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Micro Transaction, Gambling Features, And Virtual Currency In Chinese Online Games

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Zhan Ye
Zhan Ye

The document discusses microtransactions, gambling features, and virtual currency in Chinese online games. It notes that over 80% of players do not pay, but the top 20% who do pay large amounts, generating significant revenue. Gambling features like "treasure boxes" that randomly provide rewards are discussed. They create an illusion of fairness and hope for poorer players, helping keep the whole player ecosystem engaged and the game feeling fresh.

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Micro-transaction, Gambling Features, and Virtual Currency in Chinese Online Games Zhan Ye President, GameVision [email_address]
Disclaimer: What the speaker will present next are thoughts, ideas, and common practices he observed during his work. Some of them can be controversial. The speaker merely presents them as facts, not his opinions. The presentation of those thoughts, ideas, and common practices doesnt mean the speaker endorse or support them, or vice versa.
Background Info I am an old-school game developer myself. Started game dev career in 1995 in China, developing single player PC games on DOS. Recently have been working with a major Chinese online game company to help them do investment and project financing in the US. Oversee some of the collaborative projects and work with game designers on those projects. Would like to share some of the interesting findings with the audience.
A Brief Introduction to F2P MMORPGs Most online games in China are so-called Free-to-Play (F2P) Massively Multiplayer Online Role-playing Games (MMORPG). Massively Multiplayer means the game can be played by hundreds of thousands of gamers at the same time. The current world record of PCCU (Peak Concurrent Users) is 2.1 million, which is held by Giant (NYSE: GA). Role-playing games means the gamers assume the role of a fictional character in the game and take control over many of that character's actions. Free-to-Play means the gamers will not be charged a subscription fee. If they want, they can play the game month after month without paying anything.
Micro-transaction in F2P MMORPGs The company has to make money from somewhere. A method called micro-transaction is used for those F2P games. It refers to the selling of virtual goods and services for use within a virtual environment (the game). For example: Costumes Weapons Power-ups Upgrades Special capabilities
Micro-transaction in F2P MMORPGs Even with micro-transaction, still, over 80% of the gamers are not going to pay in their life time. Less than 20% of the gamers pay, and they pay BIG. And online game companies get huge revenues.
Tencent: 838 million USD Shanda: 715 million USD NetEase: 450 million USD
How F2P and Micro-transaction Work The strategy is to use free-to-play to attract a lot of gamers to the game in the beginning. Keep them playing the game as long as possible. As they spend more time in the game, they become attached to it. The time they spent playing the game, the character and equipment they acquired in the game, the friends they made in the game. All these become an investment that they cannot easily give up. Try to offer them virtual items and services that can give them: Fame and social status in the virtual world Convenience Fashion Advantages over other gamers (in PvP mode) And many other things They will pay!
Challenges in Micro-transaction Game Design It is not easy to make F2P Micro-transaction work. Game design is the key. Game designers have to think about every possible way to stimulate spending and collect money from the gamers. Monetization has become the most crucial and integral part of game design. It is not an add-on. You have to think about monetization right from the start of the project.
Monetization A science and art The secrete ingredients to successful monetization? Just have to try a lot of things. Chinese game designers have tried thousands of ideas in the past several years. We can learn a lot from them.
Monetization Good monetization design is based on deep understanding of human psychology. In a sense, game designers are exploiting peoples weaknesses That is where the controversy begins. In a sense, F2P games are operated like casinos in Las Vegas. A few examples Again, the speaker doesnt endorse those approaches, just presents them as facts. The examples were taken out of their specific game context and generalized to some degree.
Monetization Conflicts Conflicts are good. Conflicts make the game world more energetic and live. More importantly, conflicts trigger emotions. When people are emotionally unstable, they are more likely to make purchases. Example: Virtual item called little trumpet Used to curse other gamers The curse will be broadcasted to all gamers (in the same zone) A public humiliation tool Sold a lot
Monetization - Convenience People will pay for convenience. However, convenience alone may not be that convincing or persuasive to make people pay. Not a necessity. Have to combine it with other things to make it more effective.
Monetization Peer Pressure Peer pressure is a big thing in F2P games. A lot of games play with it for monetization purposes. A lot of times, people will not pay if they are alone. They will pay if surrounded by their friends. Example: You and your friends are doing a quest. You are going through a dungeon, which consists of 6 levels (linearly chained together). You are killed at level 3. You will respawn in the village you have to start over from level 1 again. You feel guilty because you let your friends down. They have to continue the fight without you (Without your help, your equipment, your unique skills). Under this circumstance, the game offers you a small item that you can purchase to enable you to respawn where you were killed so that you can rejoin the group. A lot of gamers will choose to pay simply because they dont want to let their friends down.
Monetization Showing Off People will pay just to show off, especially in front of rivalries or their loved ones. Example: In this game, you can give your virtual girlfriend flowers. Flowers will fall from the sky and everyone can see it. It creates such a dramatic effect. The game will reward the girl who receives most flowers in a day or a month with nice and unique dresses. Special titles will be given to the girl and it appears every time whenever she chats online. A lot of female gamers in China. Male gamers use online games as a dating tool. Girls want to show off. Guys want to pay the bill. The game company is very happy!
Gambling Features in Online Games One type of monetization is through lottery/gambling features. Over 90% of Chinese online games have lottery/gambling features. 5%-20% of the total revenue is from those gambling features. One good example of lottery/gambling feature is the so-called treasure box or lottery box.
Treasure Box A very common feature in many Chinese online games. Virtual boxes that randomly contain expensive weapons or items.
Treasure Box online games.
Treasure Box Gamers can collect treasure boxes, for free. In order to open them, gamers need to purchase virtual keys (1, 10, or 100 in a pack).
Treasure Box With the virtual key, you can open the box and reveal the item inside. It may be a top-level weapon, or a cheap item, or nothing. With 100 keys, you can open 100 boxes.
Treasure Box
How Important is Treasure Box Giant (NYSE: GA), one of the top 5 online game companies in China, under the pressure of government regulations, dropped that feature in Q3 2009. Revenue declined 20% and the stock price dropped over 10%. One treasure box feature alone has such a huge impact on the gameplay, the eco-system, and the revenue.
Why Gambling Features are So Important? Why So Many Chinese Online Games Have Them? Why So Many Gamers Use Them?
Reason #1 Chinese people just love gambling
Reason #2 It helps the online game company make money.
Reason #3 It helps the whole eco-system in the online game. Further explanation in the following 4 aspects: The concept of fairness the rich vs. the poor A false illusion of fairness created by those features Helping poor people staying in the game = helping keep rich people in the game Event-driven, make the game always fresh and exciting
Fairness The concept of fairness in online games has to do with how we treat people with different buying powers in an online game. Should we treat every gamer the same in the game world? Or should we treat them differently by how much they can pay?
Fairness In old subscription-based online games, every gamer pays the same amount of monthly fee and gets the same level of treatment. People think it is fair. In F2P online games, because 80% gamers dont pay. You have to leverage the fees you charge the rest of the 20% gamers. You have to reward them with big advantages for the money they pay. Rich people have tremendous power and advantages in F2P online games (e.g. best equipment, most shining armor, special items).
Fairness Top-level armor set in ZT Online, one of the most popular F2P MMORPGs in China. You can easily spend 300,000 to 1 million RMB (50,000 to 150,000USD) on those weapons and armors.
Fairness With that kind of weapon and armor, in PvP (Player vs. Player) mode, rich people always win. That creates a huge problem the balance of the game is damaged. Poor people will have no way to win. They will feel abused and defeated. With low morale, they will leave. If poor people leave, rich people will have no other to kill or play with. They will also leave. The whole system will collapse.
An Illusion of Fairness and Hope Gambling/lottery features such as treasure box create a false illusion of fairness for poor people. I may not have 300,000RMB to purchase that set of top-notch armor set. However, I can spend a few hundred on treasure boxes. And if I am really lucky, I can get a 200,000RMB armor set. Poor people are given a chance, an opportunity, and a hope via lottery.
Helps the Whole Eco-System Gambling/lottery features give poor people hope and keep them playing, thus they also help keep the rich people playing. The whole eco-system can keep going.
Inject Freshness and Excitement Just like real-world lotteries, the treasure box feature in the game is time and event-driven. For example, at the end of every month the game company can hold special promotion and announce that a new special weapon will be available through treasure boxes. There is always something new and exciting out there for the gamers to pursue.
Virtual Currencies Almost all online games use virtual currencies. Gamers pay real money to get virtual currencies and use virtual currencies in the game world to purchase virtual items or upgrades. Normally, trading virtual currencies back to real money is not allowed, at least officially. It used to be that each company or even each game has its own virtual currency system. Cannot use virtual currencies bought from Company A to buy virtual items in Company Bs online games.
QQ Coins No longer the case with QQ coins. QQ coins were designed by Tencent, a leading Chinese Internet company in 2002 for its 485 million registered users of its instant messenger software QQ Messenger. One QQ coin = 1 Chinese Yuan Because of the huge established user base of QQ Messenger, other online games and Web sites started accepting QQ coins as payment. Widely used, accounted for almost 45% of the total volume of trading in virtual items in 2008.
QQ Coins as Parallel Currency Transaction between QQ coins and real money is relatively easy and supported by many third-party sites. Due to the scale of its operation, QQ coins have become a parallel currency, to some extent. It has many implications. Gamblers can use the currency to get around China's anti-gambling laws. They can play Mahjong and card games online to get QQ coins and then convert the wins back into cash.
QQ Coins as Marketing Tool Companies can use QQ coins as an effective marketing tool. For example, The9, a major online game publisher in China, announced in the end of 2009 that it would dispense 200 million QQ coins to attract gamers to its new online game Minjiangsanguo. From the gamers perspective, the offer is very appealing because you can use QQ coins in a lot of places. You just go in and try. If you are not satisfied with the game, you can simply leave with some QQ coins, which you can use elsewhere. When the day of open beta came, this marketing stunt turned out to be a huge success! QQ coins are a very good tool to attract/reward gamers.
Thanks!

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Micro Transaction, Gambling Features, And Virtual Currency In Chinese Online Games

  • 1. Micro-transaction, Gambling Features, and Virtual Currency in Chinese Online Games Zhan Ye President, GameVision [email_address]
  • 2. Disclaimer: What the speaker will present next are thoughts, ideas, and common practices he observed during his work. Some of them can be controversial. The speaker merely presents them as facts, not his opinions. The presentation of those thoughts, ideas, and common practices doesnt mean the speaker endorse or support them, or vice versa.
  • 3. Background Info I am an old-school game developer myself. Started game dev career in 1995 in China, developing single player PC games on DOS. Recently have been working with a major Chinese online game company to help them do investment and project financing in the US. Oversee some of the collaborative projects and work with game designers on those projects. Would like to share some of the interesting findings with the audience.
  • 4. A Brief Introduction to F2P MMORPGs Most online games in China are so-called Free-to-Play (F2P) Massively Multiplayer Online Role-playing Games (MMORPG). Massively Multiplayer means the game can be played by hundreds of thousands of gamers at the same time. The current world record of PCCU (Peak Concurrent Users) is 2.1 million, which is held by Giant (NYSE: GA). Role-playing games means the gamers assume the role of a fictional character in the game and take control over many of that character's actions. Free-to-Play means the gamers will not be charged a subscription fee. If they want, they can play the game month after month without paying anything.
  • 5. Micro-transaction in F2P MMORPGs The company has to make money from somewhere. A method called micro-transaction is used for those F2P games. It refers to the selling of virtual goods and services for use within a virtual environment (the game). For example: Costumes Weapons Power-ups Upgrades Special capabilities
  • 6. Micro-transaction in F2P MMORPGs Even with micro-transaction, still, over 80% of the gamers are not going to pay in their life time. Less than 20% of the gamers pay, and they pay BIG. And online game companies get huge revenues.
  • 7. Tencent: 838 million USD Shanda: 715 million USD NetEase: 450 million USD
  • 8. How F2P and Micro-transaction Work The strategy is to use free-to-play to attract a lot of gamers to the game in the beginning. Keep them playing the game as long as possible. As they spend more time in the game, they become attached to it. The time they spent playing the game, the character and equipment they acquired in the game, the friends they made in the game. All these become an investment that they cannot easily give up. Try to offer them virtual items and services that can give them: Fame and social status in the virtual world Convenience Fashion Advantages over other gamers (in PvP mode) And many other things They will pay!
  • 9. Challenges in Micro-transaction Game Design It is not easy to make F2P Micro-transaction work. Game design is the key. Game designers have to think about every possible way to stimulate spending and collect money from the gamers. Monetization has become the most crucial and integral part of game design. It is not an add-on. You have to think about monetization right from the start of the project.
  • 10. Monetization A science and art The secrete ingredients to successful monetization? Just have to try a lot of things. Chinese game designers have tried thousands of ideas in the past several years. We can learn a lot from them.
  • 11. Monetization Good monetization design is based on deep understanding of human psychology. In a sense, game designers are exploiting peoples weaknesses That is where the controversy begins. In a sense, F2P games are operated like casinos in Las Vegas. A few examples Again, the speaker doesnt endorse those approaches, just presents them as facts. The examples were taken out of their specific game context and generalized to some degree.
  • 12. Monetization Conflicts Conflicts are good. Conflicts make the game world more energetic and live. More importantly, conflicts trigger emotions. When people are emotionally unstable, they are more likely to make purchases. Example: Virtual item called little trumpet Used to curse other gamers The curse will be broadcasted to all gamers (in the same zone) A public humiliation tool Sold a lot
  • 13. Monetization - Convenience People will pay for convenience. However, convenience alone may not be that convincing or persuasive to make people pay. Not a necessity. Have to combine it with other things to make it more effective.
  • 14. Monetization Peer Pressure Peer pressure is a big thing in F2P games. A lot of games play with it for monetization purposes. A lot of times, people will not pay if they are alone. They will pay if surrounded by their friends. Example: You and your friends are doing a quest. You are going through a dungeon, which consists of 6 levels (linearly chained together). You are killed at level 3. You will respawn in the village you have to start over from level 1 again. You feel guilty because you let your friends down. They have to continue the fight without you (Without your help, your equipment, your unique skills). Under this circumstance, the game offers you a small item that you can purchase to enable you to respawn where you were killed so that you can rejoin the group. A lot of gamers will choose to pay simply because they dont want to let their friends down.
  • 15. Monetization Showing Off People will pay just to show off, especially in front of rivalries or their loved ones. Example: In this game, you can give your virtual girlfriend flowers. Flowers will fall from the sky and everyone can see it. It creates such a dramatic effect. The game will reward the girl who receives most flowers in a day or a month with nice and unique dresses. Special titles will be given to the girl and it appears every time whenever she chats online. A lot of female gamers in China. Male gamers use online games as a dating tool. Girls want to show off. Guys want to pay the bill. The game company is very happy!
  • 16. Gambling Features in Online Games One type of monetization is through lottery/gambling features. Over 90% of Chinese online games have lottery/gambling features. 5%-20% of the total revenue is from those gambling features. One good example of lottery/gambling feature is the so-called treasure box or lottery box.
  • 17. Treasure Box A very common feature in many Chinese online games. Virtual boxes that randomly contain expensive weapons or items.
  • 19. Treasure Box Gamers can collect treasure boxes, for free. In order to open them, gamers need to purchase virtual keys (1, 10, or 100 in a pack).
  • 20. Treasure Box With the virtual key, you can open the box and reveal the item inside. It may be a top-level weapon, or a cheap item, or nothing. With 100 keys, you can open 100 boxes.
  • 22. How Important is Treasure Box Giant (NYSE: GA), one of the top 5 online game companies in China, under the pressure of government regulations, dropped that feature in Q3 2009. Revenue declined 20% and the stock price dropped over 10%. One treasure box feature alone has such a huge impact on the gameplay, the eco-system, and the revenue.
  • 23. Why Gambling Features are So Important? Why So Many Chinese Online Games Have Them? Why So Many Gamers Use Them?
  • 24. Reason #1 Chinese people just love gambling
  • 25. Reason #2 It helps the online game company make money.
  • 26. Reason #3 It helps the whole eco-system in the online game. Further explanation in the following 4 aspects: The concept of fairness the rich vs. the poor A false illusion of fairness created by those features Helping poor people staying in the game = helping keep rich people in the game Event-driven, make the game always fresh and exciting
  • 27. Fairness The concept of fairness in online games has to do with how we treat people with different buying powers in an online game. Should we treat every gamer the same in the game world? Or should we treat them differently by how much they can pay?
  • 28. Fairness In old subscription-based online games, every gamer pays the same amount of monthly fee and gets the same level of treatment. People think it is fair. In F2P online games, because 80% gamers dont pay. You have to leverage the fees you charge the rest of the 20% gamers. You have to reward them with big advantages for the money they pay. Rich people have tremendous power and advantages in F2P online games (e.g. best equipment, most shining armor, special items).
  • 29. Fairness Top-level armor set in ZT Online, one of the most popular F2P MMORPGs in China. You can easily spend 300,000 to 1 million RMB (50,000 to 150,000USD) on those weapons and armors.
  • 30. Fairness With that kind of weapon and armor, in PvP (Player vs. Player) mode, rich people always win. That creates a huge problem the balance of the game is damaged. Poor people will have no way to win. They will feel abused and defeated. With low morale, they will leave. If poor people leave, rich people will have no other to kill or play with. They will also leave. The whole system will collapse.
  • 31. An Illusion of Fairness and Hope Gambling/lottery features such as treasure box create a false illusion of fairness for poor people. I may not have 300,000RMB to purchase that set of top-notch armor set. However, I can spend a few hundred on treasure boxes. And if I am really lucky, I can get a 200,000RMB armor set. Poor people are given a chance, an opportunity, and a hope via lottery.
  • 32. Helps the Whole Eco-System Gambling/lottery features give poor people hope and keep them playing, thus they also help keep the rich people playing. The whole eco-system can keep going.
  • 33. Inject Freshness and Excitement Just like real-world lotteries, the treasure box feature in the game is time and event-driven. For example, at the end of every month the game company can hold special promotion and announce that a new special weapon will be available through treasure boxes. There is always something new and exciting out there for the gamers to pursue.
  • 34. Virtual Currencies Almost all online games use virtual currencies. Gamers pay real money to get virtual currencies and use virtual currencies in the game world to purchase virtual items or upgrades. Normally, trading virtual currencies back to real money is not allowed, at least officially. It used to be that each company or even each game has its own virtual currency system. Cannot use virtual currencies bought from Company A to buy virtual items in Company Bs online games.
  • 35. QQ Coins No longer the case with QQ coins. QQ coins were designed by Tencent, a leading Chinese Internet company in 2002 for its 485 million registered users of its instant messenger software QQ Messenger. One QQ coin = 1 Chinese Yuan Because of the huge established user base of QQ Messenger, other online games and Web sites started accepting QQ coins as payment. Widely used, accounted for almost 45% of the total volume of trading in virtual items in 2008.
  • 36. QQ Coins as Parallel Currency Transaction between QQ coins and real money is relatively easy and supported by many third-party sites. Due to the scale of its operation, QQ coins have become a parallel currency, to some extent. It has many implications. Gamblers can use the currency to get around China's anti-gambling laws. They can play Mahjong and card games online to get QQ coins and then convert the wins back into cash.
  • 37. QQ Coins as Marketing Tool Companies can use QQ coins as an effective marketing tool. For example, The9, a major online game publisher in China, announced in the end of 2009 that it would dispense 200 million QQ coins to attract gamers to its new online game Minjiangsanguo. From the gamers perspective, the offer is very appealing because you can use QQ coins in a lot of places. You just go in and try. If you are not satisfied with the game, you can simply leave with some QQ coins, which you can use elsewhere. When the day of open beta came, this marketing stunt turned out to be a huge success! QQ coins are a very good tool to attract/reward gamers.