A Different way of Monetization for WebGames

Ok sports, gather around. I want to tell you a story. A long long time ago, on a planet not so far away, the Internet wasn't as incredible as it is today. Actually, unless you wanted to keep yourself informed (by reading news, etc.) or to get in touch with other people via email or BBSs there wasn't much to do either.

I'm not going to lie to you, I'm not that old, but before the internet existed if you wanted to keep yourself entertained by playing a videogame you could either get yourself a computer such as a commodore 64, or a Sinclair ZX Spectrum, an Atari, etc. and a game or if you didn't have the means to own any of those, you could go to an arcade room.

For those of you who didn't exist back then, arcade rooms were rooms (d'oh!) filled with big wooden cabinets where each one contained a monitor a joystick and a computer inside, like the one shown below.

Each one of those cabinets had a different game that you could play, usually for a penny or a quarter. Inserting a coin usually meant having an opportunity to beat the entire game in one full swing.

As you can probably imagine, beating the whole game with just one quarter wasn't very easy... actually, it was quite hard. If you lose all your lives, you almost always were presented with the chance to continue the game. Refusing to continue meant loosing for good, and if your highscore was high enough you usually were given the choice to enter your initials.

At this point, perhaps I need to remind you of one little fact. You had to pay a quarter to play the game. Yes. A full quarter. I must have lost fortunes playing games in arcade rooms, and you know what? I don't regret it at all.

Yes, some of those games sucked. Do you know what happened when a game sucked? You usually told your friends "hey, don't put a quarter in that one, it sucks", and no one played it. If you waited a couple of weeks, they were usually replaced by new games.

However, many of them were great! Incredibly difficult to beat, but great. And thanks to all those quarters, companies like SEGA, Atari, NEO-GEO, SNK, NAMCO, CAPCOM, Midway, Konami (among many others) became succesful and were able to keep making great games.

Nowadays, the situation has changed quite a lot. Arcade rooms are gone, and technology (and of course, the internet) not only is awesome, but it's also ubiquitous.

Gaming portals like Kongregate, Miniclip or MSN Games offer thousands of different games that also, like in the old arcade rooms, some are good, and some are bad. But there is one slight difference between now and then. Now you can play games for free.

That sounds great, doesn't it? Well, yes. It sounds great for users, but it really, really sucks for the independent developers that made those games, and in the end, that winds up affecting users as well.

Let me tell you why.

Nothing is really 'free' on this planet, and games are not the exception to the rule. Usually the games that you play for free are supported by one of four different monetization schemes:

• The first one is advertisements. The developers of the game sell a license to the gaming portal (usually they pay you between 200 and 1000 bucks per game) and the gaming portal support themselves by showing banners. It doesn't matter if your game will have 0 or more than 1.000.000 plays, that risk is assumed by the gaming portal.
• The second monetization scheme is a variation of the first, the game is still supported by advertisements but the gaming portal shares the revenue of the ads shown in your game. They usually give you between 15% and 50%. If your game is a flop, you make 0 dollars. If your game is a hit, you get many thousands.
• The third scheme is to sell virtual items, which is way more complex that it sounds. You need a frictionless payment experience and a massive amount of traffic to make a profit which, if you're an indie dev, you usually don't have. Even Zynga, as big as they are, have problems monetizing more than 3-5% of their userbase.
• The fourth and last scheme is an sponsorship agreement, where you 'give away' your game to other company for an small amount of money (usually, less than 2000 bucks), they put their logo and distribute the game all over the web. Usually this deal requires an exclusivity agreement.

I think I don't need to tell you that it's really, really hard to make a profit using advertisements. And it's even harder, for indie devs, to make a profit selling virtual items. Most sponsorship agreements usually suck as well.

This leaves you with what, then? If you think about it, the only option that makes a bit of sense is the first, where you sell a license to a site to include your game. The problem is that not all sites support this model, and the best case scenario is that, after distribution, you make a maximum profit of 5000 dollars per game.

But 5000 bucks is a lot of money, right? Yeah... well, I'll just say that it depends on the game. Do you think that for a game that took a group of 3 people (2 devs, one artist) 6 months to develop, $5000 is a nice number? That's around 278 dollars per month, per team member.

And also let me tell you, it's very, very hard to negotiate a 'fair' deal for a game that took so long to develop because it stops making sense for the gaming portal.

The result of this scenario is that it doesn't make sense to spend more than 1 - 3 months working on a game on your spare time, and you wind up having gaming portals filled with a lot of small, simple and short games.

Now, I wonder what would happen if someone out there made a gaming portal that allowed me to buy virtual credits (let's say, $1 gives you 70 credits - the gaming portal keeps .30 cents per purchase), and then I could spend those credits every time I play one of these games. If I lose the game, I'd need to spend another credit.

Take Dolphin Olympics 2 for example. While it's simple, it's very very fun to play and looks really really good. Right now, on Kongregate the game has 10,928,703 plays, and I'm pretty sure that any player that tried this game would be more than willing to pay a penny to play it. This means that the developer would have won $109,287.03

If the developer did Dolphin Olympics 2 with no budget, imagine the things he would be able to do with a 100K. Using this model he could become the next SEGA.

P.S.: I'm aware that this is not a new idea, but I still believe it'd work just fine under the right circumstances.

I'd love to read your comments/rebuttals :)