When creating a free game what revenue options are there and how successful are they? What are the pros and cons of different revenue models such as ad-supported, freemium, partnerships, merchandising, virtual goods, etc.?
If possible, give specific examples of games using different revenue models and provide data as evidence (otherwise it could get quite subjective).
Answer
Monetization heavily depends on the platform, but for the iPhone specifically, freemium (specifically, buying into something that lets you play more effectively) has proven itself to be probably the most viable strategy for games in which it fits.
A few sample points:
- http://gamesfromwithin.com/the-power-of-free - a blog post talking about revenue in a freemium app, with increased sales even after making the game non-free
- ng:moco has switched all their future games to be freemium, and their shooter Eliminate showed up in the top 100 revenue generating apps despite being free.
Of course, in the iPhone marketplace, monetization of microtransactions is fairly easy since it's all handled through iTunes and most users already have a credit card tied to their iTunes account. I'm sure you'll see similar stories coming from Facebook once there's a unified way of purchasing things on there instead of a bunch of different mechanisms.
As far as ad-supported, there are conflicting reports on that matter.
Here's one that says ads are good: http://www.macrumors.com/2009/05/06/adwhirl-free-ad-supported-iphone-apps-can-very-lucrative/
And here's one that says ads aren't worth it: http://www.macrumors.com/2009/02/20/appstore-secrets-price-drops-usage-and-ad-supported-models/
Of course both of those are before iAd came out.
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