Monetization & Incentives (Part 2): Free-to-Play Games
This is part 2 of how game design and strategy are affected by the incentives created by how your game is monetized. While monetization is necessary to sustain development, overly aggressive methods can undermine the quality and enjoyment of a game. This is a hot topic when we now get to free-to-play game studios, which I have spent the last 3 years working with and building product for.
Personally, I am not in any way against game monetization. On the contrary, I believe game studios should monetize their game and do it well! Games can be both fantastic and earn great amounts of money. But you cannot be blind to the incentives you are creating. Step one to monetizing games is knowing what it means to monetize various parts of your game.
The primary ways of monetizing free-to-play games are:
- Cosmetics
- Buy progress
- Pay to win
- Battlepasses
- Ads
Why Free-to-Play
Somewhere between 2005 and 2015, the gaming industry realized that truly engaged players with disposable income will spend 2-50x what they’d spend on a paid game over time if the game was engaging enough. That changed everything. By going free-to-play and monetizing, their audiences grew massively but so did revenue. It made the best sense for live-service games (earn more from continious development) and multiplayer games (which monetize better as F2P, as we’ll see later).
Late 2000s (2007–2010): Asian F2P games like MapleStory and CrossFire showed huge profits from microtransactions, inspiring Western developers.
2009: FarmVille on Facebook proved casual players would spend real money on virtual goods, making Zynga a giant.
2010–2012: Mobile F2P games (Clash of Clans, Temple Run) began out-earning paid apps, thanks to in-app purchases.
2013–2014: League of Legends and World of Tanks demonstrated F2P dominance even in hardcore PC gaming, with revenues over $1 billion/year.
Lootboxes
Before we get into the monetization methods, let’s mention the elephant-in-the-room; RNG.
Lootboxes are a way to sell random rewards for real money, hiding the odds and exploiting gambling psychology. They can be applied to cosmetics, power, progress or any other content and are always harmful when tied to real money. Progressive countries are already regulating or banning real-money loot boxes due to their predatory nature.
Examples:
- Overwatch (Blizzard)
- FIFA Ultimate Team (EA Sports)
- CS:GO (Valve)
- Clash Royale (Supercell)
- Magic the Gathering Arena (Wizards of the Coast)
Cosmetics
Cosmetic monetization sells purely visual changes like skins, outfits, emotes, and other personalization. Players pay to express themselves or to show dedication to the game, without affecting gameplay. This is generally considered the healthiest monetization model in free-to-play games.
However, it requires the game to be actively multiplayer. It is about ownership and player expression, which is only valuable in games where your personalization is exposed to other players. Players want to show off, to feel good: this is me and only me.
Examples
- Fortnite (Epic Games)
- League of Legends (Riot Games)
- Valorant (Riot Games)
- Call of Duty: Warzone (Activision)
Positive Incentive
Players who care about the game and community are motivated to buy cosmetics because they feel invested and want to stand out. To increase monetization, studios are incentiviced to make the game more fun long-term, players more engaged, and invest in dramatic visuals.
Negative Incentive
Cosmetic monetization leads to a decrease in visual quality for non-paying players. There is an incentive for the studio to make free-to-play players have fewer and worse options. By limiting styles and cool looks by players who aren’t paying, you increase the likelihood of converting buyers. The studio has an anti-incentive to improve the visuals for players who do not pay. Most games can be perfectly fine even if they give in to this negative incentive. Games which sell cosmetics will over time have uglier and less interesting visuals for non-paying players.
It is also common for games over time to have cosmetics grow more and more extreme, which may hurt the aesthetic of the game. If the studio doesn’t keep pushing the aesthetic to more extremes, it gets harder and harder to sell skins.
Buy progress
This model lets players pay to speed up or skip grindy parts of the game, such as building, crafting, or unlocking areas. It appeals to those with less time or patience, but risks making the game feel like a chore to push purchases. The classic argument for this monetization It can however be incredibly lucrative for the studios, especially as money players will incorrectly deem it not to be pay-to-win. Long term, it fundamentally undermines the game design. A game which monetizes skipping gameplay also directly monetizes the production of a frustrating/slow/boring game. Due to the (weirdly) positive player optics and insanely lucrative monetization rate, selling progress to players is the best way to squeeze a ton of money out of a successful game, while corrupting it long-term. This is why we have seen massive games such as WoW, Escape from Tarkov, and Runescape adopt this method from the F2P mobile game industry.
Examples:
- World of Warcraft Level boosts (Blizzard)
- Runescape buying coin through bonds (Jagex)
- Mobile Legends (Moonton)
- AFK Arena (Lilith Games)
- Clash of Clans (Supercell)
Positive Incentive
Players with limited time can enjoy more of the game without spending hours grinding, in the short term.
Negative Incentive
Monetizing the purchase of progress is one of the most deceptively toxic ways to monetize a game. While buying progress to “save time” for players with more money than free-time seems innocent, it leads to major game design corruption long term as the studio is incentives to increase grind and time-waste. Paying players will even say they want this monetization mechanic (“I want to play the endgame but I only have 2 hours a week to play”), not realizing that the studio has caused the problem (making the game progression slow and boring, selling the shortcut) and selling the solution. Games monetizing by selling progress will overtime become grinder, slower, and more boring, to get players to pay to skip the gameplay. The studio is incentivised to cater to the meta “endgame”, and make everything else unfun.
Pay to win
Pay to win means selling gameplay advantages, such as stronger characters, better weapons, or exclusive abilities, for real money. It directly impacts fairness and competitive balance, favoring paying players. This method can alienate the community and shorten a game’s lifespan. A game which is pay-to-win is nearly dead on arrival in my eyes. It has fundamentally betrayed the player. It is the most toxic way to monetize a game, especially when the game has multiplayer functionality where players are competing (either by leaderboard or directly in PvP).
Examples:
- Game of War: Fire Age (Machine Zone)
- World of Tanks (Wargaming)
- Diablo Immortal (Blizzard)
- Summoners War (Com2uS)
Positive Incentive
None. A game selling wins has no positive incentives.
Negative Incentive
It destroys fair competition and drives away players unwilling or unable to pay. It replaces the game with swiping player’s credit cards. No game can survive being pay-to-win and still be a game which puts game design first. Pay-to-win games will over time become harder and grindier, incentivizing players to pay to win. If it is competitive, it will also slowly (and painfully) churn the non-payers as they can’t compete.
Battlepasses
A battlepass is a timed progression system where players unlock rewards by completing challenges during a season. It combines cosmetics, premium currency, and exclusive items to keep players engaged over time. It rewards both playtime and payment, making it a popular modern model. It combines gameplay-granted progress (play to get things) with paid progress (pay to get things). Similarly to loot boxes, it’s more of a format as you can add whatever to the battlepass; pay-to-win, currency, cosmetics. However for most games using it, the primary gain is cosmetics and in-game currency. That said, it is worth a spot in the list of monetization mechanics as it creates a unique incentive.: game progress. Encourages regular play and rewards dedication. It grants players a reward for just playing, but a leveraged reward for the payers. It aligns the incentives of the studio (to monetize) and players (to play), which is why it has become popular in the last years is serious high-quality free-to-play games.
Examples:
- Fortnite (Epic Games)
- Apex Legends (Respawn Entertainment)
- Call of Duty: Mobile (Activision)
- PUBG Mobile (Tencent)
Positive Incentive
Create a game which is fun and engaging, connecting progress with playing the game. A boring and unengaging game will not be successful with a battlepass.
Negative Incentive
Battlepasses incentives studios to slow down progress, encouraging the paid battlepass. Games monetizing with battlepasses will likely slow down to grinds. Additionally, we’ll almost always get seasonal gameplay (which isn’t inherently bad) to keep players on the “treadmill” with new battlepasses. Games using battlepasses will overtime become slower and grinder, but attempt to refresh the game with seasons or leagues (which isn’t bad for players!).
Ads
Ad-based monetization shows players video or banner ads, either as interstitials during breaks or as rewarded ads offering in-game bonuses. This allows completely free access while still earning revenue. Especially as a “hardcore” gamer (in the commercial gaming industry, everything on Steam is “hardcore”), you’d think I hate ads. But I don’t. It will make sense when we look at the incentives. The reality of ads is that many gamers simply will refuse to play games if ads are present (especially on Steam/Epic/Console). But where it is more accepted (mobile / web gaming), it actually makes a ton of sense.
Examples:
- Subway Surfers (Sybo)
- Crossy Road (Hipster Whale)
- Angry Birds 2 (Rovio)
- Hill Climb Racing (Fingersoft)
Positive Incentive
Monetizing with ads actually has major positive incentives. You must make a game where many players will play for long periods of time, even though their gameplay is disrupted by ads. Strangely enough, ads create the most positive incentive in F2P monetization.
Negative Incentive
The only negative incentive from interstitial ads is ruining the game. However, this is self-correcting as a massive amount of ads will make players churn. The incentives thus become to balance the interstitial ad volume. Interstitial ads do not have long-term negative changes, however many players despise any interstitial ads in their games and will simply churn day 0. For rewarded ads it’s a bit worse. It causes much less player churn as the ads are player-initiated and fully optional, but it does create an incentive to make the game harder, and “sell” bonuses using ad views. This can be mitigated by selling a one-time purchase to remove all ads, which I’ve seen be the largest revenue driver for some commercial mobile games. Games monetizing on rewarded ads will overtime become grinder and harder while attempting to maintain engagement, incentivizing the players to click on more optional ads.
Conclusion
Monetization shapes the design, pacing, and perception of free-to-play games. Each method has strengths and risks depending on how it is implemented. But humans will optimize, so we always see games change based on their choice of monetization:
Selling cosmetics leads to non-paying players getting worse and worse visuals, skins, and personalizations.
Selling progress bypasses, currencies, and level-ups actively leads to the non-endgame gameplay being worse, slower, and grinder.
Pay-to-win games will slowly turn the game into garbage unless you’re paying, until the only gameplay mechanic which remains is paying. Studios however will do everything they can to walk a fine line.
Battlepasses lead to games becoming slower and grinder, but always try to refresh the game with seasons and leagues to get players excited and having fun.
Interstitial ads have no long term effects, while rewarded ads lead to harder and harder games (until it is no longer fair for players). They also have to have ads, which let’s be honest, sucks.
I just think it’s interesting to think about incentives in all things, but it becomes crystal clear when it’s applied to monetization. Money doesn’t lie, and humans in organizations will always optimize for money long term. We don’t have to pretend it is not true, but we can design our games around it.
Longevity in gaming, while making money and players are happy. Can you imagine it?
I can!