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  • After Pokemon Go was released in the U.S., it took less than a day before it was making more money than all the other apps in both Apple's and Google's app stores.

  • - It's already earned $14 million in revenue since launching last Wednesdaynot even a full week.

  • But users didn't have to pay a cent for the game.

  • All that money was coming from optional purchases people were making as they played.

  • This is the world of Freemium apps — a business model that, in the past few years, has largely wiped out the market for paid games.

  • Now game designers have to monetize the gameplay, and one way to do that is by applying some fundamental lessons of behavioral psychology.

  • The first thing these games do is set up a virtual currency so that it doesn't feel like you're spending real currency, even though you are.

  • This is a variation on something we've known for decades -

  • Which is that people find it harder to spend money when they're paying in cash than if they're using a card.

  • - So when you pay cash for something, you see it leave your hands, and you get a very immediate sense of like how much your cash reserves have dropped, how much your wealth has dropped.

  • Games add yet another layer.

  • You pay for lollipop boosters with gold bars and you pay for gold bars with your credit card, which is already distanced from the actual payment.

  • And then on top of that, they don't make the exchange rate simple.

  • It's not 50 gems for 50 cents.

  • - They're always something weird like 1 dollar will get you 12 purple diamonds, and that sort of off-kilter exchange rate is the same thing you see with people spendingtourists spending money that they're not familiar with in foreign countries.

  • If incense costs 80 pokecoins and a batch of 550 pokecoins costs $4.99, how much real money does incense cost? Yeah I don't know either.

  • So you're spending money that doesn't seem real, and it only takes a second because the app store already has your credit card.

  • The whole payment process is designed to be painless.

  • Other parts of the game, however, are designed to be painful.

  • A key finding of behavioral research is that people tend to experience unexpected losses more intensely than comparable gains.

  • That can inform the timing of purchase prompts.

  • In Puzzle & Dragons, players progress through a dungeon before facing a boss...

  • and if they die, they stand to lose all the rewards that they just earned.

  • That's when they're presented with the option to save their coins and their points by spending magic stones, which you can buy in the store with real money.

  • Other developers actively embed inconvenience into the games, so that you can purchase convenience.

  • In Clash of Clans and Game of War, everything you try to build has wait times that get progressively longer but are skippable, for a price.

  • - So they build incentives to sort of remove pain points into the games, and then if they want that, then they have the incentive to insert pain points into the game.

  • Ultimately though, only a tiny percentage of players actually become payers.

  • And a small percentage of payers are those so-called "whales" — people who will spend hundreds, sometimes thousands of dollars in the app.

  • The marketing firm Swrve estimates that about half of the revenue for mobile games is coming from less than a half of a percent of all players, which means that for some of these games, non-paying users, which is most people, are essentially pouring time into a game designed to hit the pain points of a small, susceptible group of players.

  • If you're really having fun, that's great, but it might be worth rewarding games that find another way.

  • As of now, the monetization in Pokemon Go is unobtrusive. It's kind of tucked away.

  • And that lack of manipulation is a pretty good reason to buy some lure modules and some incense.

  • One argument in favor of free-to-play games and in-app purchases is that they give developers a reason to keep updating the game.

  • And they're collecting tons of data in order to inform those updatesthings like where you get stuck, where you close the game, which features are most popular.

  • All that data can help them keep making a game that you want to keep playing.

  • But it also means that they can tweak the prices based on individual profiles and behavior.

  • So if it seems like you're about to quit, hey, here's a discount.

  • Or if you're the type of person that will spend a lot of money, maybe they bump up the prices a little bit.

  • They can even look at how fancy your phone is and what country you live in and set the prices accordingly.

  • According to one survey, 40% of game developers said they were setting different prices for different players.

  • But the survey was anonymous and it's pretty hard to tell which games those are.

After Pokemon Go was released in the U.S., it took less than a day before it was making more money than all the other apps in both Apple's and Google's app stores.

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B1 US Vox incense spending app designed exchange rate

How free games are designed to make money

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    Clark Kang posted on 2016/08/11
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