Microtransaction

Microtransaction (sometimes abbreviated as MTX) is a business model where users can purchase virtual goods via micropayments. Microtransactions are often used in free-to-play games to provide a revenue source for the developers. While microtransactions are a staple of the mobile app market, they are also available on traditional computer platforms such as Valve's Steam platform.

Free-to-play games that include a microtransaction model are sometimes referred to as "freemium". "Pay-to-win" is sometimes used as a derogatory term to refer to games where paying for in-game items can give the player an advantage over other players, particularly if the items cannot be obtained by free means. The objective with a free-to-play microtransaction model is to get more players into the game and provide desirable items or features that players can purchase if they are interested in them - it is hoped that in the long term the profits from a microtransaction system will outweigh the profits from a one-time-purchase game.

Items and features available by microtransaction can range from cosmetic (such as decorative character attire) to functional (such as weapons and items). Some games allow players to purchase items that can be acquired through normal means, but some games include items that can only be obtained through microtransaction. Some developers ensure that only cosmetic items are available this way to keep gameplay fair. Microtransactions are regularly used as a way of acquiring Loot boxes.

Microtransactions are most commonly provided through a custom store interface placed inside the app the items are being sold for. Apple Inc. provides a framework dubbed "in-app purchases" for initiating and processing transactions. Google's framework for the same use is referred to as "in-app billing", named more from the developer's point of view. Apple and Google both take 30 percent of all revenue generated by microtransactions sold through in-app purchases in their respective app stores. Steam offers support for microtransactions in games on its platform through the Steamworks SDK.

Impact

Mobile web analytics company Flurry reported on July 7, 2011, that based on its research, the revenue from free-to-play games had overtaken revenue from premium games that earn revenue through traditional means in Apple's App Store, for the top 100 grossing games when comparing the results for the months of January and June in 2011. It used data that it analyzed through 90,000 apps that installed the company's software in order to roughly determine the amount of revenue generated by other popular apps. They discovered that free games represented 39% of the total revenue from January, and that the number jumped to 65% by June, helped in part by the fact that over 75% of the 100 top grossing apps are games. This makes free-to-play the single most dominant business model in the mobile apps industry. They also learned that the number of people that spend money on in-game items in free-to-play games ranges from 0.5% to 6%, depending on a game's quality and mechanics. Even though this means that a large number of people will never spend money in a game, it also means that the people that do spend money could amount to a sizeable number because the game was given away for free.

A later study found that over 92% of revenue generated on Android and iOS in 2013 came from free-to-play games.

Electronic Arts Corporate Vice-President Peter Moore speculated in June 2012 that within 5 to 10 years, all games will have transitioned to the microtransaction model. Tommy Palm of King (Candy Crush Saga) expressed in 2014 his belief that all games will eventually be free-to-play. According to Ex-BioWare developer Manveer Heir in a 2017 interview, microtransactions have become a factor in what types of games are planned for production.

Free-to-play/microtransaction may be used as a response to piracy; the developers of the mobile game Dead Trigger switched the game to the free-to-play model due to a high rate of piracy. While microtransactions are considered a more robust and difficult to circumnavigate than digital rights management, in some cases they can be circumvented: a Russian developer created a server to fake authentication for iOS in-app purchases, allowing users to obtain microtransaction features for free.

Many consumers have referred to video game micro-transactions as a means of milking their product for more profit. "Companies take content they’ve already developed for their games and put it behind a paywall, asking for $20-$30 to access the “season pass.”

Consumer organizations have criticized that some video games do not describe adequately that these purchases are made with real money rather than virtual currency. Also, some platforms do not require passwords to use a credit card to complete microtransactions. This has resulted in customers getting unexpectedly high bills (known as bill shocks).

The Data Behind Microtransactions

Microtransactions have become increasingly common in all kinds video games. Smartphone, console and PC games all have conformed to the use of microtransactions, due to its high profitability. Many companies and games, especially smartphone games, have taken on certain business models that offer their games for free, relying purely on the success of microtransactions to turn a profit.

SuperData

SuperData is a company that does Qualitative and Quantitative research on video game markets and spending habits of consumers. SuperData collaborates and is essentially hired by a variety of companies, ranging from banks to game developers. They work in favor of the companies that either hire them or share data with them, creating business strategies, outlining profitable regions in the gaming market, and making companies seem more appealing to investors.

The Data Collected

SuperData gets a massive amount of data involving consumer spending habits, consumer games preferences and even their interest in certain brands. This information is obtained through the companies they work with. PayPal and Visa are two of the companies that share consumer spending habits with SuperData for them to conduct their research. Notably enough, SuperData’s work is targeted to support these companies that thrive off microtransactions, and is not easily available to the average consumer whose information is what’s making there work possible. The three major console companies, PlayStation, Microsoft Xbox and Nintendo also are primary data sharers with SuperData. In addition to this, companies like Google, Apple, Blizzard and Twitch are also partners. With all this data collected, it allows video game companies, like EA, Blizzard and Ubisoft, to implement microtransactions safely into there games, knowing what regions and types of business models they will have success with.

Ethics Behind the Data and Microtransaction

Data

The collection of this data on consumers, although technically legal, can be considered unethical. Companies are selling data about consumers, involving there spending, bank information, preferences, ect, all to overall understand the consumer better, making business models for gaming companies safer and more profitable. Considering all the companies involved, the limits to the data being shared are endless. Visa, Google, Microsoft and PayPal already have so much data on consumers already, and are freely able to share it. Google in specific hold information on more than just video games, which raises questions of what they are sharing. With the microtransactions already under a negative spotlight from the gaming community, people may not be happy to hear that data on them is being shared to make microtransactions possible.

Microtransactions

In the eyes of gamers, sometimes microtransactions are done the right way, and sometimes they are done the wrong way. Data shows that most gamers (77%) like microtransactions when they are done “correctly”, mainly supplying cosmetic items and other non-game changing products. The other side of the argument is those who believe games that require microtransactions to be successful are what ruining the gaming industry. Certain companies like Blizzard and EA, and a variety of other smartphone companies have had vast amounts of criticism due to there choices with microtransactions. Games like Hearthstone and EA’s Star Wars Battlefront 2, took on business platforms that either force their player base invest what was considered an unreasonable amount of time, or buy into microtransactions, so they could keep them selves on an even playing field with other players.

The profit in Microtransactions

The data from a variety of sources, including SuperData, show that microtransaction can vastly increase a companies’ profits. Free smartphone games like Clash Royal, Clash of Clans and Game of War are all in the top 5 most profitable smartphone games of 2016, despite being entirely free. Microtransactions alone are what make their profits. Grand Theft Auto as another example, was a game that held the price of a standard game (60$ USD) on release, yet they through microtransactions they have made more money than they have on game sales. The data speaks truth, where its clear that microtransaction is a business model that all game companies are conforming to, and for good reason.

See also

• Downloadable content
• Loot box