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Part of the addictive appeal of the apps that millions of people play, from “Candy Crush Saga” to “Clash of Clans,” is that they are free to start playing. Consumers do not risk much by downloading one of the free apps to their mobile devices; if they don’t like the game, they can always just stop playing.

Teenager uses iPhone to use educational app.

But if they like the game, the app developers and their marketing teams have come up with myriad ways to encourage them to spend a few dollars to keep playing. More sophisticated than simple freemium strategies, which require payments for advance capabilities, these tactics leverage players’ sense of flow and near obsession with the games to get each of them to pay just a little. For example, in “Candy Crush Saga,” after using up all their free turns, players must wait 20 minutes for another free turn to become available. But if a consumer is in the groove, ready to keep playing, it might be easier to pay 99 cents to receive five more turns immediately—and then five more turns after that, and then five more turns after that, and so on.

The players who thus wind up spending at least $100 per month on in-game additions and turns are known in the industry as whales, a term taken from casinos, who rely on big spenders to make most of their money. Just as casinos grant loads of free perks to these high rollers to get them to remain in the casinos, app developers are finding ways to reward and entice their whales to stay in the games. Thus for example, a regular player who already spends $25 per month in a game might receive a special offer of 600 coins for $5, when the normal exchange rate would be 500 coins for the same price.

The need for whales has increased, especially as app developers have moved away from distracting in-game advertising. Consumers found the obtrusive advertisements, such as banners or videos that interrupted their game play, annoying. With so many other game options available, they responded to this annoyance by simply leaving the game. That outcome was not beneficial for either the app developer or the advertiser.

Instead, in-game purchases offer several advantages. Because the prices are relatively low, consumers find it reasonable and acceptable to make the purchases. Who would worry about spending a dollar on a fun game? In addition, the app developers make it very easy to conduct the purchases; players barely need to pause their game to click on the purchase button. As consumers grow more accustomed to making purchases through their mobile devices, any such risk barrier also has diminished. Finally, the app developers have learned precisely when to issue the offers for extra turns, more armor, or extra lives. At the moment a player finds her- or himself stuck, unable to progress forward or up a level, she or he is far more likely to indulge.

As a result, the most successful apps earn revenues in the millions and even billions of dollars, suggesting that a lot of players are clicking a few times, but quite a few whales also are clicking a lot.

Discussion Question:

What kinds of tactics do app developers use to encourage consumers to make purchases within games?

SOURCE: Sarah E. Needleman, “Mobile Game Makers Try to Catch More ‘Whales’ Who Pay for Free Games,” The Wall Street Journal, May 10, 2015

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