How Do Web-Based MMOs Make Money?

How Do Web-Based MMOs Make Money?

When you go about your business on the Internet, you’re bound to come across a fistful of ads for browser-based massively multiplayer online games (MMOs). Many are “!!!FREE!!!” to play, and take place in fantasy realms bursting with dragons and treasure. The infamous ads for one online Civilization ripoff, Evony, go so far as to promise you doe-eyed maidens who spend a lot of time on their knees, their generous cleavage bopping about. Hint: Evony will never deliver unto you a personal woman slave, no matter how long you choke the game down.

Maybe you’ve signed up for a couple of these free online (a.k.a. free to play) browser-based MMOs. Chances are good that you abandoned them after a day or three of consistent play. You’re not alone: There’s a huge gap between the number of folks who sign up for these things versus those who actually play consistently for months at a time. So if these games are free to play–and most of them keep their promise on that front–how are they sustaining themselves? Servers don’t run cheaply, and developers cannot be caged and forced to work for pizza and Mountain Dew alone.

Gamasutra looked into the finances of MMOs last year. Interestingly, what the results showed were that the flexibility of MMO game mechanics coupled with endless possibilities for virtual purchases and the adaptability of small development companies makes these online games attractive to players and investors alike. Despite the oversaturated market, a number of MMOs actually pull in decent cash.

That doesn’t mean what’s here today isn’t necessarily going to fade away tomorrow. MMOs compete not only for players’ money; they compete for their time as well. If they don’t have the latter, they won’t get the former. Success generally depends on how willing a company is to adapt to a constantly-changing market that’s heavy with competition.

MMOs are, for the most part, put together by small companies that can shift as soon as someone gives the order. This is a very positive trait, as one investor named Jeremy Liew pointed out in Gamasutra’s article. Liew is the managing director of Lightspeed Venture Partners, a California-based firm that offers funding for companies that are starting up free-to-play browser-based MMOs.

“The business policies that made big companies so successful can sometimes blind them to the things they now need to do to become successful on the other side of the disruption,” Lew said. “It’s hard for them to change. Small companies transition much more easily.”

That means, Liew continued, that a small business handling an MMO has room to experiment with creating content that dedicated users will actually pay earthy cash for. It might be a special weapon, an otherwise inaccessible quest, or the coveted “UnWither Ring” that keeps crops forever young and healthy in FarmVille.

Raph Koster, the founder and president of Metaplace Inc, which develops free-to-play virtual worlds, also pointed out that creating and advertising a free-to-play MMO is far cheaper than producing, advertising, and distributing a subscription-based MMORPG like World of Warcraft.

“Free-to-play is all about upping your ROI [Return On Investment],” said Koster, who worked on Ultima Online and Star Wars Galaxies before moving on to web-based game development in 2006. “All the costs of boxes and distribution that are associated with a subscription model go away. The cost of development is significantly lower.”

“Even your marketing budget changes radically,” he continued. “Our product’s reputation will spread primarily via word of mouth. And because it lowers the barrier to entry for people to come in and try things, it gives you a huge shot at acquiring large numbers of customers.”

Though some MMOs offer a monthly subscription that allow access to special features, it’s easier to get players to pony up cash for a one-time payment on a special offer or item. That means a developer can cycle through a handful of trinkets to see what catches players’ attention, and what doesn’t. This, too, demonstrates the MMO’s necessary ability to adapt to its players. If something clicks, the game can be continuously built around the players’ demands. If something proves unpopular, it can be taken away just as easily.

Of course, the average MMO’s continuing evolution means that even the most well-produced web-based game will always appear a little rough around the edges. But, as Liew pointed out in Gamasutra’s article, players actually expect the bar to be a bit low, given that the basic product is usually free.

“[You] can practically throw anything up,” he said, “even if it’s buggy, even if it’s not feature-complete, even if it crashes sometimes — and see how people react to it. (…) If you are a master craftsman who likes to spend six years making everything just so before releasing it to the public, then you’re probably better off sticking with the older business models, because you’re going to have a tough time reconciling much, much lower revenue with high cost.”

“But if you can wrap your head around the implication of less money in and less money out … and you can develop the games with relatively small, multiple teams that are constantly turning them out like an assembly line … you’re going to find that free-to-play MMOs are an exciting and worthwhile place to be.” (Plus, on the bright side, if you’re still having trouble getting people to sign up for your MMO, you can always fall back on the hope that people will sign up to see the big-breasted women in your game’s ads.)

But in all seriousness, the answer to how web-based MMOs make money is simple: Offer a variety of different virtual upgrades (items, bonuses, access to new areas, subscription plans that offer more play/features/content, etc.) at a variety of different price points, and hope that of every 100 users, one or two buys some. The odd part being that the formula actually works, and well, in many cases. And when it doesn’t, well… at least you didn’t pay a lot for a cardboard box and CD up-front, right?

About Nadia Oxford
Nadia is a freelance writer living in Toronto. She played her first game at four, decided games were awesome, and has maintained her position since. She writes for 1UP.com, Slide to Play, GamePro and other publications, and is About.com’s Guide to the Nintendo DS.

1 Comments

  1. This is a very complicated topic have you got anymore articles on the subject thanks

Leave a Reply