The Whales of Microtransactions, and the Elephant in the Room

Microtransactions are a popular monetization model in tech: apps, games and online services are marketed as “free”, but once you start using the product, you must make small, in-app purchases to access more content. These microtransactions can be anything from buying replays for Snapchat, to boosts in Candy Crush to speed up your progress. More and more people in tech realize the potentially addictive experiences that make the user pay little by little for a product, instead of a larger sum all at once. And not only have microtransactions changed the way we monetize our products — they have also changed how we as developers create things, what we try to achieve, and how we interact with our audience.

Providing a free demo of a product with certain features hidden behind a paywall is standard in tech, and more than anything, people are happy to be able to try something out before buying it. However, microtransactions have changed the way developers lock content, and the amount of money customers have to spend in order to get full access. Many developers are now willfully designing time-consuming mechanics to inspire consumers to spend money to speed the process up; like how Dead Space 3 offered players the choice between either buying good items, or spending hours exploring the game world to get the same items through in-game efforts. An increasing number of games force people to spend money if they want even a chance at winning or progressing, such as Dungeon Keeper, in which natural progress in the game will take several days… unless you pay for instant gratification. Essentially, game studios are now purposefully designing bad systems and mechanics, hoping that people will be willing to pay to get past the poorly-made parts of the service: when microtransactions are the sole source of income, we start to build our entire product around that model.

It’s not surprising that microtransactions are on the rise: in recent years it has become more profitable than subscription-based monetization. World of Warcraft has sustained itself for more than ten years with a subscription model, but these days their average revenue pales in comparison to Candy Crush. In fact, microtransactions have become so pervasive that many mobile game stores have a “pay once & play” category where they guarantee that there will be no extra in-game purchases.

Photo CC-BY Stefanie Eisenschenk

The manipulative nature of microtransactions has long inspired people to compare the model with gambling. For example, this article from PCGamer extensively compares certain microtransaction mechanics with gambling, stating:

“In short: card packs and crate drops are a form of gambling. If you’re okay with that, then there’s no reason not to enjoy games like Hearthstone. It’s worth checking to see if packs can be earned with a sensible amount of in-game progress before investing lots of time.”

On the surface it may look like a fair comparison, but it fails to note that online gambling itself is heavily regulated. Most countries have some form of rules that developers need to adhere to. In the UK, for example, online gambling needs to be licensed and must:

• Ensure no link between gambling and crime or disorder
• Ensure that gambling is conducted fairly and openly
• Protect children and vulnerable adults from harm or exploitation

There is also a gambling commission that ensures companies continue to adhere to these rules once a license has been granted. The restrictions are there to protect those who partake in gambling, and to ensure that people aren’t taken advantage of or dehumanized. In contrast, companies that leverage microtransaction models are rarely regulated, if at all — even by in-community ethics guidelines or oversight. Developers are left to make ethical decisions on their own, and their products aren’t prohibited from app stores or other online marketplaces even if their monetization model is manipulative. Sure, every once in awhile we will get headlines of a child (or adult) – often unknowingly – spending huge amounts of money on a game, but these stories are lost from the headlines as quickly as they appear.

Dehumanization of the customer

Photo CC-BY Triet Do

In game development, we often talk about “whales”. They are an outlier; a small group of consumers that make up 50% of all in-game revenue:

“These people are very valuable users who are single-handedly making games profitable so that game companies can make a lot more games for those people who don’t pay anything.”

– VentureBeat, “Only 0.15 percent of mobile gamers account for 50 percent of all in-game revenue”

Because of this, it has become common for game developers to create systems that monetize the “whales”. What we don’t consider is that perhaps “whales” are such big spenders because we specifically create systems to manipulate them. When developers assume that a majority of gamers won’t spend money, but a small group will spend huge amounts, that small group becomes the focus of their business model. While we could instead try to innovate how we build microtransaction systems, and try to inspire a larger group to pay smaller sums of money, we are stuck trying to get the whales to give us all they’ve got. It’s depressingly ironic that, out of all words we could use, we settled on “whales”. The word is right there, in every design document and marketing strategy, haunting us with parallels to how we will carelessly hunt other species to near-extinction. Because that is what the “whales” become; different; alien; another species; a group we can exploit without remorse.

The way our industry talks about “whales” is dehumanizing at its core. They are a faceless group of spenders, and we count on them to sustain our microtransaction models. Not through an equal exchange of goods for services, but through manipulative mechanics that will draw them in no matter what. We robbed these people of their humanity the very moment we started referring to them as “whales,” and made them the foundation of our financial success.

Photo CC-BY CJ Sorg

The people who end up in this category are usually vulnerable. They may be so young that they lack an understanding for how much money they are spending, or not know that they are spending “real money” in the first place (like the Belgian boy who spent $46,000 on a “free” game). They may have an addictive personality, something that many microtransaction models count on and are custom-tailored to take advantage of. In games specifically, the “whales” can be people who feel the need to complete every challenge in the game; this is quite common since it was a recurring design in the games we grew up with. Many monetization models take advantage of it, ensuring that a person will have to pay multiple times to be able to complete the game.

“… they say, ‘I just dug this new pit, this monetization pit, that somebody could spend 10,000 dollars or 50,000 dollars in and not reach the highest level.’ It’s all about the monetization of the game.”

 - Interviews with designers of these monetization models reveal an industry that knows its audience well and doesn’t hesitate to exploit their weaknesses

For many, that weakness is a need for escapism. They want to disconnect from reality, and sometimes the rinse-and-repeat structures of  “match the colorful candies” or “build city, get resources, expand city” is more alluring than a massive, open world game like Skyrim:

“These games allow you to zone out. They all follow this high-hit-frequency/low-volatility model that puts you into a trance where your worries drop away. It’s a mechanism for escape even more than it is a mechanism for excitement.”

– Natasha Dow Schüll, MIT professor and author of the study “Addiction by Design”

Our industry could, and should, do better. If microtransactions as a model are going to keep influencing us this way, we are going to need more guidelines. Online marketplaces and app stores need to set the standard by banning products that are unethical, or have poorly executed monetization models. We should not, as an industry, accept games and apps that offer no exit option in the hope that forcing people to be stuck on a screen will inspire them to purchase something.

The ethics of microtransactions

Photo CC-BY Alper Çuğun

Unless the developers of a game, app or online service have the well-being of their audience in mind when deciding on their monetization model, they are bound to abuse their consumers. There’s a choice between exploiting people’s weaknesses, and building a stable system where good design is worth paying for; many will choose the first option, simply because it’s easier. It takes less thought, less empathy, and while it may not be the best long-term plan, it’ll make enough profit in a short time to be worth it.

This is why we need communities, marketplaces, app stores and maybe even countries to establish rules for developers who create products with microtransaction models. Even now we can identify the characteristics of a manipulative microtransaction model, as many of them share similar mechanics: content that is time locked for several days, products that have no max amount that users can spend, shops where prices aren’t clearly displayed, products that don’t inform the users of their spending regularly, etc.

Designing a good product takes effort, and even the most experienced tech workers will be tempted to skip time-consuming challenges. Microtransactions have, for some, become the perfect way to avoid having to build a solid experience: they only need to create a good hook, and hide the rest behind a paywall. It doesn’t matter what the end goal is, or if having full access is any different from the free version. It doesn’t matter if paying to progress is the only solution, as long as people keep paying. As long as they get hooked and stay curious and hopeful, it’s good enough.

But it shouldn’t be.