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Thursday, October 9, 2008

Optimizing Pay for Play Conversion

In a recent blog I discussed the benefits of using Free Play as a tool to avoid the dreaded credit card fall off problem and to create a retention pool that allowed fatigued Pay for Play players to continue with a game property in the Free Play pool. Another option is to offer a lower risk Pay for Play product that bridges the gap between a Free Play and a Pay for Play offering. Certainly providing a Free Play and Pay for Play product combination is powerful and preferential to a pure Pay for Play offering. However, the step from Free Play to Pay for Play can be too steep for some players. To minimize the risk and perceived player trepidation associated with a Pay for Play offering a lower entry fee option should be considered. This could be in the form of a mirco-transaction for a single game, table, tournament, etc. Or it could be a flat fee payed for a fixed game access period.

A possible critique of this strategy focuses on the lower revenue per customer for Free Play or Micro/Subscription transactions. Certainly this is true but it leaves out the fact that the pool of players interested in playing for free and for a lower committed monetary amount is higher. The illustration below attempts to show that these pool size differentials can be dramatic leading to a nice revenue stream from the two lower risks options. This approach should also take into account the higher conversion rate to Pay for Play and the retention value of these other models. If you combine all of these factors into the cost of acquisition you will find that this triad approach results in a superior return of marketing budget invested.

The other advantage of this combined revenue model approach lies in the conversion overlap of the three transaction models. The illustration below shows that the overlap of the micro/subscription model with Pay to Play players is higher then the overlap of Free Players and Pay for Play players. This makes sense because people that have never transacted or frequently Play for Free have a higher likelihood of staying put as opposed to players that have monetarily transacted in some fashion. This phenomena suggests that offering an intermediary transaction is very important to monetize players in a Pay for Play model. In fact the Play for Free model is growing exponentially and virally through the proliferation of social networks. These social networked players are playing and inviting their friends to play in extraordinarily high numbers. However, a bridge to get these players over to a higher yielding Pay for Play model is required to take full advantage of these ever growing pool of players.

An operator can partner with other operators that offer complementary game proposition. Each of them could focus on a market segment and exchange players. However, this should be a temporary solution unless legal constraints necessitate branding and operator distinctions. Branding is important and brand switching can be confusing for a player. A player would most likely want to stick with one brand and stay within one property.

In conclusion, the online gaming world is evolving quickly with the concept of a game is changing with the total numbers of players increasing rapidly. Many of these players are playing for free, casually and enjoying it. The size and comfort level of this Free Play pool is significant and should be used to build player confidence and retention in a Pay for Play site. The transition from Free Play to Pay for Play can be made more effective if an intermediary, lower risk/reward offering is made available to players. It is preferential that this combination of different experiences and transaction models be provided under a single brand umbrella.

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