to the site regularly, not overall unique visitors. What was interesting was that for his multi-player games, 3% of active players converted to paid players, suggesting their may be some additional conversion lift from multi-player games. Daniel James echoed Paul Preece’s numbers, suggesting 3-4% of Three Rings users pay as well.
The key thing they stressed was that only a very small percentage of your users end up converting, because first they need to become active users that come back and are retained by your game as well as be eager enough to pay through one of a variety of ways.
Per User Transaction Value & Lifetime Value
Daniel James went on to share that his company’s Puzzle Pirates game was seeing an average transaction size of about $20, with a per user lifetime value averaging $125. This suggests that while its difficult to get people to pay, those that do pay may pay significantly.
Its thus important to ensure for that small number of users, you provide enough reasons and the ability for each user to plow a significant amount of money into the game if desired.
Leaderboards Drive More Retention
While everyone would agree that leaderboards drive additional retention of users who go on to compete with strangers or friends, Jameson Hsu from Mochi Media shared some details on exactly how much additional retention can be expected. Jameson said that they have seen leaderboards increasing retention by up to 30%.
This suggests that adding your own leaderboards or integrating with existing leaderboard platforms is often a worthwhile exercise to drive additional game play and retained users. Given that monetizing through micro-transactions typically relies on highly active users, this becomes even more important for driving lucrative monetization.
Bret mentioned that one of their social games, Mafia Wars, was getting 1.7 million daily players on Facebook. Texas Hold-em, in addition, gets over 1.5 million daily players. Bret also mentioned there were social games out there making $20-30K/day in revenue. These large numbers trump what most classic flash game developers would expect in terms of traffic and monetization.
Adam Caplan from Super Rewards, which provides payment and ad offers to fuel micro-transactions, said that they are now paying out over $10 million/month to social game developers, an equally significant figure. And Super Rewards is just one of many providers in the space.
While Bret encouraged flash developers to get into this space, he cautioned them that they won’t win by simply porting their game over. They need to design their game with the right mechanics targeted at this audience, including making the game playable in 5 min chunks, appealing to user’s desire for status, and focusing on reciprocity loops of gifting and social grooming.