Are you trying to make flash games for a living, but having a hard time making ends meet? Have you made an engaging & fun game, then spent months polishing and tweaking it to perfection before releasing it onto the world? Maybe you got it right and it's a hit – it's been played and enjoyed by literally millions of people! Well time to sit back and watch the pennies roll in, my friend, because that's all you're going to be getting. This may sound alarming, but it's what most flash game developers have experienced using what I call the 'Ad Model' of monetisation.

All this could be yours!

The Ad Model

Over the last few years Flash gaming has enjoyed a massive rise in both the quality and quantity of games on the market. What caused this? The online ad market boomed. It suddenly became (marginally) profitable to build a flash game, throw in some easily-included ads and set it free on the internet. A few well-documented hits made a relatively large amount of money, yet were often made by a single developer working in his spare time over the course of a few months (as previously flash simply couldn't fund an actual team of developers), and this caused a 'gold rush' effect of developers piling into the flash games space. Over time the ad model for flash games has matured into a market where developers can make money from various sources:

• In-Game Ads: in-game ads such as MochiAds, usually shown once while the game is loading
• Around-Game Ads: site ads like Google AdSense shown around the flash game either on the developer's own site, or on a site like Kongregate or Newgrounds which offers revenue share to developers
• Sponsorship: this is where a portal pays the developer to 'tag' their game with the portal's branding (and usually a 'more games' link), effectively paying for traffic delivered to the portal as the game is distributed around the internet. FlashGameLicense was set up to help developers find sponsors for their games, and it has proven to be very effective.
• Licensing: this is where a portal or site pays a developer for a one-off license to use their game; generally they pay a fixed fee to be able to use the game without the sponsor logo, in-game ads, links to the developer's site, etc on their own site; multiple licenses can be sold alongside a sponsorship

Generally speaking you can, and should, use all these options at once as Ada Chen advised in a talk she gave at Casual Connect in 2008. This model is working for some developers, the ones who can efficiently make engaging, short flash games and keep churning them out, but it's really only been a success for very few. Most flash game developers are still relying on other sources than ad-funded games to keep going full-time (for example, making games on contract for third parties).

Not Enough To Go Around

The problem with the ad model is that all the money is coming from one limited pool: advertising. You might find that sponsorship and licensing get you significantly more than in-game ads, but the money from those things comes from that same pool. Portals buy traffic from you (via sponsorship/licensing) with the money they earn from .. advertising! The amount of money in the advertising pool is limited, plus needs to be shared out amongst a whole load of middlemen before it trickles through to developers. No one has explained this better than Dan Cook in his recent Flash Love Letter, Part 1:

Image by Dan Cook, used with permission

A Better Model

Luckily there's a better way to fund game development than scrounging for ad-pennies. It's been proven in almost every form of consumer entertainment ever made, from theatre to music to cinema and yes, even games: ask the consumer of the entertainment to pay you for providing it. That's it. Asking the players to fund game development takes away the dilution effect of trying to get ads to pay everyone's cut, and directly rewards the developer regardless of the size of their 'aggregated traffic-power'. It works for all those other kinds of entertainment, and it certainly works for the rest of the gaming industry.

And it can work for flash games too. Several developers have been successfully charging players for full versions of their free flash games, by integrating a payment processor such as PayPal. This method (often called a "demo", write that down) is so proven that almost no console or PC game doesn't use it. Others have tried splitting out the purchase into smaller bundles using a microtransaction/virtual currency provider, and are charging for decorative things like a fancy hat or small upgrades like level packs and new weapons instead of selling the whole game in one go. In fact recently launched providers such as MochiCoins, GamerSafe and Heyzap have made it easier than ever for flash developers to take payments from players. One advantage of the idea of using virtual items, temporary powerups, or other small purchases is that you aren't putting a cap on how much your biggest fans are able to spend on your game. Generally speaking selling virtual items works best in a persistant-world / MMO style of game, where you can put all kinds of social and economic effects into play to really leverage the idea – just look at this breakdown.

Regardless of how you are charging players, or what they are paying for, the fact that you are charging at all means you are using what I call the 'Premium Flash Game' revenue model.

Premium Games Need To Be Frickin' Sweet

One downside to charging money upfront is that you need to make players fall in love with your game before they will pull out the credit card, and that means spending a lot more time polishing the gameplay and expanding the content before release. The quality level of today's (and yesterday's!) flash games is definitely high enough to convince players to pay – developers just need to focus on expanding the experience; make "long form games" instead of focusing on quick, throw-away games. Again no one's explained this better than Dan Cook, so make sure to read his Flash Love Letter, Part 2 – you can do it right now if you like, we'll pause this part of the internet until you come back.

And Now For Some Examples

Lets have a look at some real-world examples of revenue made by flash developers using the Ad Model, and compare them to ones using the Premium Model. I'm going to use 'Gross eCPM', a term I just made up, as the baseline stat to compare these ad-based apples versus premium oranges. If you aren't familiar with it, eCPM is an advertiser's term and stands for effective cost-per-mille – or how much an advertiser has to pay out per 1,000 impressions of their ad on average. As the payee, you can think of it as how much revenue you made per thousand plays of your ad-enabled game. What I call Gross eCPM is calculated by taking the total amount of plays of a game, and dividing it by the total revenue made from them (whether it be from ads, sponsorship, microtransactions or full game purchases). This handily lets us compare two very different ways of monetising with a single comparative number.

First up let's look at the numbers for some flash games using the traditional Ad Model to generate revenue:

Desktop Tower Defense (play)
One of the original 'break out hits' of modern free flash games, created by a single developer, and supported by ads inside & around the game.

Total Plays: 15 million in the first few months
Gross Revenue: ~$12,000 in that same time frame
Gross eCPM: ~$0.80
[source]

Mytheria (play)
A fairly typical successful flash game, though not a massive hit in terms of plays

Total Plays: 3.7 million plays to date
Gross Revenue: ~$8,200 to date
Gross eCPM: ~$2.22
[source: email interview]

Armor Wars (play)
Another game by the same developer as Mytheria (Diffusion Games), released afterwards to stronger interest from sponsors

Total Plays: 2.2 million plays to date
Gross Revenue: ~$9,300 to date
Gross eCPM: ~$4.23
[source: email interview]

Chronotron (play)
Another game created by a single developer, and supported largely by revenue share on ads on Kongregate.

Total Plays: 7 million at time of this article
Gross Revenue: ~$15,000 in that same time frame
Gross eCPM: ~$2.14
[source]

Now let's have a look at some games using the Premium Model by selling full games:

Fantastic Contraption (play)
A free-to-play flash game, hosted on it's own site plus some portals, with a premium unlock for $10 that let you make your own levels and play other people's custom levels. Included solution-sharing via unique URL that helped it spread virally.

Total Plays: "over 3.5M unique users in the first 3 or so months"
Gross Revenue: "for every unique site visitor, he converts 0.5% to a paid version [at $10]" = ~$175,000
Gross eCPM: ~$50.00
[source]

Now Boarding (play)
A free-to-play flash game hosted on various portals that had an upsell to a downloadable for-sale version (at ~$15)

Total Plays: 4.2M – 6.2M plays (some portals made it impossible to track this, hence the range) over the last year
Gross Revenue: 10,500 sales so far x $15 = ~$155,000
Gross eCPM: ~$25.00-36.90, depending on above
[source: phone interview]

And some games using the Premium Model by using microtransactions:

Twin Shot (play)
A free-to-play flash game by Nitrome with various virtual currency unlocks, including a level pack and cheats

Total Plays: "over 10 million plays"
Gross Revenue: unspecified (but calculations from the eCPM they gave says it would be about $25,000 at the time of the Q&A)
Gross eCPM: ~$2.50 but up to around $5.00 in english speaking territories (based on 60% developer cut of Mochi Coins revenue alone)
[source]

SAS: Zombie Assault 2 (play)
A free-to-play flash game by Ninja Kiwi with various virtual currency unlocks

Total Plays: "about 5.7M plays and 700k plays from the expansion pack" = 6.4M plays
Gross Revenue: ~$22,400
Gross eCPM: ~$3.50 but up to over $11.00 in english speaking territories (based on 60% developer cut of Mochi Coin revenue alone)
[source]

Minions On Ice (play)
A free-to-play multiplayer flash game by the Casual Collective where you could pay to get bonuses and access to extra vehicles quicker than normal

Total Plays: n/a
Gross Revenue: n/a
Gross eCPM: an ARPU of $0.40 was mentioned by the developer, which means $0.40 revenue per unique player. My Gross eCPM counts total plays rather than unique plays, but if we ignore that we would get a Gross eCPM of $400; if we had the 'total plays' number this would be lower – but not all that much lower.
[source]

That's a massive, orders-of-magnitude difference between the revenue rate for ad-funded flash games and premium flash games. And once you start charging the players instead of hoping for ad money, the sky's the limit. Puzzle Pirates, a casual MMO run by Three Rings revealed last year that they make make an ARPU of ~$1.50 per player, per month – which would give a comparative Gross eCPM of ~$1,500. Yep.

Edit: Daniel James (Three Rings CEO) left a comment giving me a much better way to calculate a comparable 'Gross eCPM' for Puzzle Pirates. He says for every 1,000 new visitors to the site they get about 100 who actually download & play, leading to a lifetime value of about $200-$500; so a better 'Gross eCPM' for Puzzle Pirates (over many months) is ~$200-500.

Set Phasers To Premium

I hope this has convinced you, the flash game developer, to seriously consider moving away from the Ad Model and moving into Premium Flash Games. It's the future – embrace it.

PS- Many thanks to all the flash developers who have shared their revenue numbers with the rest of the industry. We too will be doing this as we work on our first game.

This post has also been published on the Mochi Land blog. Thanks Mochi!

Itsa Money!

We want to build up this part-time game development gig into a successful business, so we have to think about how to make this profitable from the beginning! Here's how we are going to monetise the games we are working on – if you are a game developer (or thinking of becoming one) this should be very helpful to you too!

Casual Flash Game

The first game we are building is a casual flash game: playable within a browser without a powerful gaming PC and immediately ready to play without a big download. There is a huge, huge market for flash games with literally hundreds of millions of people playing them every day – in fact more people play games online than on consoles! The downside is that while console gamers are used to shelling out giant wads of cash for games (or even measly extra controllers), online punters have gotten used to getting things for free. Despite this there are still opportunities to make some serious cash:

Advertising

Wherever there are eyeballs looking at something, there are brands paying to advertise to them. Online gaming is a natural fit for this. One way of ad-enabling your casual game is to add in-game advertising (companies like MochiAds, GameJacket or CPMStar make this very easy), while another good way is to host the game on your own site and serve ads beside it using Google AdSense. Both ways will make you good money, but only if you can get millions of people to play your game. The most popular games have made tens of thousands of dollars from advertising alone – some of which were games made by a single developer in a couple of months! Have a look at these examples of cash made from ads in casual games:

• Bloons (2 developers) making $30,000 a month
• MochiAds forum thread about revenue totals
• 1 developer, over $4,500 in 1 year
• 1 developer, over $1,700 in 1 month

If you do make a super-popular hit you can make a lot of money this way, however it's not easy and the payout for less popular games is hardly enough to make you quit your day job! Have a read of Ryan of Untold Entertainment's excellent Pimp My Game series of articles where he puts a game he made in 48 hours through the various ways of making money – I think it's up to $17 of sweet, sweet profit so far.

Sponsorship

The most popular gaming sites (called portals) are making money hand over fist from advertising; so much so that they are willing to spend a pretty penny to sponsor games. A game sponsor will generally get their logo and a 'more games' link back to their portal inside your game, and in return will give you an up front cash payment (from $500-1000 for a very simple game to thousands or even 10k+ for something really good). If your game is popular they will get many more visitors, making their portal even more valuable to their advertisers.

Licensing

Portals need the games developers are building, particularly the good games that get players coming back again and again. So much so that many will license your game for their site, paying you a fixed fee to get to host your game (and sell ads around it). Between sponsorship and licensing many casual game developers have reported matching the earnings they see from in-game ads (all three methods can and should be done together). FlashGameSponsorship is a great site that explains in detail how sponsorship and licensing your game to portals can work for you. The same people have also built FlashGameLicense which lets you show off your game and invite sponsorship/licensing offers from game portals; I've heard great things about it and we will be using it when our casual game is ready.

Selling To Customers

The above revenue channels all rely on giving your game away; how about the traditional, proven method of asking gamers to buy your game? Some developers are doing just that. Naturally you need to make a pretty good game to justify the cost to a market of gamers used to getting things for nothing. How about the best-looking arcade game I've ever seen in Flash, RoboKill? They have a demo playable online and you can unlock the full version by paying $10. I'd love to know how successful this has been for RockSolidGames!

Be A Portal

If they are happily paying out large amounts in sponsorship for simple games you can bet your right arm they are making even more money themselves! So you could certainly try hosting other people's games w/ advertising and see how it pays – we may even try it down the line. MochiAds give you access to free games for your site as long as the developer gets to show their in-game MochiAds – this would be an excellent source for games if you wanted to try being a portal without spending too much up front.

Persistant Game World

Our long term plan is to build a multiplayer tactics game with persistent units hosted on our site. This will make for a much more compelling, exciting game – and it also gives us way more ways to earn money from our happy gamers:

Community

The game should be free to play for everyone as you need to grow a community around a multiplayer game or it will never get anywhere (particularly with our generous marketing budget of 2 shillings and an old shoe). You can use ads on the site to get a little bit of revenue, but practically speaking you will not get the millions of players you need to make you those fistfuls of hot, sweaty cash.

Subscriptions

You then offer an enhanced version of the game at a price for people who are really into the game. Enhanced can mean extra functionality, or new races/ingame stuff only available to subscribers, or even just cosmetic bonuses like getting an 'I Rock' badge on their profile.  One thing that is important to us is to totally avoid making players who don't subscribe be unable to compete on a fair playing field in the multiplayer game – we will never make it so you feel you have to pay to be able to do well. That said many online games do exactly that so it certainly is a (slimy) way to encourage subscriptions.

Sell In-Game Thingies

That's right, thingies. One very interesting alternative to subscription-based revenue is to use micro-transactions to directly sell in-game stuff to your players. This can be anything from enhanced items to the ludicrously popular cosmetic stuff- special pirate hats for your players, or a custom badge for your profile. This model of providing the game for free and then selling extras to enthusiasts can really scale up moneywise and there are a lot of examples of it doing extremely well. Just look at Maple Story which made over $30M in 2007 from selling in-game clothes and hair makeovers! We'll be thinking very carefully about this model vs subscriptions when we are getting ready to launch our persistant game.

Alternative Revenue Ideas

Those are the most obvious ways of earning money from your game, but that's not quite the end of the story.

Sell to Other Developers

Once you have a lovely, polished game engine you have the option of licensing this out to other developers for a tidy fee. You could also do this with smaller components, like a map editor or similar. Flex in particular doesn't have much in this space but must have a large amount of prospective customers. We may consider this, depending on just how lovely, extensible and useful our work ends up being!

Blog -> ???? -> Profit

Writing a blog can directly (eg ads) and indirectly (referrals to your game, free PR, getting 'noticed') make money for you. We don't intend to ever directly try and make money from this blog but it will be interesting to see what else comes up!

Sell The Company

You can't really plan for this one or count on it happening, but sometimes small independent game companies get bought out by bigger companies, making their founders filthy rich and smug to boot. I'll let you know if it happens to us!

Have any other ideas about this topic? Post a comment!