In recent years the terms “micro-transaction system” and “micro-payments” have been floating around a lot all around the world. The success of such systems on the Asian game market and the possibility of their implementation in games in Europe and North America have been wildly discussed by many involved in the game industry.
So what does a micro-transaction system actually mean and why has it proven to be so successful in both Russia and some Asian countries? Basically, a micro-transaction system is a business model used for free-to-play online games that allows players to purchase different in-game items at a very low price. Since the items are cheap the payments for them are small, people aptly began to call these transactions “micro-transactions.” To understand the reasons why this model has proven to be so successful we will have to take a look at what a free-to-play game really means.
How has the micro-transaction system been implemented in “free-to-play” games in Russia?
It’s obvious from their name that you pay nothing to play a free-to-play game. But if you want, you can purchase in-game currency and a great variety of extra in-game items and abilities for a very low price, thus allowing your character to progress faster in the game and/or look different from all the other characters who play for free.
Since the free-to-play game model has been very successful in Korea it is often referred to as the “Korean Model.” However, in Russia we call it the “Russian Model” because competing models, including subscription and trial-to-purchase, maintain insignificant market share in comparison to free-to-play in Russia’s online game market. In fact, approximately 93% of all Russian massively multiplayer online games use the free-to-play model.
In 2007, the size of Russia’s free-to-play game market was estimated at $70 million USD and the number of Internet users in Russia exceeded 27 million people, five-to-six million of whom play online games.1 About 10%–30% of the users who play free-to-play games two times per month or more make in-game purchases.
In 2007, IT Territory earned over $20 million (USD) using the micro-transaction system which has been successfully implemented in all its free-to-play online games (www.dwar.ru, www.territory.ru, 3k.mail.ru, drive.mail.ru etc.).
What’s so special about free-to-play games that make players pay when they could just play for free?
Players who engage in subscription-based games have to pay before they start playing. This causes many players to feel as though they have already paid “enough” for the experience. The goal of the developers of subscription-based games is to create a level playing field so that the players feel the game is fair to everyone. If the developers were to offer in-game items for sale it would break the balance of the game allowing those who spend more to crush the normal subscribers, causing the normal subscribers to feel cheated and alienated by the inequality in game-play.
In free-to-play games, players do not need to put money down before playing. After they become involved enough in the game, players will desire to perform better, to edge out the competition, and to give themselves a unique appearance to stand out from the others. Thus motivated, players will begin to make purchases of game items because of their low cost and the fact that they won’t feel as if they have “already paid” as in the subscription-based model. Although it is possible to “earn” most items without purchasing them, it is time-consuming—and most players will be willing to pay the minimal costs to save time.
Lets’ take a look at what you can sell to players in a free-to-play game:
• Game Currency is the first thing players buy in the game—because without game money they can’t purchase any in-game items. Due to the structure of the game, players will eventually need to fill their character’s pockets with game currency in order to progress.
• Power-ups and Limited-Use Items are the second most popular category of game items that players buy in the game. These are finite enhancements and items that can be used only once or a few times until they run out and must be purchased again. These include things like special potions and magic scrolls that can have devastating effects. Though they may only work once, players do not hesitate to buy them due to their low cost.
• Rare and Unique Items are very popular among players who are really involved in the game and want to look different from other players. These items include either one-of-a kind or extremely rare and powerful items that can only be acquired by purchase. As a result, acquiring such items can give paying players a major edge over their non-paying competition.
How did the practice of selling in-game items for actual currency get started in Russia?
The first Russian browser-based MMO game was developed and launched in 1999 by a group of programmers who did it for fun with no intention of gaining any profit. The game became very popular and for quite a long time it could be played absolutely for free. At one point the players suggested that the game administration should sell different items and abilities to those who were willing to buy them. Ironically, then, the idea of monetizing what was previously free came from the players themselves rather than from money-hungry entrepreneurs.
Eight years have passed since those early days and today we can say that in Russia the micro-transaction system has proven to be the most successful payment model for MMOGs, and the situation is unlikely to change in the next three-to-five years. For the next few years, free-to-play games are likely to occupy the largest share of Russia’s MMO game market.
What are the possible reasons for the success of the micro-transaction model in Russia?
It has been said that the majority of Russians don’t plan their purchases. Moreover, Russians on average don’t like to pay for anything if they are not sure that they will use it. Russians have a similar attitude towards games: They are unwilling to put down money on a game they haven’t even played yet or are not sure about. At the same time, Russians can be quite emotional and prone to making spontaneous purchases. Generally if Russians feel the desire to purchase something and the price seems reasonable they will make the purchase without hesitation. The micro-transaction system works well in many countries but thanks to the Russian mentality it has proven to be even more successful in Russia than in any other country.
Will the micro-transaction system work for multiplayer casual games?
All the transaction tendencies that have so far been discussed are true for both hardcore MMOGs and casual multiplayer games. Though currently there are not many casual multiplayer games on Russia’s market, the micro-transaction system is most likely to work as well for them as it does for MMORPG’s. For example the micro-transaction system has been successfully used as the main payment method in many online multiplayer casual games in Korea and China.
IT Territory was the first company on Russia’s game market to launch a browser-based multiplayer online casual game called The Bugs in 2005 (http://zhuki.mail.ru/ ). It’s a game in which you become the coach of a team of cute little bugs: They take part in different types of races and swimming competitions and pursue unique quests. In return you have to feed them, heal them if they get injured, train them, etc. With the money you get when your bugs win competitions (or with real-life currency) you can purchase food, medical kits, clothing and other equipment for your bugs.
Is the conversion rate better in trial-to-purchase or free-to-play models?
Today the trial-to-purchase model is quite popular in the casual game markets of Europe and North America. On average out of every 100 downloads only one or two users actually purchase the games. In our experience, by contrast, up to 30% of those who play free-to-play games will make some sort of micro-transaction purchase.
Summary
• Almost all Russian free-to-play games utilize the micro-transaction system.
• The micro-transaction system is a method of making profit by offering in-game items at minimal prices in free-to-play games.
• People enjoy this model because it allows them to try the game for free and then to progress through it faster by making low-cost purchases of items.
• Based on its usage in MMO games, the micro-transaction model is likely to work well for casual multiplayer games in Russia.
• The conversion rate of free-to-play games is much higher than that of trial-to-purchase download games.
