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How to make money with online games

by Samuel Asher Rivello

Facebook eclipsed Google as the number-one website by traffic in the United States in May of last year with over 500 million members. The Flash game development juggernaut, Zynga—the social-game developer behind the Farmville game for Facebook—topped $200 million of revenue in 2010. Zynga has all five of the top five grossing games for Facebook, and it creates its popular games using the Adobe Flash Platform. Flash gaming is making some serious money.

In this article, I show you how to use your Flash development skills to earn more revenue—either working alone or on a small team. And while mobile gaming is growing at a tremendous rate, most of the casual gaming is still deployed to computers because mobile devices are still somewhat limited by bandwidth and processing speed.

Revenue models for casual games vary dramatically. Online games are usually free to play, but they run on pages that feature banner advertising. Site owners earn money by driving traffic to third-party sites. Other games are free to play but incorporate product branding within the game. These "advergames" are basically one big ad, analogous to product placement. Theatrical movie websites and toy websites often incorporate advergames as part of a promotional campaign.

Another way casual games earn money is through the "freemium" business model. In this scenario, users can play the trial version for free but pay for the full premium experience. Other revenue methods include subscriptions and microtransactions.

Online gaming became popular in the 1990s. As computers have become more powerful and Internet speeds have increased, the industry has grown significantly (see Figure 1).

Annual online game revenue in billions of U.S. dollars from 2006–2011.

Figure 1. Annual online game revenue in billions of U.S. dollars from 2006–2011.

The online gaming market research company DFC Intelligence predicts even more increases for casual games in 2011:

Approximately $3–5 billion of this year's revenue will target online computer games, such as projects created with the Flash Platform. Americans spent more than $3 billion in video game subscription fees last year. A new report by market research firm Pike & Fischer estimates that Americans will spend $5 billion annually by 2015.

Understanding game developers

Mochi Media is a company that provides tools to help game developers monetize their own games. They recently completed an exhaustive Flash Games Market Survey to find out who is making games and how they are doing it.

The following are some of the highlights of the survey’s findings:

It’s interesting to note that 70% of Flash game developers are creating games as a hobby or secondary business; it is not their primary means of income.

Developing for a gaming company

Many developers in the Flash game industry work as contract-based or full-time employees. These include the creators of the game ideas, the artists who draw and animate game assets, sound designers, and of course the Flash and Flex game developers who bring it all together with their programming skills.

Work for hire is a stable way to earn a living and can be very rewarding and fun. But to maintain more creative control and to generate more potential income, it is worth taking a risk. Create the game and invest in monetizing it yourself to reap the most benefits.

Offering training and creating middleware are two other viable ways to monetize your skills. To monetize completed game projects, there are two major strategies:

Considerations when monetizing free Flash games

Historically, advertising-based revenue was based on displaying banner ads in the same HTML page that contained the Flash game but outside of the game itself. Over time, that practice has evolved to include ads within the game. Developers can use APIs to programmatically pause games (typically during startup) to show ads. Game players can click the ads, which open in a new window. Advertising deals are typically paid to game developers based on the number of ads shown (impressions) or the quantity of traffic generated (clicks).

Sponsorship

In addition to featuring individual ads or using APIs for ad networks, you can also make money by being sponsored.

Companies that sponsor games brand your game with their own advertising, logos, and marketing messages. The sponsor includes a link from your game to their website. Games that are the most financially successful do the best job of encouraging game players to click the link.

Game sponsors take a risk because they may not earn money on their investment. Sometimes the advertising in a game performs well, while other times a game may underperform. Sponsors generally cast a wide net and recoup their losses with one very popular game.

Licensing

Unlike sponsors, who incorporate their ads and distribute games on the Internet, licensing companies often incorporate a smaller branding presence within the game and require that the game is only available on their website. For example, big game portals, such as Kongregate.com, may license your game as their exclusive content.

The big difference between licensing and sponsorship is that the licensor wants your game to become part of their property. This enhances the consistency and branding of the overall gaming experience for users while driving traffic.

In addition to these options, monetization strategies may also include displaying banner ads outside of Flash games, offering additional items for micropayments, or providing premium subscription-based services.

Selling Flash games for a premium

There are several ways you can make money by selling a Flash game directly to the video game community.

Straight sale

With a straight sale, you sell the complete game for one upfront cost. While this was the traditional offline video-game model for decades, it has become less popular in the past ten years. In part, this may be due to the purchasing habits of gamers, who avoid paying high costs and enjoy the abundance of free or inexpensive alternatives available online.

Freemium

To get players interested in a new game, you can offer a trial or incomplete game experience for free, and then enable users to upgrade to get the complete game for a flat fee.

Microtransactions

Some games are free to play, but during the game experience, often between levels, users are encouraged to convert real-world money into virtual game currency. This strategy is becoming more popular and is proving to be very lucrative.

The design philosophy here is to keep the game fun to play for nonpaying users. Since the game offers the complete experience for free, you can attract a wide audience of players. Hard-core players can pay real-world currency while playing the game to make purchases that enhance the game, such as unlocking weapons, displaying alternate locations, improving skills, acquiring character accessories, and modifying other aspects of the game itself. These items have no inherent value outside the game.

Many companies handle the in-game logic for virtual currency and offer a variety of payment options (such as PayPal). If you are an independent game developer with limited resources, using one of these existing systems can be well worth the service provider’s commission. For example, Mochi Media uses a Mochi Coin system. You benefit when you incorporate this service because the provider is encouraged to distribute your game to more portals—since it receives a small fee with every transaction.

Subscriptions

Subscription services may offer a free trial game to start (or charge a lower introductory fee) to enable users to try the game and see if they like it. After the trial expires, players can continue playing if they make regular payments (usually on a monthly basis). A subscription model includes many of the benefits of a microtransaction setup.

In this scenario, games typically provide a deep, immersive, but incomplete experience. For example, content may be distributed in the form of episodes. Providing these episodes in smaller installments can reduce development hurdles, focus your team's innovation, and keep loyal players returning for more content as soon as it’s released.

While the subscriptions model represents just one of many video game business models, it is growing exponentially. The number of online gaming subscribers, which totaled 19.4 million at the end of last year, is projected to more than double to 44.5 million by the end of 2014.

Comparing different business models

The Internet was born and raised on banner ads. This practice carried over into the gaming industry during its early years. Much of traditional online marketing involves simply driving more traffic to a website. Therefore, it’s no surprise that the most popular strategy at the moment involves incorporating ads within Flash games (see Figure 2).

Comparison of strategies used to monetize Flash games.

Figure 2. Comparison of strategies used to monetize Flash games.

Although incorporating ads in Flash games is currently the most popular strategy, it is not necessarily the best strategy. In a recent blog post, Colm Larkin, founder of the Irish game development company Gambrinous, recommends using a premium business model over the current advertising models in place today.

Strategies for selling and promoting games

Some of these solutions, such as licensing your game, include a distribution strategy. But if you chose a model that doesn’t, then how do you get the finished product into the hands of game players?

The larger social game companies (such as Zynga, EA, and Playdom) are proven machines of self-promotion and viral marketing. Inside and outside the Flash game experience, users are encouraged to socialize their game activities and accomplishments, and invite their friends to play. Heyzap, a newer startup in the Flash gaming space, helps game developers distribute games. But you can do your own promotion, too.

You can promote your projects by creating a website and by using social networks (such as Twitter and Facebook) to generate traffic. It’s also helpful to add trailers on YouTube. If the game is exceptional, it will generate its own momentum and spread from player to player by word of mouth.

Newgrounds.com is a game portal with an especially clean setup for posting Flash games and collecting player evaluations. By posting your game before integrating ads, you can get valuable feedback, including player-based ratings, reviews, informal bug reports, and statistics on performance. Even if you only offer a game for a short time, you can compile a list of things to fix and improve. Consider addressing this feedback before pitching the product to licensors because a more polished game will fetch a higher price and generate more game play.

Game developer Mark Grossnickle initially launched AQI Zoneout on a few portal sites (see Figure 3). The game received about 500 game plays per day for the first week.

The front menu of the AQI Zoneout game.

Figure 3. The front menu of the AQI Zoneout game.

Grossnickle contacted Flash Game Distribution (FGD) about distributing the game. Once added to their portal, the game received thousands of plays per day (13,000 on day 13 alone) for a 26-day total of 54,500 game plays.

During the game's run, FGD submitted it to 195 other sites. Of those 195 sites, FGD collected 24 requests to add AQI Zoneout. FGD also sent AQI Zoneout to 497 publishers, which helped create more buzz around it.

Considerations for developing financially successful Flash games

According to Ira Willey, creator of the popular game portal AddictingGames.com, if you provide immersive game content and excellent performance while following these guidelines, you’ll attract players that are more likely to play your game repeatedly:

For more great tips and recommendations, check out Ryan Wolniak’s eBook Getting Your Flash Game Sponsored.

Casual games are big business, and the Flash Platform is a vital part of the industry. While big companies are employing great Flash talent and commanding large revenues, an incredible community of individual developers and small teams are making a successful living developing games with the Flash Platform.

Developing financially successful games is fun and rewarding, but it is also challenging. Fortunately, there are many resources available, including the Adobe InMarket service, which enables you to easily distribute your completed game.

To learn more about developing games for Flash, check out these recent Edge articles:

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Samuel Asher Rivello is the principal of Rivello Multimedia Consulting (RMC). RMC's Flash and Flex services include software architecture, consulting, development, and training. Sam has a decade of experience creating games and applications, and is currently traveling the globe to collaborate with top companies. Follow Sam on Twitter at @srivello.