Nima Pourshasb, the VP of Corporate Development at Live Gamer provided a guest article for Social Times

The ability to identify user segments with the highest monetization potential is very valuable to the P&L manager of any new social game. If survey data suggests that, say, German gamers have the highest ARPPUs, one might be tempted to focus resources on acquiring German users and converting them to paying ones. One may even use these data points as guiding benchmarks for monetization initiatives. These geographic comparison studies are becoming more commonplace but can be very misleading.

They seem to convey information about a country’s gamers’ willingness to pay for virtual items, but are instead reflecting the nature of the composition of the survey set within a country. Specifically, the broad grouping into country categories ignores the following:

Nature of titles in survey set

ARPPUs can significantly vary depending on:

• Game genre (e.g. social, casual, MMO, virtual world): Users in social games value the social utility of their virtual item collection while an MMO gamer is willing to economically invest primarily to improve its characters’ ability to progress in the game.
• Business model (e.g. free-to-play, subscription, freemium): The same user can be paying $15/month to play World of Warcraft (subscription) and only purchase $3 worth of diamonds in Runes of Magic (free-to-play) every month.
• Platform (Facebook, web, mobile, console): Once Apple allows a virtual currency in its iPhone and iPad platforms, ARPPUs will spike.
• Drivers of purchase (e.g. gifting, self-expression, game leveling, content consumption): Typically, gamers spend more on gifting than on self-consumption of the same virtual good, as they are willing to pay a premium for communication enhancement.

Chart 1 illustrates how significantly ARPPUs can vary across game genres (and sub-genres) for several Live Gamer clients in the same country (Note: Game genres have not been specified to avoid identification of publishers).

Payment options offered by titles in survey set

According to Global Collect, the number of payment methods can lead to an increase of 22% of conversion for e-commerce. The payment methods offered in a game are typically a function of:

• Publisher preferences, driven by difficulty to integrate, perceived ability to increase conversion and reduce drop out during check out, processing costs and fraud
• Consumer preferences, driven by availability, convenience, cost and perceived security

The choice of payment method has a direct impact on ARPPU. For example, SMS payments typically have fixed price points, lower maximum prices and can include a premium of up to 40% (due to carrier charges) for the convenience of paying with your cellphone. At the same time, completion of surveys from offer providers does not require the user to open their wallet.

Chart 2 highlights how different the payment type distribution (based on transaction volume) can look between two Live Gamer clients: a European and a US publisher.

ARPPUs of titles are constantly changing

In the current trend towards Gaming as a Service, the game experience is constantly “tweeked” to revisit the balance between the “free” experience versus the value-add through purchasing virtual items. New features (e.g. user-initiated actions, expiration of virtual items, etc) are continually incorporated and even game design is altered to encourage users to micro-transact. Hence, games at different stages of their lifetime and with varying virtual goods commerce tactics will display different ARPPUs.

Chart 3 presents an ARPPU time series for one our client’s titles.

Recently a global developer asked Live Gamer for a country comparison analyses for their genre across four specific countries, hoping that we would offer them averages based on our unique database that contains ARPPU data since 2001 and covers 23 countries. Because of the reasons discussed in this blog post, we intentionally kept away from any form of aggregation, and instead presented them with Chart 4 based on the single title that we believe to be most comparable to theirs.

In conclusion, we strongly recommend game and other online social entertainment developers to dig into the survey sets of geographic comparison studies. In the cases where a characterization of the underlying data is not provided, the data points should be taken cum grano salis.

More importantly, it will ultimately be the ability to drill into user game and purchasing behavior that will provide the reliable insights to maximize ARPPU across the board, regardless of the country.