Monday, March 15, 2010

Emperors new clothes and suits made of suede

On numerous occasions I've heard it claimed that Free to Play (F2P) games are generating Average Returns Per User (ARPU) per month in the double digits.

I've always doubted these claims. They make no sense. Its well known that less then 5% of the users of these games pay *anything* at all. In order to return a monthly ARPU of even $10, this means that the average spend of those who DO spend money must be at least $200 a month.

How many people do YOU know that spend $200 a month, month after month, on micro-transactions? The very idea boggles the mind.

Where then did these inflated values come from? I found the answer in this article.

The answer to the mystery is in a footnote... almost an afterthought....

"* Note that this is based on monthly users. Many MMOGs calcuate their average revenue per user (ARPU) based on Peak Concurrent Users. On this basis, ARPU can be more than an order of magnitude higher than the $1.40 guideline."

This is nonsense. An accounting trick. The Peak Concurrent Usage (PCU) of a paid for game is only 5% to 10% of the user account population. If WOW (or most other pay to play MMORPGs) calculated their monthly ARPU this way, it would be between $150 and $300!

The PCU of free games is, logically, an even lower % of their account population as the incentive to come online is lower then if you are paying monthly for the privledge, and accounts of people who quit the game are never removed.

The F2P Emperors' new clothes, it turns out, are far less then their tailors' would have you believe. And as for suede suits, that goes to an old crude aphorism about gullible people I will chose not to repeat.

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