The following is a guest post from Matthias Sala, the founder of the mixed-reality game studio Gbanga, having worked on activity-based advertising at Xerox PARC, Palo Alto, smart vacuum cleaners at the ETH Zurich and self-refilling refrigerators at Siemens Smart Home Lab in Munich. He won the Sentient Future Award for Bin It!, a futuristic waste disposal system with a gamification component.
In the last decade, the video games industry has reinvented itself. Adapting to the presence of free culture and piracy in digital distribution, the industry has responded by publishing free-to-play games with novel business models. If you have a look at the Top Grossing apps in the App Stores and Markets, you will find that the majority of the top titles are free-to-play games.
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In opposition to this trend, few news apps are present among these top grossing rankings and, excluding the New York Times, most newspapers do not report on exciting revenues from digital media. At the same time, newspapers and publishers have fallen into a severe crisis despite existing lucrative business models and concepts for digital content—just look at the games in the App Stores!
In the highly competitive market of games, everything is free. However, our players appreciate our games so much that they are happy to pay between 99 cents and 99 dollars for virtual goods that have no physical value per se. At the same time, newspapers with high quality articles are struggling to persuade readers to pay for their articles. Obviously, there is some potential for print media to learn from the gaming industry.
Free offerings are half of the truth
Most games are free because there exist too many substitute goods. Nobody would pay for a game because the number of alternatives is too large. If you compete in the market of interchangeable games, advertising is the simplest method to monetize. With this method players are confronted with a lot of bothersome ads and may not become loyal customers as a result. The advertising concept works pretty well, if you have an enormous reach. An example is Talking Tom or Shazam; many people have installed the apps, only a very few have paid for them. The counterpart in print media are the free papers (for commuters) that, interestingly, are very lucrative for publishers.
Mobile internet usage is increasing and soon the majority of Internet users are likely to access websites from their mobiles. Mobile banner ads are obviously not a sustainable solution because, firstly, people are not immersed enough to notice mobile ads and, secondly, they are unlikely to be happy compromising the already limited space on their small mobile screen. Mobile banners reportedly to not work. Mobile ad prices are not only 5 times lower than on the desktop, in mobile gaming too, ad-based business models seem to be unsuccessful: none of the Top Grossing apps feature ads. But how could digital media monetize their content?
The Myth of Paywalls and the Cartel
The Paywall seems to be a simple solution: mirroring the traditional format of customers paying for articles at a newspaper kiosk. After introducing Paywalls at New York Times and NZZ, reports began to spread that online readers abandoned online newspapers in favour of free offerings. Apparently the interruption of a payment form while reading was too strong a frustration for customers. Or was it because it is just too easy to find free alternatives online (substitute goods)? This phenomenon lead to the short-sighted argument that all publishers should unanimously participate in the Paywall model to create a sort of cartel. In a brave new media world, no one would be able to read news for free and all readers would just accept the Paywall.
Paywall as a word already sounds user-unfriendly. So is the approach to solve the problem: the news industry, which is built on the principles of freedom, wants to have a totalitarian solution that is unlikely to become true. It is comparable with the music industry that tried to prevent customers from using their music digitally. The Paywall might work for a limited group of regular readers (see New York Times), but there are also friendlier solutions out there.
What the media industry can learn from games
A cartel in the games industry is unthinkable. It is why user-friendly and innovative practices have emerged, as summarised in the following list:
- Provide great content for free
- Make it easy to start using your content (on-boarding)
- Offer micro-payments in the right moments
- Introduce dynamic pricing
- Increase loyalty and takeover with quality and variety
1. Offer great content for free
Games and news alike are short-lived and expendable. Game titles differentiate themselves from their competitors primarily through brands, and the quality of graphics and sound. Beautifully crafted games of famous brands like Disney tend to be more successful than an unknown game character (games likeMinecraft are an exception to the rule). Big brands offer games for free as a fun and accessible entry-point for players to become familiar with the brand. Familarity and quality are the main reasons for a player’s decision to buy into a product.
The same is applicable to media: readers are fans of their favorite newspaper, their favorite TV show or their favorite blog. They have had great experiences in the past and appreciate the different angle of writing, the quality of research, etc. Readers will return to those media services frequently to see what is new. To block readers in this stage with a Paywall is counterproductive. The Economist’s digital strategy with a combination of free qualitative blogs and apps is a perfect example for “great content for free”.
2. Make it easy to start using your content (on-boarding)
In games, the first couple of seconds of usage are crucial. Prospective players make their decision within 45 seconds on whether they wish to play a game or drop it forever, based on the game’s fun factor and whether it is understandable. A smooth on-boarding is achieved with the help of tutorials, video sequences and a fancy, intuitive design.
In online media, similar metrics apply to how readers can be converted into returning customers. Is it easy to sign up for advanced services? Are cookies used to show recently read articles and preferred categories? Are push notifications sent for updates of the articles that one read? Basic, but convenient functionality can turn one-time visitors into regular visitors. Forms with more than two fields (or credit card information) are a guaranteed show stopper.
3. Offer micro-payments in the right moments
Usability of games is increased with the inclusion of small feature pop-ups that can be handy for frequent players—pop-ups offering tools to create virtual farms quicker, or additional levels that can be unlocked. Such features are offered through micro-payments precisely at the moment when they become handy—not before and not after.
News sites should also offer context-sensitive features, such as a quick archive search tool; printing of an infographic in higher resolution; a PDF export of a special topic or the daily favourites; or the activation of detailed statistics in an economy analysis article. Such added value can be purchased with small amounts of cash (micro-transactions) and is sure to receive huge success. For instance, many readers would be happy to outperform their work colleagues by making a micro-transaction payment for a high resolution infographic for an internal business presentation, instead of downloading the free low-res screenshot.
4. Introduce dynamic pricing
As described before, it is a must to offer a basic free service that is convincing, as it’s the equivalent to a business card. However, this basic service should be complemented with added-value services that are offered via micro-transactions. The pricing of these services should be dynamic, much like in a supermarket: week-end specials, promotions for power players, multipacks and bundles (which are also lucrative tools of the games industry).
Online media have great usage metrics, such as access numbers per article and popularity of topics. These metrics can be used in the business model: complete versions of very popular articles might have a price wheras the rarely read articles are free (or vise-versa). The long-tail of free articles is also beneficial for SEO purposes. In popular economy articles, the percentage numbers are hidden and can be unlocked with 99 cents. The patent filed by Yahoo is a good indicator that there is potential in such an approach.
5. Increase loyalty and takeover with quality and variety
In the video games industry, committed players are constantly rewarded with extra levels, bonus points and advanced avatars. Beginners are rewarded with starter packs. After each app launch, a positive surprise happens: players win new items or score extra points. All these positive experiences increase player engagement entertainment value.
There are likewise many opportunities to reward readers on news sites, such as: rewarding readers for repeatedly sharing articles; readers of specific topics can be given a sample of new premium content that would normally cost something. Readers should be assisted in discovering new and surprising articles, similar to what Amazon’s Recommendations do.
The agile games industry as a treasure chest
The games industry is a treasure chest of smart business models and great product designs that are fun to use. Within the last 30 years, the industry has had to radically change and adapt repeatedly: in the ’80s with home consoles which turned amusement halls obsolete; in the ’90s the challenging distribution of PCs; in the new millennium the pervasion of the Internet and later the mobile smartphones. Games and playful design are not just buzzwords, but an opportunity for all industries, including the digital media business.
Matthias, the author has been working on games for almost 20 years. His game studio Gbanga specializes in Playful Design (a better form of gamification) and develops gamification studies for companies.