Tuesday, October 25, 2011

Newell on free versus free-to-play and Team Fortress 2

"The most recent thing that also is really puzzling is that we made products available for free on numerous occasions, without significantly impacting the audience size. We recently said, 'We're now going to do something different, we're not only going to signal that it's free but we're going to say it's free to play,' which is not really a pricing signal, even though that's what you would ordinarily think it is. And our user base for our first product that we made free to play, Team Fortress 2, increased by a factor of five. That doesn't make sense if you're trying to think of it purely as a pricing phenomenon."

"Why is free and free-to-play so different? Well then you have to start thinking about how value creation actually occurs, and what it is that people are valuing, and what the statement that something is free to play implies about the future value of the experience that they're going to have."

"And then the conversion rate, when we talk to partners who do free-to-play, a lot of people see about a 2 to 3% conversion rate of the people in their audience who actually buy something, and then with Team Fortress 2, which looks more like Arkham Asylum in terms of the user profile and the content, we see about a 20 to 30% conversion rate of people who are playing those games who buy something."

"So that's a fairly surprising and fairly recent statistic, which is that there seems to be something about the content that significantly changes how your monetization occurs, with apparently much broader participation than you would see out of something like FarmVille."

"We don't understand what's going on. All we know is we're going to keep running these experiments to try and understand better what it is that our customers are telling us... It's just an exciting time but also a very troubling time."

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