KONGREGATE

Don't Call Them WhalesF2P Spenders & Virtual Value

KONGREGATE

CEO & Co-Founder of Kongregate

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KONGREGATE

Kongregate depends on the 2%

2.1% of players buyvirtua l goods onKongregate.com

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75% of O Uf revenuecomes fro m virtualgoods

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KONGREGATE

We really depend on the 0.1%Spenders by Spender Cat egory

• $1-$10 • $10-$SO • $50-$100 $l ClO-$SOO $500+

4%

Revenue by Spender Cat egory

• $1-$10 • $10-$50 • $50-$100 • $100-$500 $500+

1%

72%

Kongregille .com platform stem, 2008·2015

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KONGREGATE

Same story for individual games.11 ...

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2014 lop grO$sing Kongregale games, lifetime reve nue by spender c.ategory

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KONGREGATE

Our mobile games look similar...'..

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Percentage Of Total Revenue ByPlayer Spend Deciles, January 2014

KONGREGATE

This is normal for the industry

&NftJe50.8%

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''"'""'' '"' 0.7% 1.4% 2.2% 2.8% 4.0% ~ ~os

16.3%

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KONGREGATE

So who is buying?lifetime ARPU bV Age

$10.00

$9.00

$8.00

$7.00

$6.00

$5.00

$4.00 +$3.00

$2.00

$UIO

$_ ~ " i " i if Ii 'i' Ii i ii'" Ii i ' " I ii ,1

13 15 1719212325 27293133353739 41 43 45 47 495153555759616365676971

KONGREGATE

And yet very uncomfortable" Polygon ... ..A ...... ...._

WHALE HUNTING

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$ In •

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Do Social Games Exploit the Mentally III?

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Chasing the Whale: Examining the ethics or free-ta-play gamesFree-to-play developers toss around the term ......hales" - - but what are [hey? What are their lives like? And

~uld (leslgnen stop targetlng them? This In-depth pIeCe examInes the ethIcS .n)l,Jnd all 8"91" on the~nue.

07.08.13 I ' ••lur. I Mike R_ I 119 l;:l

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So who is buying?

0."'"'

1."'"'

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$-

$700

$600

$500

$400

$300 +-1------;( - --=--------:;-:r......

$'00

$100

13 IS 17 19 21 23 2S 27 29 31 33 3S 37 39 41 43 4S 47 49 51 53 5S 57 S9 61 63 65 67 69 71

- ARPPU

KONGREGATE

Disposable Income$90,000$80,000$70,000$60,000$50,000sre.ooo$30,000$10,000$10,000

$- +----~-~-~--~

I Coll ege

• H5

10 30 50

AI·

60 70 80

KONGREGATE

So who is buying?Top 20 Spend ers. Kongregate.com

I cm

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=~ - -

24 27 29 31 32 32 34 35 36 38 42 42 44 45 46 48 49 49 53 68

-g-• ToP Game - 2nd Game 3rd Game - 4 th Game 5th eame 6th Game Other Games

KONGREGATE

Sessions per DAU by Age and Eventual Spend Category

What drives purchasing?

----------\ 'li.L"L~VUN,- e .tlS He O

r25.00

5.00

20.00

30.00

15.00

10.00

030 ~~ 120 15018021D240 270 m330 3~390 420 450 480 510~

- Non-Spender -<$500 Spender - $s ()(}t spender

.. .. • • .. . . , . , . .

KONGREGATE

Most long-term players spend" Spenders of Daily Active Players

100.0%

9<l."" +-­80.0%

70.0% i-,--

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40.0%

30,0%

20.0%

10.0% •0."" l.... _

o 30~ ~1201S0 180210240270~0 3~3ro3~420 4S0480

•

KONGREGATE

How quickly do people spend?Days to First Purchase

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30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180, i , , ' ''''''''''''''''''' , '

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100.0%

900%

80.0%

70.0%

60,0%

50.0%

40.0%

30.0%

20.0%

10.0% ti ,0.0% i

0 10 20

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KONGREGATE

Spending over timeSpend Deciles by Day

ID ~ ~ 120 ISO 1M 210 240 270 300 330 3W 3~ 420 450 480

$7,000

$6,000

$5,000

$4,000

$3,000

$2,000

$1.000

$-0

-. . - .. " . .. . , . . . .. . ,

$800

$600

$400

$'00

$.

KONGREGATE

Spending over timeSpend Deciles by Age

o 30 W ~ 120 ISO l~ 210 240 270 300 3H 3W 3~ 420 4W ~O

- spend decile 7- - spend decile 9 - spend decile 10- - --

KONGREGATE

So how do you spend $5k+ in a game?Big Spender #1: 40-year-old Californian

Primary game is an Action ·RPG• Single-p layer in a social environment• Skill -based level ing, multiple class paths• Guilds & co-op multiplayer• PvP & tourna ments with lot s of modes• Plays 4-6 days a week, 1000+ lifetime p lays

Plays & spends in other games but 90% of m oney/ti me spent in main game.

KONGREGATE

Shocking Reveal #1

I'm the big spender

KONGREGATE

So how do you spend $5k+ in a game?

2014 main game spend: ~$7.5k:

• Consumables & Energy -7 $2,200• Ski ll Upgrades -7 $1,800• Equipment/Items -7 $300• Cosmetic Items -7 $200• Gui lds/Guild Items -7 $250• PvP/Tournaments/Gui ld Wars -7 $2,700

KONGREGATE

Shocking Reveal #2

And I'm spending it on figure skating

Super Figure Skating RPGSingle-player in a social environment ~individual sport done in a shared session

Skill-based leveling. mu ltiple class paths ~5 classes with Blevels. level up after earning 5-6 skill"ochlevernents" at official test sessions

Guilds & Co-Op Multiplayer ~Skating Club of SF; Synchronized Skate Teams, Ice Dance, Pairs

PvP/Tournaments/G uild Wars 7Frequent competitions, organized by age, level, and mode (freestyle,artistic, light entertainment, etc.); points also tallied for clubs/rinks

Figure Skating MonetizationGame Cat egory Skati ng Equ ivalent My 2014 Spend

Consum.1bles & Energy Ice Time $2,200

Skill Upgrades l essons $LllOO

Eq uipment/ Ite ms Equipment/locker $300

Cosmetic Item s Cost umes $200

Guilds/Guild Items Club membership & $250testtng fees

PvP{Tournament s! Compenno n fees . $2,700Guild Wars t ravel

Total Spend $7,450

Games are HobbiesHobby

WeeklyGolfer

Amateur Guita rist

Restaurant Gourmet

Baseball Fan

Quilter

Serious Runner

Possible Spend

$3k-$lOk a year for green fees , d ubs, lessons, driving range

$2k·$Sk for guitar. lessons. strings. music, recording eq uipment

$2k-$Sk annua lly (eatlng out weekly, $40-$100 avg tab)

$lk - $3k lo r season rickets, $2k+ lo r a trip to sp ring tra ining

ssoo.su for materials. $SOO-$Sk for a high-end sewing machine

$SOO-$5k for shoes, dothing. race fees 1$50-$300 each). travel to races

Rational Spend

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My Figure Skating Spend by Year

$14,000 DOfothy Hamrllcamp + 2.... coach

$12,000 <,

jFi l~t narional

$10,000 championshipsSt4lrt~d

\jcom~n& Equipment

$8,000Jcrned sVnchteam l e ssons

$6,000 Sold KM,",''', 1 J Ice TimebO\,l llht custom skat~

Suncd -, - e otter$4,000 i l(o n&ff'l 4Ite

June 2006

!No mant>yor nme -$2,000 j 1\- -$0 <- - ~

2004 200' 2006 2007 2008 2009 2010 2011 2012 20U 2014 20 1S·

Other Industries Have Similar Dynamics

Radio ••

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• •• •

• Mass Audience• Free + Ads

• Fractional S/User• $148 revenue

• Moderate/ SmallAudience

• $50-$ 100 per veer

• tapped• $1.78

• ModerateAudience

• Mod erate Price1$0·99 -$9.99 )

• Uncapped

• $48

• Small Audience• Prem ium Price

($15-$ 100)

• UnC1Ipped

• SO.S8

• Small Audience• Premium Price

($50-$500)

• Unca pped• $6 .28

• Tiny Audience• High Price

($1.000+)

• u nca pped

• ?

Other Industries Have Similar Dynamics

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Including Console GamesGameStop Customers

• Non-Members - PowerUp Rewards Members

GameStop Revenue

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• Non-Membe~ - PowerUp Rewards Members

Powerup Rewards Tier

Basic (Free)

Pro ($1S, Gamelnformer + discounts )

Average # of Tran sactions

3

10

AVf'rage Annual Spend

$160

$570

If this is normal, why are we souncomfortable with big spenders in

free-to-play games?

Reason 1: Data!

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Reason 3: We Don't Value Digital GamesPilid Mo bIle App Pa id PC G.ames Used Console Games New Console Games

lowest Price $0.99 $0.99 SO.99 $4.99

Hlgnest Pr ice $19.99 $59.99 $56.99 5249.99

Average Sale Price $1.50.$2.50 · $10.001-- $17.50" · 540 .72· .. •

Estlmated Ann ual US <$0.58 " $18?· · $28" · $5.3B· ·· ·Revenue

Is a new console game really worth 4-5x the average PC game? 20-25x theaverage paid mobile game?

·Guesstimate from looltil'l8.t tile to p pIIid cllarts ··Very rougtl guesstimate from tillking10 PC d~elopel"S

•• •ApprO Kimalt', but I know some people who s~1 a 101 of uloed conwle games ·· · ·N PO

Reason 2: Spend is More ConcentratedP~id Mobile App Freemlum M obIle

-ppenuOI I f2P GOIIme MMO F2PGOIIme

Down loadi 50,000 1,000,000 1.000,000 500,000

Conversion ''''''' 15 " 1.5% 1.5"

It of Bu~rs 50,000 15,000 15,000 7,500

ARPPU $2.99 $2.99 $15.00 $75.00

Total Revenue $149,500 $44,850 $225,000 $562.500

ARPU $2.99 $0.04 SO.23 $1.13

Note s f ree, one low price Multiple buckets of Multiple buckets o runlock currency, $0.99- curre ncy. $499-

$19 .99 $99.99

Demand for Games is Inelastic

.... lne lutlc Demand

L..- "- Qo ' d .

Area of th e box = total revenue

Wait, What About Steam Sales?UGUI. ALIE~S:

COLO~IAL MARI~ES

LOOKS AWI'UL.

au MY GOO ALI~:Cot..OlJIAL MARIAJE:S

1:S 90,. ot:r:l

Prices Anchor Our Perception of Value

--

On Mobile Value is Anchored Very Low

F2P Games Set Their Own Value

Reason 4: We Don't Value Virtual Goods. .

••

•• •

Reason 5: We don't value gamesequally with other hobbies

______ ..-.. -..J

so VIDEOGAMES IS AWASTE OF T1MEjI,- 1 .4jI. ..,1,J]~I..I· k. •~. . . • I

PIIASETEU ME HOw KHDWING WHAT i.--- - -THE IlARDASHIANS An FOR BREAUASTIS IMPDJiTANt·; ,

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KONGREGATE

Thanks to many people for help with this talk. You know who you are.

To read this talk and othe rs visi t our blog:b!!P://developers.kon9@9ate.com/blog

To learn more, submit a game, or contact us visitb!!P://developers.kon9@9ate.com

Follow us on Twitter: @EmilyG and @KongregaleDevs

And finally please visit our booth in the Expo.