Strategies to Monetize and Maximize the Lifetime Value (LTV) of Players in the GaaS Arena

Premium, Freemium or Subscription? Each approach has advantages - and pitfalls

The Games-as-a-Service (GaaS) market is booming for good reason: players have been delighted by continuous content updates, evolving narratives, and vibrant communities offered by GaaS titles. With this experience, however, comes the clear lesson for any business in the fiercely competitive GaaS space. The winners will be the businesses which successfully adopt monetization strategies that maximize player lifetime value (LTV).

This article explores key strategies to not only convert players into spenders but also cultivate a loyal and engaged player base that generates consistent revenue over time.

Understanding Player Motivations: The Cornerstone of LTV Optimization

Psychology has a huge role to play in how much a player is willing to spend within a game. As Ryan Ward, CEO at PIXLVRSE says:

“An often-overlooked advantage of the premium GaaS model is the psychological effect of the upfront purchase on player engagement and retention.”

Ward cites three established psychological concepts:

Endowment Effect: players will value things that they own more than things that belong to someone else. In premium games, this means players who buy a game see it as "theirs" and assign greater value to it compared to a free alternative. This increased perceived value translates to higher engagement – they're more likely to invest time and effort into “their” game.

Sunk Cost Fallacy: players hate feeling they have wasted something. This applies to money spent on games, and the upfront cost of a premium game acts as a "sunk cost" that players subconsciously try to justify. They play longer to "get their money's worth".

Commitment and Consistency Principle: we have a strong desire to be consistent with past choices. Buying a game can be seen as a commitment and so players, wishing to be consistent with this decision, are more likely to stick with the game for longer periods to justify their initial purchase.

With the proliferation of GaaS, however, premium games face a unique challenge: convincing players to pay upfront when free alternatives abound. To overcome this hurdle, developers need to focus on the value proposition. Premium games offer a complete experience, where the expectation is a playing environment that is free from (or largely free from) intrusive ads and manipulative in-app purchases.

Players seeking a focused, high-quality experience with a guaranteed full game might be more willing to invest, but the choice isn't always clear-cut. Freemium games can offer a taste of the gameplay loop, catering to players who want to try before they buy. Ultimately, the success of a GaaS title, regardless of the pricing model, hinges on delivering long-term value. This means engaging players with consistent content updates, fostering a sense of community, and offering a rewarding gameplay experience that keeps them coming back for more.

Monetization Strategies for Boosted LTV: A Multi-Faceted Approach

Effective GaaS monetization goes beyond a singular approach. Here are key strategies to consider:

The Power of the Freemium Model:

Revenue from Free to Play games amounts to over 85% of all game revenue.

The freemium model, where players can access the core game for free with optional in-app purchases, remains a dominant force in GaaS. Freemium games tend to have more aggressive psychological strategies for in-app purchasing as they do not have the Premium model’s up front payments by players.

Such strategies include:

Fear of Missing Out (FOMO): Countdown timers for deals or events create a sense of urgency. Players fear missing a "limited-time offer" and might rush into purchases they wouldn't normally make.

Gambling Mentality: Loot boxes with undisclosed odds exploit the thrill of gambling. Players keep spending, chasing the high of a rare item.

Pay-to-Win Pressure: Games where spending gives a competitive edge make players feel like buying is necessary to succeed. It preys on the desire to win and be the best. This can backfire if there is a sense that the player must “pay to win”.

Hidden Costs: Multiple in-game currencies with some purchasable only with real money obscure the true cost of items. Players spend more than they realize due to this confusion.

Exploiting Impatience: Tasks that are deliberately frustrating to complete can be bypassed with real money purchases. Impatient players are more likely to spend to avoid the tedious process.

Social Bragging Rights: Features showing off bought items create social pressure. Players feel the need to spend to keep up with others and maintain their social standing.

Fake Rarity: Claims of "limited" or "rare" items create a false sense of scarcity. Players rush to buy something they might not actually need, fearing it will disappear.

Subscription Services:

Subscription models offer players access to premium content, exclusive rewards, or gameplay benefits for a recurring fee. Simon Carless, writer of the GameDiscoverCo newsletter says:

“If you’re a dev making a ‘one and done’ narrative game, with a clear beginning and end, and a decent-sized budget, subscription services are going to be an increasingly important part of your planning if you want to get to breakeven… in 2023 or 2025.”

From the player’s point of view, subscription services provide them with a sense of value, ownership and ongoing engagement, fostering the kind of loyalty that means consistent revenue streams. For the developer, this regular income stream from subscribers will be crucial in supporting ongoing LiveOps.

As a strategy, you should consider different subscription tiers offering varying levels of benefits to cater to diverse player needs.

Targeted In-App Advertising:

Targeted in-app advertising within GaaS can be a double-edged sword. On the positive side, it offers a potential revenue stream for developers, allowing you to provide the game for free or at a lower cost. These ads can be tailored to user preferences, potentially showing players relevant products or services they might be interested in. This targeted approach can also be less intrusive than traditional advertising, minimizing disruption to the gameplay experience.

There are also significant drawbacks to consider. Overly aggressive ad placements can be frustrating for players, interrupting the flow of the game and leading to negative sentiment. Furthermore, the quality and relevance of targeted ads can vary greatly. Bombarding players with irrelevant ads can backfire, pushing them away from the game entirely. Additionally, there are legitimate concerns over player privacy. For targeted advertising to be effective, it often requires collecting user data, which can raise concerns about data security and how that information is used. Finding the right balance between generating revenue and maintaining a positive player experience is crucial for the long-term success of a GaaS title with targeted in-app advertising.

Beyond Monetization: Strategies to Nurture Player Loyalty and Maximize LTV

While effective monetization is key, it is only one piece of the LTV puzzle:

• Prioritize Player Engagement: Content updates, seasonal events, and limited-time challenges keep players engaged and coming back for more.

• Personalize the Experience: Leverage player data to tailor in-game recommendations and reward structures, fostering a sense of connection and value.

• Foster a Thriving Community: Encourage player interaction through in-game social features, forums, and events, promoting a sense of belonging and loyalty.

As Nick Lim, CEO at Sonamine says, development should know how they are generating money at an early stage:

“Some developers try to build the game first and then add monetization features later. This is a mistake because monetization and game development need to go hand in hand.”

Lim says that there is a delicate balance that must be struck so that developers do not place an emphasis on monetization at the expense of gameplay.

Data-Driven Optimization: The Key to Sustainable Success

Data is the lifeblood of successful GaaS monetization. Utilize analytics tools to track player behavior, spending patterns, and response to different monetization strategies. Use these insights to refine your approach, optimize pricing models, and identify opportunities for new in-app purchases or subscription

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