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Contemporary games employ sophisticated designs rooted in behavioral psychology to incentivize (or, some would say, to manipulate) their players to spend real money on in-game microtransactions. In a 2016 talk given by Torulf Jernström (see also his own summary of it), the CEO has outlined the most common tricks of trade, which are reframed here not as a guide for enterprising designers, but as a sort of Defence Against the Dark Arts class for the gamers that they prey upon.

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Monetization Models

Minnows, Dolphins, Whales

The perhaps most famous and best-researched monetization model categorizes players by the amount they spend. Note that the numeric data here comes from Jussi Laakkonen's 2014 study, so it may be no longer representative, but it still demonstrates general trends.

  • Non-payers are players who never spend any money on in-game purchases. According to Laakkonen, they comprise about 55% of all players, averaged over all games with microtransactions.
  • Minnows are moderate payers who comprise ca. 24% of a player base and spend $1–9 per month on a single game. According to Jernström, they take on average 8 days to "convert", i.e. to convince to make their first purchase in a given game.
  • Dolphins are heavy payers ($10–19 per month), comprising ca. 14% of players and needing around 12 days to convert.
  • Whales are ca. 6% of players who spend $20–49 per month on a single game and need 18 or more days to convert.
  • Super-whales are a subset of whales who spend $50 or more on a game every month and comprise only about 1% of its player base.
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Jernström also observes that games targeted at different demographics tend to have different payer structures: more casual games tend to receive relatively small sums from a large number of players, while more hardcore ones tend to make most of their revenue from a few very devoted whales.

Opponents of microtransactions in games tend to become very riled up by the industry's use of animal names to categorize paying customers, viewing it is a form of deliberate dehumanization and turning individuals into commodity. They also often point out (see for example, this Jimquisition video) that while the industry likes to frame whales as well-off players with a lot of disposable income, a lot of whales are actually compulsive spenders and/or gamblers whose psychological disorders make them vulnerable to the manipulative design discussed below.

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The Four Cs

In chapter three of his 2013 book Free-to-Play: Making Money From Games You Give Away, Will Luton identifies the four main categories of IAPs ("in-app purchases") and suggests targeting them at different Player Archetypes, as previously identified by Richard Bartle:

  • Convenience is everything that makes progressing through the game's content more comfortable and expedient for the player. This includes hiding ads, enabling Gameplay Automation, bypassing or greatly accelerating Forced Level-Grinding, and even just letting players skip mandatory wait times ("pay-to-skip"). According to Luton, Convenience is primarily targeted at the player type that Bartle called "the Achievers"note , while Jernström claims that they also account that the vast majority of IAP revenue. The darker side of this success, however, is that some modern games intentionally throttle progression to incentivize buying progress boosters — most infamously, Middle-earth: Shadow of War, a AAA single-player game, had to be completely rebalanced after patching out IAPs.
  • Customization are cosmetics that individualize the in-game appearance of player avatars and/or their abodes. Luton assigns them to the Socializersnote , and Jernström places them second in terms of profitability. While the industry often frames Customization as a more ethical alternative to pay-to-win mechanics (see below) because it's "just cosmetic" and doesn't affect core gameplay loops, it is undeniable that as status symbols, cosmetic items in multiplayer games have as much value to some players as a competitive advantage has to others.
  • Competitive advantage is anything that gives paying players a gameplay advantage over non-payers in PVP mode, in other words, "pay-to-win". Luton targets them at the Killersnote . P2W microtransactions are far and away the most controversial kind, because they destroy the sense of fair competition that people seek in games, and even Jernström advises against implementing them because they are incredibly difficult (or outright impossible) to balance.
  • Content is any piece of new game content available for download at an extra cost after the release. Luton associates it with the Explorersnote , and while it tends to be the least controversial kind of microtransactions, Jernström also places it as the least profitable one, given the high production costs of original content. DLC controversy usually revolves around "day-one DLC"note , which is often accused of being content that was supposed to be in the base game but was carved out just before release to make extra profit, and generally overpriced contentnote .

Hook, Habit, Hobby

Dimitar Draganov has proposed a temporal model of three stages of monetizing a player:

  1. At the Hook stage, the developer's goal is to entice the player into spending a small amount of money on an obviously-lucrative IAP offer, even at a significant cost to the devs. This is intended to tear down the player's reservations about in-game spending and to secure their commitment to spend more. A salesperson would recognize this is a combination of the foot-in-the-door and low-ball techniques, both of which play on our subconscious desire to be consistent in our behavior (in other words, once you've spent some money, that's just what you do now), while a drug dealer would just call it the "gateway drug".
  2. The Habit stage sees the player paying for progression boosters (a subcategory of Convenience above) to grind through the main body of the game's content, with the key words here being "pay" and "grind". Towards the end of his presentation, Jernström notes that of the four main progression types (skill, luck, grind, and pay — this classification seems to be his own finding), skill is the least monetizable option, so he strongly advocates for the normalization of grinding and paying in monetized games.
  3. The Hobby stage begins when the player finishes the main content and reaches the "endgame" after maxing out all available stats. At this point, progression boosters are replaced with consumables (Convenience) and cosmetics (Customization), as the game becomes another ritual of the player's everyday life, with no upper limit on their in-game spending.

Tricks of the Trade

Gachas

The term "gacha" is derived from the Japanese gashapon vending machines, which sell randomized collectable items; by the late new '10s, video game mechanics based on this concept have become much better known as Loot Boxes. Lootboxes are appealing to players (at least, in moderation) because anticipation of an unknown prize triggers the brain to release dopamine, a neurotransmitter associated with motivation and pleasure. The darker side of this, however, is that, especially for addictive personalities, the reward of dopamine release can eclipse the actual in-game rewards, leading to spending far in excess of the rational (cf. Extra Credits explaining the Skinner Box). And even those not prone to addiction can overspend on lootboxes if they succumb to the Sunk Cost and Gambler's Fallacy. Developers, on the other hand, see both increased profits from the sale of gachas and increased player retention, as it simply takes longer to obtain the items needed to finish the game.

Hot state

In his 2011 book Thinking, Fast and Slow, psychologist and behavioral economist Daniel Kahneman describes two modes of decision making in humans: System 1 is fast, unconscious, and relies on simple pattern recognition, while System 2 is slow, analytical, and performs structured and methodical computations. System 1 requires little cognitive effort, but is also prone to obvious-in-hindsight errors and Logical Fallacies; System 2 is much more rigorous, but also expends more energy and is often too slow for time-sensitive tasks (such as playing fast-paced games). Kahneman's key finding is that while we've evolved to have both systems because we need both at different points of our lives, System 1 in particular is prone to making us behave irrationally if we are not mindful of it.

Jernström in his presentation refers to using System 1 for decision-making as being in the "hot state", and advocates for circumventing the players' System 2 entirely by offering IAPs of immediate usefulness or gratification while they are in the System 1-dominated flow of play, before System 2 can properly boot up. As an example, he points towards the tried-and-true mechanic (going back at least to the early days of Arcades) of offering to sell the player an extra life immediately after dying in-game.

Loss aversion

Loss aversion refers to an inherent human biasnote  of valuing something we already have more than something of equal objective value that we could gain: for example, the risk of losing $100 on a coin flip usually outweighs the prospect of winning $120 in the same game, even though it would be perfectly rational to take the gamble. According to Jernström, games exploit this bias by having you pay to keep the rewards you've already earned, such as threatening to take away your in-game earnings if you die before reaching a checkpoint and don't buy an extra life, or capping how many items you can carry and discarding everything above that unless you pay to increase the cap.

Artificial scarcity and Limited-time offers

Limited-time offers of (artificially) scarce IAPs are, as Jernström points out, a logical combination of hot state and loss aversion. Scarcity has been identified as one of the six key principles of persuasion by the psychologist Robert Cialdini in his 1984 book Influence: The Psychology of Persuasion, who pointed out that even the threat of losing the option to have something (when the LTO expires) is enough to trigger our loss aversion and to convince us to buy it. Time pressure, meanwhile, additionally effectively prevents our System 2 from rationally examining the offer.

IKEA effect

In his 2014 book Hooked: How to Build Habit-Forming Products, Nir Eyal describes the "IKEA effect" as the emotional attachment we experience to things we have put our own work into — e.g. we value furniture from IKEA more after having assembled it ourselves than if we had received it already assembled. According to Jernström, games use this to transition from the Hook to the Habit stage with a simple gameplay loop of receiving a trigger/reminder from the game, the player doing something, receiving a randomized reward, and then, crucially, doing a simple chore to get them emotionally invested in the activity. While the IKEA effect isn't used to make you spend directly, its cumulative effect makes you more likely to spend money in-game in the long term.

The most obvious application of the IKEA effect in contemporary games are the battle pass systems, particularly in the Battle Royale Game genre. These work by charging money up-front, then making players grind or complete certain challenges before giving them the rewards that they have already paid for, increasing the likelihood of them buying the next battle pass. Additionally, because battle pass rewards can only be obtained within a specific time frame, they trigger loss aversion (specifically, the "fear of missing out" or FOMO) with their limited-time offers.

Anchoring

Anchoring is a cognitive bias that describes how when we lack expert knowledge, we latch onto the first price we see or hear as our baseline and compare all later offers to it. Jernström describes how games use it by first offering the player an intentionally overpriced IAP, then "lowering" the price later on to make the deal seem lucrative (Cialdini would point out that this particular example also uses contrasting perceptionnote  and the door-in-the-face techniquenote ). On a more macro level, companies often announce intentionally egregious monetization strategies for upcoming games, only to scale them back after the fan backlash hits, effectively arriving at their intended monetization setup while also scoring some free consumer-friendliness points.

Social proof

Social proof was identified by Cialdini in 1984 as one of the six principles of influence and describes our bias towards imitating the behaviors of those similar to us in uncertain situations. According to Jernström, games can use it to normalize spending money in them by broadcasting the act of IAPs to other playersnote  and, conversely, by never officially communicating the fact that the silent majority of players are non-payers. The dark side of IAP normalization is that peer pressure can go out of control, such as when Fortnite players were bullied by their peers for not purchasing in-game cosmetic items (via lootboxes).

Availability heuristic

Availability heuristic refers to a cognitive bias that makes us think that certain events are more likely than they factually are if we hear about them a lot. Particularly in regards to gachas/lootboxes, Jernström suggests that games broadcast rare and legendary Random Drops to other players to create a false expectation that their individual chances of getting good loot are comparable to the likelihood of someone in the world getting it.

Because... reasons

In 1984, Cialdini pointed out that System 1note  puts irrational trust in rational-sounding arguments, specifically that people are much more inclined to agree to a request if it is followed by "because..." and a stated reason — even when that reason makes no sense.note  Jernström claims that just adding "because it helps the developer" after asking the players to make IAPs increases their spending. On a macro level, the same technique has been used to normalize microtransactions "because games are too expensive to make otherwise", despite many arguments to the contrary.

Artificial Intelligence

As Dr. Tommy Thompson points out, many mobile and AAA publishers are actively researching the use of or already using Artificial Intelligence and, specifically, machine learning (ML) and Video Game A.I. to boost their in-game monetization.

Churn prediction

In the game monetization context, "churn" refers to players stopping to pay for in-game purchases. As Thompson explains, most publishers employ teams of specialists to develop churn models and player analytics, using collected player data to calculate a) which percentage of their player base will spend money on a game within reasonable time ("churn ratio") and b) how long it takes for a paying player to stop spending money on it ("churn rate"). Both of these tasks are pretty trivial to accomplish with enough data and basic ML, and when combined with player clustering (i.e. grouping players together by play style and spending habits — something ML also excels at), can give the publisher a pretty clear idea of how much money they can extract from a specific individual.

Real-time analytics and manipulation

The next stage of using AI for monetization, which is speculative at the moment, will presumably involve analyzing and classifing individual player behavior in real time, then dynamically tweaking their moment-to-moment gameplay experience to encourage in-game spending. While there is no evidence at the moment that such systems have already been implemented in popular games, Activision has infamously patented one back in 2017, so they are definitely an area of intense ongoing research.
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