Mastering F2P Cosmetics Monetization in Games

Summary

In this insightful discussion, Anton Bernstein, CEO of Pocket Worlds, delves into the nuances of cosmetics monetization in free-to-play games. He highlights the importance of understanding player psychology and the significance of social status in driving cosmetic purchases. Bernstein also addresses the impact of secondary markets on cosmetics sales, the role of user-generated content, and the cultural differences in monetization strategies between Eastern and Western markets. The conversation offers valuable insights for game developers looking to enhance their in-game economies.

Takeaways

• 😀 Cosmetics monetization is crucial for long-term success in free-to-play games, especially on mobile platforms where it's challenging to find success.
• 🔍 Understanding player psychology and why cosmetics matter is essential for successful monetization, as is recognizing the importance of collectibility and secondary markets.
• 🎨 The presence of a secondary market, like in 'Counter-Strike: Global Offensive' (CS:GO), can significantly influence the primary market by creating a sense of value and rarity around cosmetics.
• 💰 The way cosmetics and non-cosmetics are sold can affect scarcity and player perception, impacting the monetization strategy.
• 🤝 The connection between cosmetics and user-generated content (UGC) can enhance player engagement and the perceived value of in-game items.
• 🏙️ Anton Bernstein's company, Pocket Worlds, has experienced significant sales in both primary and secondary markets, with the majority of revenue coming from cosmetic content.
• 🎮 Multiplayer and competitive games, like Battle Royale titles and team-based games, tend to perform well in cosmetics sales due to the social and status-related aspects of these games.
• 🧐 The fairness of a game (i.e., fair-to-play versus pay-to-win) can impact the sale of cosmetics, with purely cosmetic items often doing better in fair-to-play environments.
• 🔑 High engagement and time spent in a game are strongly correlated with cosmetics sales, as players become more invested in their in-game identity and status.
• 🌐 Cultural differences between East and West affect monetization strategies, with Eastern markets often favoring more direct paths to high-status items through spending.
• 📈 Tracking KPIs and metrics, such as conversion rates, depth of spend, and equip rates, is vital for assessing the performance of cosmetics in a game.

Q & A

What are the key aspects to consider when discussing cosmetics monetization in free-to-play games?

The key aspects include understanding player psychology behind cosmetic purchases, the role of collectibility and secondary markets, the methods of selling cosmetics, and the relationship between cosmetics and user-generated content.

Can you explain the 'paper clipping' concept mentioned in the script?

Paper clipping is a form of social crafting where players trade up low-value items for higher-value ones incrementally, aiming to acquire rare or valuable items within the game.

What is the significance of the secondary market in cosmetics monetization?

The secondary market can significantly impact cosmetics monetization by creating a platform for players to trade items, adding a layer of collectibility and speculation that can drive the demand for cosmetics.

How does the presence of a secondary market affect the economy of a game?

A secondary market can lead to challenges such as exploitation, fraud, and inflation if not properly managed. It requires careful control to prevent the economy from becoming unstable or turning into a speculative bubble.

What are some of the potential dangers of having a secondary market for cosmetics in a game?

Dangers include the risk of inflation, exploitation, and the loss of control over the in-game economy, which can lead to a poor experience for new players and disrupt the balance of the game.

How does the concept of 'mimetic' behavior play a role in cosmetics purchases?

Mimetic behavior refers to the tendency of players to buy cosmetics because others are buying them, driven by a desire to fit in or be part of a community, which can significantly influence the popularity of certain items.

What is the role of vanity in the context of cosmetics in games?

Vanity is a primary motivation for players to purchase cosmetics, as it allows them to express their identity and status within the game world, often to impress other players or to stand out visually.

How does the cultural difference between East and West affect the monetization of cosmetics in games?

Eastern markets tend to be more accepting of pay-to-win mechanics and gacha systems, while Western markets often prefer a fair-to-play approach, valuing skill over in-game purchases.

What are some metrics or KPIs that should be tracked to evaluate the performance of cosmetics in a game?

Key metrics include conversion rates, average revenue per paying user (ARPU), depth of spend, equip rates, and the value of items in the secondary market if present.

What is the importance of community in driving the desirability of cosmetics in a game?

The community plays a significant role in determining the popularity of cosmetics by dictating trends and expressing collective preferences, which can drive the demand for certain items.

How can the battle pass system impact the sale of cosmetics in a game?

The battle pass system can drive meaningful conversion by offering a series of rewards that players can unlock by engaging with the game, which can include cosmetics and contribute to player retention and monetization.

Can you provide an example of a game that successfully implements a secondary market for cosmetics?

Counter-Strike: Global Offensive (CS:GO) is an example of a game with a successful secondary market for cosmetics, where players can trade and sell skins, contributing to the game's overall economy.

Outlines

00:00

🎮 Introduction to Cosmetics Monetization in Games

The video script opens with a discussion on cosmetics monetization in free-to-play games, led by Anton Bernstein, CEO of Pocket Worlds. The conversation aims to explore why players purchase cosmetics and the importance of understanding player psychology and collectibility. Anton highlights the significance of secondary markets for cosmetics, using CS:GO as a prime example, and touches on various topics including scarcity, sales methods, and user-generated content (UGC) related to cosmetics.

05:02

🏆 The Impact of Game Type on Cosmetic Sales

Anton elaborates on the types of games that successfully implement cosmetics sales, focusing on multiplayer PVP games like Fortnite and Counterstrike. He explains that the time spent in these games and the competitive nature foster a desire for status and self-expression through cosmetics. The discussion also covers the difference in motivations for cosmetics purchases in simulation games like Highrise, where social status and identity play a crucial role.

10:03

💰 Fair Play and Pay-to-Win Models' Influence on Cosmetics

The conversation delves into how the fairness of a game affects cosmetics sales. Anton suggests that in games with a pay-to-win model, the intrinsic value of cosmetics can be overshadowed by the desire for power and progression. He contrasts this with fair play games, where cosmetics are more about self-expression and time spent in the game, and where high engagement correlates with higher cosmetics sales.

15:06

🤔 Player Motivations and Perspectives in Cosmetics Purchases

Anton discusses various player motivations for buying cosmetics, including self-expression, status signaling, and speculation. He also addresses how the perspective of the game (first-person or third-person) influences which cosmetics are more popular. For example, weapon skins are more sought after in first-person games like CS:GO, while emotes and dance moves are popular in Fortnite due to their visibility.

20:07

🎉 The Role of Secondary Markets and Speculation in Cosmetics

The script explores the concept of secondary markets for cosmetics, using the example of CS:GO to illustrate how active secondary markets can drive primary market sales. Anton explains the speculative component of cosmetics purchases and how it can be influenced by the availability of a secondary market. He also discusses the potential dangers of uncontrolled speculation and the importance of managing the in-game economy.

25:07

🌐 Cultural Differences in Cosmetics Monetization

Anton highlights the cultural differences between Eastern and Western players in terms of their approach to cosmetics and spending in games. Eastern players tend to prefer games that allow immediate high spending for status, while Western players value effort and fair play. The discussion also touches on the challenges Western games face when entering the Eastern market due to these cultural nuances.

30:09

📈 Tracking and Managing a Cosmetics-Based Economy

The script provides insights into the key performance indicators (KPIs) and metrics for managing a cosmetics-based economy in games. Anton emphasizes the importance of tracking conversion rates, depth of spend, and equip rates to understand how well cosmetics are performing. He also discusses the challenges of managing economies with secondary markets and the need for careful monitoring to prevent inflation and exploitation.

35:09

🔄 The Dynamics of Primary and Secondary Markets in Cosmetics

Anton explains the dynamics between primary and secondary markets in the context of cosmetics sales. He outlines the different methods through which players can engage with the secondary market in Pocket Worlds' games, such as trading, marketplace listings, and secondhand grabs. The discussion also covers the importance of taking a rake from transactions to manage the in-game economy and prevent inflation.

40:10

🚀 Final Thoughts on Cosmetics Monetization

In the final paragraph, Anton shares his final thoughts on the potential and pitfalls of cosmetics monetization. He stresses that cosmetics can greatly enhance revenue and player engagement but only if players care about their in-game universe and social status. He warns against the misconception that simply introducing cosmetics will automatically generate sales, emphasizing the need for a well-designed and player-centric universe.

Keywords

💡Cosmetics monetization

Cosmetics monetization refers to the strategy of generating revenue through the sale of non-functional, aesthetic items in a game, such as skins or outfits. In the video, Anton Bernstein discusses the importance of understanding player psychology and the market dynamics to successfully monetize cosmetics in free-to-play games. It is a key theme as it underpins the business model of many popular games like 'CS:GO' and 'Fortnite'.

💡Free-to-play games

Free-to-play games are video games that can be downloaded and played without any upfront cost, but offer in-game purchases, such as cosmetics, to generate revenue. Anton emphasizes the challenges of finding success in this model, especially on mobile platforms, and the importance of long-term monetization strategies.

💡Player psychology

Player psychology pertains to understanding the motivations and behaviors of gamers, particularly why they choose to purchase cosmetics. Anton mentions that understanding this is crucial for successful cosmetics monetization, as it helps in crafting items that appeal to players' desire for status or self-expression within the game.

💡Collectibility

Collectibility refers to the appeal of items that can be collected, often because of their rarity or desirability. Anton discusses how the concept of collectibility can drive demand for cosmetics and lead to secondary markets, where rare items can be traded or sold among players.

💡Secondary markets

Secondary markets are platforms or systems where players can trade or sell in-game items outside of the primary game economy. Anton uses 'CS:GO' as an example, explaining how an active secondary market can drive the primary market for cosmetics.

💡Scarcity

Scarcity in the context of gaming refers to the limited availability of certain cosmetic items, making them more valuable and desirable. Anton talks about the impact of different sales methods on the scarcity of cosmetics and how it can influence player purchasing decisions.

💡UGC (User Generated Content)

UGC stands for User Generated Content, which is content created by users rather than the game developers. Anton mentions the connection between cosmetics and UGC, suggesting that the ability for players to create and share content can enhance the appeal of cosmetic items.

💡Highrise

Highrise is a product developed by Pocket Worlds, the company led by Anton. It serves as an example of a game that heavily relies on cosmetic sales for revenue. Anton shares insights from Highrise's experience with secondary markets and the importance of community engagement.

💡Battle Royale games

Battle Royale games are a genre where a large number of players fight against each other until only one player or team remains. Anton cites 'Fortnite' as an example of a Battle Royale game that has successfully monetized cosmetics, partly due to the competitive and social nature of the genre.

💡Fair to play

Fair to play refers to games where success is determined by skill rather than in-game purchases. Anton discusses the impact of this game design philosophy on cosmetics sales, suggesting that games with a fair play model can foster a stronger desire for cosmetic items as players seek to express themselves without gaining a competitive edge.

💡Pay to win

Pay to win is a game design approach where players can gain advantages by making in-game purchases. Anton contrasts this with fair to play games, noting that the presence of pay to win elements can diminish the appeal of cosmetics if players are more focused on gaining power than expressing their identity.

💡Engagement

Engagement in gaming refers to the level of interest and participation from players. Anton states that high engagement is correlated with the success of cosmetics sales, as players who spend more time in a game are more likely to invest in its cosmetics.

💡Social signal

A social signal is a cue or indicator that communicates information about an individual's status or identity within a social context. Anton explains that cosmetics can serve as social signals in games, reflecting a player's status or personality, which is a key motivator for purchasing them.

💡Gacha

Gacha is a mechanic in games where players spend in-game currency for a chance to obtain random virtual items, often cosmetics. Anton mentions gacha as a method for selling cosmetics and discusses its effectiveness in driving deep spending among a core audience.

💡IP Integrations

IP Integrations involve incorporating well-known intellectual properties or brands into a game to attract players and increase engagement. Anton discusses the potential of IP Integrations to boost cosmetics sales, but also notes that their impact can vary and may require significant brand relevance to be effective.

💡Economy management

Economy management in games involves controlling various economic factors to maintain a healthy in-game economy. Anton talks about the challenges of managing an in-game economy with a secondary market, such as preventing inflation and exploitation, and the importance of monitoring economic indicators like GDP and transaction volume.

💡Rake

A rake is a commission or fee taken by the platform from transactions in the secondary market. Anton explains that taking a rake is necessary to prevent inflation and maintain a balanced economy, and shares the specific rates used by Pocket Worlds for different types of transactions.

Highlights

Anton Bernstein, CEO of Pocket Worlds, discusses the importance of understanding cosmetics monetization for long-term game success.

Key topics in cosmetics monetization include player psychology, collectibility, secondary markets, and scarcity.

CSGO is highlighted as an example of an active secondary market driving the primary market for cosmetics.

The significance of how cosmetics and non-cosmetics are sold in games and their impact on scarcity is explored.

UGC's role in enhancing the connection between cosmetics and user-generated content is examined.

Anton shares Pocket Worlds' experience with cosmetics in Highrise and Ever SKU, emphasizing the dominance of cosmetic content in their revenue.

Multiplayer PVP games and Battle Royale titles are identified as successful in cosmetics sales due to their social and competitive nature.

The impact of game fairness on cosmetics sales is discussed, with fair-to-play games potentially driving higher cosmetic revenue.

High engagement games like League of Legends and Valorant are noted for their ability to sell cosmetics effectively.

The perspective of the game (first-person vs. third-person) influences which cosmetics sell better.

The presence of a secondary market in games like Counter-Strike significantly impacts cosmetics sales through speculation.

Fortnite's sales strategy, including battle passes and IP integrations, is analyzed for its effectiveness in cosmetics monetization.

Anton emphasizes the importance of community desire in driving the success of cosmetics in games like Highrise.

Different player motivations for buying cosmetics, such as vanity, self-expression, and speculation, are detailed.

Cultural differences between East and West in gaming, particularly regarding pay-to-win and cosmetics, are highlighted.

The challenges and dangers of managing a secondary market in games, including exploitation and inflation, are discussed.

Key performance indicators (KPIs) for assessing the success of cosmetics in a game are suggested for product managers.

Anton offers insights into Pocket Worlds' growth and hiring, inviting interested individuals to reach out.

Transcripts

hello everyone and welcome I'm here with

Anton Bernstein the CEO of pocket worlds

and today we are going to be discussing

cosmetics monetization and free toplay

games and before we kick it off Anton

what do you think are some of the most

important things we could cover when it

comes to uh cosmetics monetization and

certainly I think if if we look at the

market today and how difficult it is to

find success especially on the mobile

side maybe not especially I think I

think there's problems all over the

place I think it really is important to

understand how to monetize your game for

longer term success but when you think

about Cosmetics monetization like what

are some of like the

highlevel topics or issues that you

think about and we can dive into them

after after you um after we hear from

you the areas that I think are worth

exploring one is you know first of all

why do people buy cosmetics in the first

place uh because there's something about

certain games and certain products that

uh yield High cosmetic revenue and

others I've seen people try to throw in

cosmetics and they just totally fall on

their face um and so understanding kind

of player psychology and why Cosmetics

matter understanding uh

collectibility uh as a notion and how

that leads into secondary markets so

marketplaces uh of cosmetics and of

content in general um but a lot of kind

of big titles like uh csgo is probably

the best best example of um an active

secondary Market that drives the primary

Market um I think also thinking about

the way both cosmetics and non-c

cosmetics are sold in games and how

those methods might lead to

scarcity uh or not lead to scarcity uh

and then finally another interesting

place to explore is ugc and uh the kind

of the Inplay and the connectedness

between cosmetics and user generated

content and how those two kind of

interface with each other um um so I

think all of those would be interesting

to explore and then we can go even if I

forget to ask you about any of those

please remind me but definitely a lot of

great topics I think we can start to

cover um but just for our audience to

establish sort of like your expertise in

this area could you also talk to us a

little bit about pocket worlds and

high-rise and your experience actually

with Cosmetics just just to set a little

bit more context for our audience sure

so I started pocket worlds about 11

years ago uh we have two products today

highrise and ever Skies we do about 30

plus million dollar in sales or so uh in

the primary market and our secondary

Market is quite big almost hundred

million uh annually that's people kind

of transacting with each other in our

in-game currency uh and pretty much the

entirety of it you know maybe 80 to 90%

is cosmetic cosmetic content um and so

yeah we've kind of invested heavily in

that uh heavily in the secondary Market

uh most of that comes out of high-rise

but also ever SKU is the social Avatar

platform that also has uh well the

entirety of the revenue there is

Cosmetics is just meaningfully smaller

than than highrise okay and maybe we

could start with one of the topics that

you mentioned which is like the kinds of

games that are able to successfully sell

cosmetics and so if you were to think

about some of the most successful games

that sell Cosmetics you mentioned csgo

obviously there's games like fortnite

and games of that nature that have

pretty high scale uh with respect to the

sale of Cosmetics based items but when

you think

about specific games and then the kinds

of games that are able to sell Cosmetics

extremely well what do you think what

what are those games and those kinds of

games yeah so I would say there's a kind

of a few different categories of which

games sell it best um so

of course multiplayer

PVP so often that's Battle Royale games

like uh fortnite or um you know team-

based games like a

Counterstrike there once people are

spending quite a bit of time and they're

playing

competitively they start to care about

status and how they look and how they

present themselves yeah you know you

look kind of badass killing someone with

a certain kind of cosmetic or a skin

that nobody else has and I would say

there's kind of two motivations there

one is um the way that these games are

designed they're designed in such a way

that um they're spectating after the

battling and so if you die you end up

spectating someone else you end up

seeing their cosmetic you end up

spending a lot of time looking at

Cosmetics like purely just time spent

visually looking at someone's cosmetic

they it's it's kind of designed whether

purposefully or just by virtue of you

know there's nothing else to do after

you're dead in a game of Counterstrike

um or a game of fortnite um but you end

up staring at somebody's kind of

Cosmetics right which one drives your

kind of purchase behavior um secondly uh

just the fact that um you care about

your status in this world and and that's

not just PVP multiplayer so for example

highrise is more of a simulation type of

game or product um similar to Roblox if

folks have heard of Roblox on the cast

but there as you spend more time in a

social world you start to care about

your status you start to care about the

way you express yourself the way that

people see you and so Cosmetics are a

huge way to show off your identity show

off who you are show off if you have

high status just like in real life you

know if you're wearing a I don't know if

you have a Birkin bag from Herz it

signals a certain kind of status and

certain kind of access um Cosmetics are

also a social signal so kind of the

kinds of games that I see it working in

they tend to be very heavily multiplayer

they tend to require quite a bit of time

and in those games in those worlds

people care about their status uh and

how they reflect their status and they

often do that through cosmetics and when

I think about Cosmetics I also wonder

about certain other factors that could

potentially impact the sales of

cosmetics in a game and so a couple of

things I I'd love to get your input on

is to what extent does a game that's

more fair to playay versus Pay to Win

impact the sale of cosmetics and then

well let's start there get your thoughts

and then I've got a couple other factors

I'd love to ask you about as well yeah

well okay if it's fair to play so say

it's you know um counter- strike you

know which is purely cosmetic there

there literally is no benefit to buying

valer fortnite yeah exactly um any of

these there I would say it is all about

how you present yourself and all about

kind of time spent so I would guess I

would venture to Guess that um dollars

invested for kind of the same person

kind of you know whether you're uh I if

you have the same-sized wallet dollars

invested for those games is highly

highly correlated to time spent so as

you spend spend more time you care more

about how you present yourself in that

game and so you end up spending more on

Cosmetics over time it's very highly

correlated to time spent and that's what

we've seen as well in high-rise um when

you start adding uh kind of pay pay to

play um if you look at you know um I

don't know uh a lot of the Eastern kind

of MMO games where you end up having the

kind of these big gotta purchases that

give you actually a lot of power early

on

um or TCG games where you're buying card

packs things like that um I would say

the the desire to have something that's

purely cosmetic is just uh intrinsically

nerfed in the player behavior and player

psychology and instead of something

being valuable because it's super scarce

that still exists to some degree you

know the Black Lotus is still the most

valuable card in Magic the Gathering um

to the tune of you know hundreds of

thousands of dollars I think actually

there was like a one million plus dollar

purchase in the recent past um but uh at

the same time because there's a power

progression and because things have

stats Beyond uh scarcity and have stats

Beyond status uh some of these kind

of pay to win power stuff um starts to

kind of supersede the problem is that or

I don't know if this is a problem but

the reality is that in a lot of these

games where it's not purely cosmetic

where you start to have power when you

start buying stuff with power uh the

game ends up getting stuck in this Loop

of requiring uh to uh kind of introduce

power creep and they start to power

creep items and they start to power

creep characters um they also have a

tool to change the meta so they can

either change the meta which sometimes

they do and you see that happen in like

a clash Royale

um where they're constantly tweaking and

changing the meta or they have to power

creep and power creep just means you're

you're turning and burning through

through Power and that's the way for

example if you remember game of war from

machine Zone that just was huge right it

was huge for a short period of time

billions of dollars in Revenue um and

then it just completely died and it

completely died because of power creep

and it was just designed to constantly

power creep um so it's kind a rambly

answer but I will say that you know the

tools that people have if they're going

to be selling through a gacha mechanic

or whatever something that gives power

are either power creep or completely

changing the meta can can you think of

any power creep games that do sell

significant Cosmetics as well I I can't

think of any

offhand

um

um yeah I'm not sure I guess there's

like some middle ground with um yeah

like character unlock games sure like

games where you're unlocking a character

because it is kind of fair to Fair kind

of fair play yeah like I think you're

generally right where you know I I think

pay to win you Pro probably generally

don't tend to see it as much cosmetic

cells and to your point as well like

whether it's League or these mobo type

games when they introduce a new champ

it's usually a little bit overpowered

and you kind of some motivation for

buying would be trying out somebody new

but also to increase your win rate

potentially and then they Nerf it later

um but yeah they changed the meta I mean

if you supercell I would say is really

impressive um with Clash Royale and

brawl star with I mean they they do have

it's not necessarily power creep it just

they keep changing the meta they keep

changing the dynamic like you know as

they introduce a character or as League

introduces a character it kind of de

facto Nerfs some other combination of

characters yeah and so that's the way in

which they keep it fresh it it's kind of

an interesting balance between power

creep and uh changing the meta that they

really kind of prevent the power Creep

by constantly changing the meta every

time they introduce some sort of

different power or unique power um and

that's why they spend so much time

tuning pre-launch of any

character the second factor I was going

to throw at you is something I just call

High engagement but like a League of

Legends or a valerant or these kinds of

games where you're just playing over and

over and over again I tend to think that

if you think about monetizing either on

the front end or the back end meaning

like front end meaning um willingness to

pay like you just love this game so much

that even if the devs have something

stupid like a whatever like a pink bunny

suit you're just like well I love this

game so much I want to support the devs

I'll just buy that stupid thing and then

payment optimization is more like the

game of war but it does to me seem like

and like you kind of alluded to it in in

answering the first question but you're

saying that the more time spent the more

highly engaging a game is the better

your odds are at selling Cosmetics is

that fair to say definitely yeah it's

super highly correlated to time spent I

will say also the the community what

what I've seen in high-rise for example

yeah is the the community often dictates

the desirability of content I mean we

have tools at our disposal to drive

scarcity so depending on how we sell and

we can get into merchandising cosmetics

and what that looks like yeah but in

general the community decides hey this

is this is something that's really

appealing this is something that we want

and uh because that's kind of the let's

call it the um kind of like the the the

cultural desire like what people in the

community want uh anyone who's spending

a lot of time in that world and cares

about their status and cares about being

part of that world start to buy it start

to consume it because you know they want

the status they want other people to

kind of see them as as um uh someone who

cares and someone who expresses

themselves the same way that others do

um a little bit mimetic in that way uh

and so I think that's another Big Driver

it's like in highrise for example we

can't just like sell some random thing

if if we just throw something out there

and the community doesn't see it as

something that's appealing or something

that's interesting it will do palpably

worse than something where the community

has kind of latched on to it and said

hey this is attractive this is

interesting and then there's a ground

swell of many many people who are

interested in buying that product um and

so there is the component of like yeah

we want to buy this because we're

spending time here but then also there's

the component of we want to buy this

because other people want to buy this um

because humans are mimetic in that way

the the third factor I wanted to ask you

about is perspective right and so

whether you're a first person or third

person if you're first person like inv

valerant and you're seeing your gun a

lot then you know I I would it's a lot

easier to sell weapon skins for example

but how much of an impact or I'd love to

hear your perspective in terms of you

know what you can sell or how well

Cosmetics sell depending on first or

third person perspective yeah um I think

it changes which cosmetic cell um I

don't know how much it changes whether

or not cosmetic cell like as an example

degree that itself yeah so fortnite if

you look at the breakdowns there was a

survey actually done of like a thousand

people people spending in in fortnite

and this was kind of the breakdown that

the survey identified 10% uh spent on

emotes or dance moves um 14% spent on

harvesting tools 18% spent on gliders uh

and then 60% spent on outfits or

characters um and an interesting

component for example of uh fortnite is

because it's this um kind of third

second person perspective y back items

are really valuable because you see the

back all the time right whereas in

Counterstrike it's all about the weapons

Y which weapon do you see because you're

spending all your time in this first-

person view um buying selling trading

weapons um but I would say both have

massive cosmetic demand despite having

different perspectives different angles

it's just which items are most visible

and so those are the items that people

are kind of drawn to or or into right

and then maybe the last last Factor I

would want to ask you about is it seems

like there may be different by the way

oh sorry one more thought on this yeah

please it's kind of an interesting stat

that almost 20% have spent on

gliders uh because gliders are not

visible in spectating mode so gliders

this is kind of an interesting one which

is you're buying it for yourself I mean

you're buying the buying the glider for

yourself you're getting the glider for

yourself you're not doing it so that

other people can necessarily see it um

so I think that's also kind of an

interesting reflection on you know is

this driving is this because of status

or is this because it just feels good

and I'm spending a lot of time here and

um I really want this glider to look

really good right and maybe this is a

question that we can also address when

we talk

about uh player psychology as well as

player motivations as well as primary

and secondary markets but it does seem

like there are some games that have a a

motivation to buy Cosmetics or

visibility and if you were to look at a

game like the banana game I don't know

if you've played that but that seems

like it's more speculation oriented and

I don't know to what degree you would

consider csgo a little bit speculative

as well but when it comes to like

potentially the reason why people are

buying Cosmetics um and having that

whether it's more of a a vanity

motivation or a speculation motivation

what do you think about that and how

that impacts the ability of the degree

to which you can sell cosmetics

yeah well it totally depends on and and

I would say this is a difficult aspect

of Designing a game it totally depends

on if there's a secondary Market

available or not so have the um creators

of the game chosen to implement a

secondary market so like you know if you

remember Diablo II with their auction

house yep you know they saw in Diablo I

big eBay Market I was playing Diablo I

and I was buying and selling items all

the time um in Diablo II

uh they leaned into that released an

auction house and it just totally fell

on its face partly because it was just

poorly drop rates were poorly designed

um I actually think the auction house

would have been great if they had

designed it uh correctly when with the

drop rates um but I would say that's a a

huge component so if you look at

Counterstrike and you look at all of the

different skins

marketplaces that exist around

Counter-Strike and if you look at all

the gambling marketplaces that exist

around Counter-Strike it is so clearly

clear that there's a heavy speculation

component um there's a heavy speculation

component around Counter-Strike and how

Counter-Strike cosmetics and secondary

content Works um and that's because

they've enabled and allowed this uh very

rich secondary Market you know the most

extreme version of this is crypto games

um I'm actually an investor in Sky Mavis

they make axi infinity and axi infinity

was probably the first highly

speculative um very successful uh game

with actual gameplay obviously there was

crypto kitties before that and um but um

there you saw it was pure speculation I

mean the whole thing and the problem

with speculation when it's pure

speculation is it almost takes over the

entire gameplay and it turns into a bit

of a um not a pyramid scheme but

um you know turns into a

bubble speculation is tough unless you

really control it and for the game

developer you know we think about this

all the time we think about our economy

and we think about our economy as GDP

and we think about our secondary Market

as a component of our GDP and we very

much control you know the levers that we

control is scarcity of content scarcity

of items um currency uh for example we

look um we look at a trailing 30-day uh

amount of currency in people's wallets

and if it goes too high or if it goes

too low we need to change something

about our liveops in order to not

inflate the economy or in order to not

deflate the economy but in order to kind

of manage the economy so that it doesn't

a it doesn't become a bubble but also it

doesn't become kind of nothing um and so

a secondary Market must be really kind

of I would say effectively controlled to

not basically take the whole game and

turn it into a big speculative bubble

game like beanie babies um so that

that's like a big component of secondary

but there's a lot of games out there

that don't have secondary as an example

fortnite does not have secondary and it

does 5 billion in annual sales um they

just have a ton of users in high arpu

because people are spending a lot of

time there and they care about their

Cosmetics right um League also doesn't

have a secondary Market um but you know

I would say probably Counter-Strike is

the best example of secondary Market

maybe Magic the Gathering and and

Counter Strike are are probably the two

best examples that I can think of right

and yeah I'd love to touch on that a bit

more maybe later but just to kind of

close the loop on specific games that

you think the audience should be aware

of when it comes to like really great

examples and as far as like key

reference games or emulation targets we

talked about csgo fortnite League of

Legends um and they seem to be primarily

either shooter games or MOBA games um

you also mentioned Diablo which is an

arpg but like are there any other

specific games that you think the

audience should be aware of and then the

followup to that would be in terms of

the genres what else is selling well in

terms of Cosmetics

besides clearly and obviously

shooter MOA and then what else like what

other

genres but maybe starting with like

specific reference games that you think

people need to need to learn yeah well

you know there's also the the you know

not not quite cosmetic um kind of M RPG

character-based games like a genin

impact or um you know fake Grand order

honkai star rail um these are more power

progression power creep Meta Meta

changing but then also um just very much

character-based uh and they obviously do

tremendous amounts of sales um you know

a billion a year for for um these

products generally um but but yeah I

would say um there's that category of

game there's uh also in our category of

game there's there's us there's Roblox

um to kind of a a smaller level there's

you know IMVU or um uh Second Life you

know to give you an idea second life is

purely cosmetic it's been around forever

right yeah you know they do um a

tremendous amount of Revenue they they

do if you include primary and secondary

Market about 180 million maybe 200

million in revenue and off of fairly

small base of users you know 50 60,000

concurrent um at the peak uh and so that

is for example a game where they're

selling um real estate scarce real

estate and items and content around real

estate and all of it is heavily ugc so

it it's really an old one but an

interesting one to explore um uh of

course Counter-Strike is is is the

biggest we talked about it you know

League DOTA um these kinds of uh kind of

competitive gameplay valerant um

uh Apex Legends too um was doing really

well on Cosmetics so yeah I would kind

of take a look at those uh pretty

heavily and maybe just talking about

okay so there's a lot there's

potentially a lot of developers in our

audience who are interested in in

selling

cosmetics and from your experience when

you think about whether it's the a

specific arpo Target for different kinds

of games or the the kind of depth of

spin that you could could potentially

get because for some of these like you

know like a like a game of war you could

potentially have someone spend one two

250,000 a

month and the those kinds of games can

you basically can drain the economy so

easily whereas in a Cosmetics based game

you know how many skins before it's

enough totally whether it's League you

know I've got these three skins or I've

got 10 shirts and I've got 30 pants you

know when how do you think about that

and what what the differences maybe if

there are amongst different kinds of

games yeah so uh I would bring it back

first of all to the notion of the

secondary market

so in a title that has a secondary

Market you do have the capacity to spend

you know in the case of csgo there was a

there there's actually a weapon that is

worth about $1.6 million right now so

you can spend $1.6 million buying this

weapon in fact it had an offer of 1.2

million um and so if there is a

secondary market and there is true

scarcity then there is the capacity to

spend a lot of money and in just one

purchase and it's not because you're

looking for power progression it's

because you're looking for status it's

the equivalent in real life of buying

you know the the fanciest branded suit

you know um there is theoretically

infinite depth and it really just

depends on people's available wallet and

how much they're willing to spend and

what their demand is for that item so I

would say in a world where you do have a

secondary market for Cosmetics uh it's

not that you're going to have a 100

shirts it's you're going to have one

shirt that's extremely desirable and

extremely valuable and somebody else

wants that shirt they want to buy it

from you um and so that drives a lot of

the meteor kind of spend on Cosmetics if

you don't have that then yeah I mean

um in general like capacity to spend is

a bit lower and it's a little bit more

consistent um I I've seen you know

different figures for fortnite um that

you know have been pretty broad I've

seen a figure of like $80 RPO I've seen

a dollar of $10 rpu um or figure of $10

rpu so there's some range there um

because their private is a little hard

to tell with with league as an example

in

2022 u based on the data that we looked

at um they were sitting about $12 arpo

with about 150 million monthly active

users in 2022 and about like say 25 to

35 million daily active users um so but

but it's hard to say there because you

don't see the the range the the kind of

the variability you just kind of see an

average arpo um how much of that is

carried by you know Big Spenders who who

have have very Deep Pockets um but again

League doesn't have that secondary

Market market so it to your point it's a

little harder to spend like $100,000 in

a pure cosmetic you know in fortnite

it's going to be hard to spend $100,000

and so they're relying on really really

big scale um and much higher conversion

and I would say fortnite for example is

kind of best-in-class on conversion you

know they really pioneered the battle

pass system and I think that battle Sy

pass system has actually driven

meaningful conversion uh combined with

you know High ma High engagement um and

so that kind of they're balancing It Out

by increasing conversion and they can

kind of afford lower arpo verse say a

lot of these e Eastern games you know a

lot of the big MMOs whether it's genin

or somebody else um they're having much

lower conversion you know probably in

the two to four per range if I had to

guess right um but they're having way

higher average revenue per paying user

you mentioned fortnite's battle pass and

speaking then to the form of sales of

Cosmetics so whether it's in a battle

pass or you're selling items

individually or selling as part of some

kind of gotta loot box of some kind or

some other form uh what what do you what

performs the best is is it battle pass

to sell Cosmetics that does the best or

um I think it depends on the title yeah

I think it depends on the title and the

type of title so a battle pass works

really well to convert Rel relatively

highly but at fairly low arpo right you

know with a battle pass you just can't

spend all that much you know I think the

most expensive battle pass that fortnite

has is maybe 25 bucks um something like

that uh and you know historically it's

been 10 bucks 12 bucks uh so you can

only spend so much so it's really good

if you're a mass product with really

Mass Appeal and you're driving up

conversion and your whole goal is to

drive up conversion and you have really

high engagement because the whole way a

battle pass works is you're really it's

kind

of I'll just kind of like detour here I

don't know if you remember Club Penguin

but but Club Penguin they kind of

designed the first um they called it the

Velvet Rope so they designed the Velvet

Rope I don't know if you ever heard that

term but I love it and it's basically

this idea that like little kids you know

they're playing Club Penguin for free

and they're earning currency but they

can't spend the currency until somebody

buys a subscription and so you're like

playing playing earning currency earning

currency and then eventually 20 days in

you have all this currency but you can't

spend it on anything because you can't

you need to buy a subscription and so in

Club Penguin the kids would then go to

their parents and be like look I did all

this work can you please buy a $10 a

month subscription so that I can spend

this currency and so a battle pass is a

version of that where you know if you

spend 20 20 days on this thing and

you've gotten so far this battle pass

and you have this whole track where you

you can buy it um but it's funny that

Club Penguin was doing this 20 years ago

um and it was a different variation and

it was like a different motivation but

they were doing this 20 years ago um but

anyway it's really great for

conversion gacha is really great if you

have more of a core game with a smaller

audience but it really is a core

audience it's it's less broad more

narrow

and you're trying to get those two to 4%

of people who end up converting you're

trying to get them to uh invest more

heavily into the title and so there uh

if you look at the Eastern games that's

the way they're designed and they're so

heavily you know GED every Everything is

a gacha um everything is designed for

gacha because you're trying to go really

really deep there right and I'd love to

dive deeper into player motivations and

specific types of items that sell well

but before that I just thought of a

question I'd love to hear your thoughts

on which is you know when I look at some

of these shooter games like fortnite it

seems like a lot of the Cosmetics or the

the conversion of the sale of Cosmetics

is driven by big IP Integrations so

whether it's like the the ninja

integration or the Marvel integration or

the Stormtroopers integration or the

this and the that and so to what degree

do you need scale to be able to do those

kinds of things in order to sell

Cosmetics well like if if you had a

small shooter game with a battle pass

how effective are you going to be at

selling Cosmetics versus a fortnite

where you can you know you can buy a

Batman cosmetic or something like

that from what I've seen I think it's

it's it's definitely tougher um you know

I will say supercell has shown that it

works on mobile in a fairly casual

environment you know brawl Stars has a

battle pass um I'm pretty sure Clash

Royale has a battle pass so um it it

does work there it's still fairly large

scale and they don't do any brand

Partnerships from what I've seen um they

have their own brand and their own IP

and they have done a pretty good job of

of kind of monetizing that um but they

have a lot of other monetization methods

you know they're they're fairly

monetization rich and I would imagine

the battle pass is not the bulk of their

revenue um I'm not sure I don't have dat

on that but um that's just kind of my

guess

um I would say if it's just kind of a

small shooter and they're monetizing

entirely through a battle pass it's just

pretty tough to get the arpo high enough

to

justify the costs of building and

maintaining the live Ops of a shooter

that maybe is is ever green and you have

to keep changing it without getting some

of those really deep deep monetization

methods like a gacha system um I I think

it's quite quite tough you need to be at

Large Scale to be able to do that that

that's my take um and then as far as the

IP

Integrations

um yeah you know we've been doing a some

on high-rise for example you know again

to give you an idea of scale let's say

at about 30 million in primary Market

Revenue we've been starting to do some

IP Integrations and activations and

those have been um interesting I I would

say I haven't seen them meaningfully

move our Cosmetics sales

they've been engaging and they've been

interesting for some folks um and we

have some interesting ones coming up

that like are big IP and big Brands and

we'll see what the impact will be there

but in general I would say they've been

Break Even is in terms of impact um but

but also you know we're not working with

Star Wars so it's like maybe Star Wars

is a whole another level I I would say

that the kind of the IP integration the

brand integration needs to be really

high and it needs to be like of a really

strong really relevant BR to that

audience everything else is going to be

neutral to possibly negative okay so

yeah talking more about player

motivations and you had already

expressed that one of the primary

motivations is is Vanity for example but

could you maybe dive a little bit deeper

when whether it's in high-rise or from

your understanding of some of these

games that are so successful selling

Cosmetics what are some of the player

motivations

behind buying specific kinds of

Cosmetics if you were to do a highle you

know kind of categorical breakdown of of

the potential different kinds of

motivations and then what are some of

the items that you believe sell the most

based upon those

motivations there's kind of many

different types of players and different

games attract different types of players

um probably you know Bartles kind of

taxonomy of of players but there's like

Achievers killers socializers and uh I

forget what the fourth one is I don't

know if you remember um and

so I would say all of them are doing

different things so you know the the

Achievers for example are often trying

to complete so they're they're kind of

focused on

completion or they're focused on getting

the rarest thing in in the game that's

what what kind of I've seen um and uh I

would say the motivation that I've seen

in in high-rises is much more about

getting kind of the most valuable or

rarest thing there's a there's a concept

in highrise they call it paper clipping

um I think it exists elsewhere in like

um just in real life but this idea of

paper clipping which is you kind of try

to get items and then you try to uh

basically it's kind of a form of social

crafting so you have three low value

items and you try to trade them up for

one Higher value item and then you do

that a few times now you have three midv

value items and you try to trade them up

to a high value item and so on and so

there's kind of this I think of it is

social crafting uh because you keep kind

of like combining these items into one

Higher item and so I would say there's

there's these Achievers who are really

trying to get kind of the rarest item or

trying to complete

collections um there's the the at least

in highrise there's a major kind of

self-expression um category of person so

it's someone who's trying to express

themselves through cosmetics and they

have a certain Identity or image of

themselves and so when they see

something that resonates with that image

or resonates with that identity they

really feel the need and desire to to

have that thing so that they can wear it

and express themselves and high-rise is

an example so high-rise is a kind of a

simulation social type of platform um

people are changing their outfits five

plus times a day uh and so they're

changing their outfits constantly uh and

there's different reasons for that but

mostly it's you know there's some other

energy that they want to put forward or

some other way that they want to express

themselves like 2 three hours later um

or they're trying to hang out with their

friends and as they're hanging out there

with their friends their friends are

dressing up in certain way they want to

dress up in that way too um so there's

like a big um self-expression component

uh there's the there's the speculative

component so there's this kind of genre

of player that I've seen who are really

trying to play the economy game I would

say they're also Achievers um but

they're trying to kind of drive towards

collectibility um they're trying to kind

of the way they see winning is uh not

losing money and essentially their

portfolio of assets growing in value

over time and it's kind of a non-trivial

uh number of players who are who are

trying to do that um so yeah those are

some um you know there's also kind of

the The Killers the competitive players

I would say those they're kind of trying

to show off generally speaking um and

trying to show off to other and show off

high

status one other Nuance I wanted to ask

you about is um basically the difference

between east and west and so a while

back I think it was around 2015 or so I

was working in China and one of my

friends was talking to me about a game

in which it's like a farming game but it

was connected to WeChat and there was an

incredibly expensive building like I

don't know something like $10,000 or

something like that and he's like the

reason why people buy that is because

people can see that you have that

building and so the guy that has that

building all these girls would message

that person with that building for

example and so um I I guess there's kind

of two nuances or questions I have there

one is like do you see any games doing

things like that with status and the

impact of having a community or social

to your point like some people are

buying Cosmetics even though no one else

can see them so like that the social

impact of that and then East versus West

in the sense that we also discussed or

you had mentioned before that in Asia

there's a lot more gotcha loot box pay

to win is more acceptable right because

there it's like it's not like in the

west it's more about hey I'm so skilled

I don't pay even though some of these

players may have spent you know hundreds

or thousands of dollars they try to say

that they don't pay whereas in Asia it's

more like look how rich I am I paid all

this money in this game and so maybe you

could speak to some of these nuances

with respect to

status social community and then East

versus West which might be a little bit

tied to the issue

around uh the culture around fair to

playay or pay to win yeah I mean it's

it's spoton it's 100% true I mean I've

heard of stories where um Western games

would launch in Asia and people would

churn because they literally cannot buy

the High status item until they make

more progress right because in the west

uh like you said people tend to um kind

of look down on people who just pay a

win or look down on people who just jump

in and spend all their money and now

they're like super loaded in the game

they they they value effort they value

work and they value kind of getting

there fairly um from their perspective

and so that's the way often times

Western games are designed you know the

the battle pass as an example

is very much a western design because

you need to play a bunch in order to

unlock on the you know 30th day the

really rare item Eastern games are

designed in such a way where on day one

you should be able to spend dramatically

and be able to get the highest value

thing um very quickly and I I've heard

of stories where when they're not

designed that way in the East people

actually churn out um especially high

value kind of players people players who

want to invest heavily they just turn

out because they're like this is going

to be too much work I'm out um and so

that is definitely a major cultural

difference and cultural nuance and

that's why you know the these games in

in Asia particularly in China Taiwan um

but also even Japan uh and South Korea

uh they're super gacha heavy the gacha

is totally unlocked from the beginning

and you can just sink a lot into that

title so that you can immediately um be

kind of leveled up and be strong and um

they're also very heavily MMO focused

they're deeply social you know if if you

look at those games they very much tend

to be uh normally like kind of like top-

down MMOs um you know think like a a

maple story or something like that um

and so yeah it's it's a huge difference

I'll flag that high-rise for example

we're not um live in China South Korea

Japan um a little bit in Taiwan and so

we don't get as much exposure to that

yet um we're kind of uh starting to and

working on it um if you look at you know

our number one competitor Roblox they

ended up partnering I think with tensent

to launch in in China and kind of

tailored it that way and I see a lot of

Western titles needing to partner with

someone in the East partly you know for

Regulatory and government reasons but

also partly because that there is a very

big cultural difference into terms of

how people spend and how they think

about spending

right um maybe for our audience I I can

just name without naming the specific

game as an example of a game that was a

little bit more pay to win oriented

where we saw in the west or in the US

sub 2% conversion but then in China the

conversion was over 10% and the AR poo

poo was actually dramatically higher so

to your I think that just kind of

confirms to us like what we've been

talking about that this is this is

certainly a phenomenon that Developers

will have to try to understand and um

you know whether you're catering for the

Western Market or if you're catering to

China it's probably gonna have to be a

little bit of a different design I think

what's interesting is the so Western

games I think have a hard time entering

the East but there are a number of

Eastern games that are entering the west

and fairly

successfully um and I think it's because

that there is that kind of depth of

spend in the West and it's possible and

and viable it's not like everyone's like

no you know it's it's not fair and I'm

not going to participate in this game

because very early people can come in

and and spend a bunch um so so I will

say it's

like on the margins a little bit

one-sided um but obviously you know

league has become huge in you know yeah

I I think that's an important point I

think in our conversation I don't think

we're telling the audience pay to win

can't win in the west because clearly it

does yeah of War being a good good

example but uh that there are

proclivities and cultural differences

that one should keep in mind definitely

cool so I I think one of the other

topics that um we were going to punt on

so maybe we talk about it now or punt on

to later in the conversation is this

notion of primary and secondary

markets and so I i' love to hear more

about that I know you're running

something specifically you had mentioned

I think in primary you're selling like

30 million and then in the secondary you

I think you said 100 million so could

could you break out like so what does

that mean uh from an economics

perspective in terms of like that 100

million do you take a rake on some of

those transactions how does that benefit

you and then I'd love to hear more about

the Dynamics between of what you

mentioned because you also said that

having a secondary Market is a little

bit potentially dangerous with Diablo

being you know a a the an example and so

I'd love to hear more about the dangers

of a secondary Market as well yeah sure

um so I I'll kind of cover our um

primary and secondary market so our

primary Market mostly consists of um

either gacha or direct sale so we sell

Cosmetics through a gacha mechanism I

mentioned we release it for a limited

period of time people can buy it and

then they can um trade it in the

secondary Market we also do some direct

sales where we sell it for limited

quantities or limited time or Limited

stock um we also have some kind of event

progression systems where people can

progress over time and they they can

kind of win items and then trade them

away um and then the secondary Market we

have um a few different methods that

people can uh tap into the secondary

market so the way that they can sell

through the secondary Market one we have

a Marketplace so people can list items

on that Marketplace uh two they can

trade with each other directly so I can

give you an item in exchange for another

item or for currency our in-game

currency is called gold um that's kind

of the the scarce currency it must be

purchased you can't really earn it um

and then also we have something that we

call Secondhand grabs which basically

you have your own gacha in your own room

and you can put a bunch of stuff in it

and then people can spin it and they can

um kind of win one of your items one of

your kind of inventory items um the last

piece I'll mention is because we just

rolled out high-rise Studio which which

is our IDE to be able to build games and

experiences inside of high-rise uh

creators can now start giving away or

selling items directly inside of their

experiences using H studio so um anyway

that that's kind of the way that we're

designed uh the bulk of the secondary

Market transactions happen through the

marketplace but a non-trivial amount you

know 20% or so um come from Trading uh

and another large non-trivial amount

comes from secondhand grab so

um they all kind of drive towards the

secondary Market uh I would say the the

dangers one one of the biggest

challenges with having a secondary

Market is uh exploitation and fraud it's

so hard

to have the levers that a product that

doesn't have a secondary Market has so

as an example we can never give away our

currency because if we start giving away

our currency I mean we can to some

degree as a marketing expense but if we

start giving it away somebody will find

a way to exploit it and start to flood

the market with currency right so just

blue Stacks all that yeah and so it's

very it presents this challenge where if

you do offer a secondary Market all of a

sudden you can't you know bring someone

in and start kind of like giving them

currency in order to succeed and because

there's no power progression you know

most other currencies just aren't that

valuable you know where if you remember

Game of War I don't know they had like

20 currencies and each currency was

actually important because it would gate

power and so you could actually give

away a lot of these different currencies

without giving away the hard currency

you know the the really kind of valuable

expensive one that must be purchased

whereas for us um because it's purely

cosmetic uh and there isn't kind of this

power progression it's much it's more

difficult to introduce these soft

currencies that normally in a

traditional free to play game you'd be

kind of giving away to get people to

return and come back it's a really nice

lever so we don't have that lever as

much and so that that's a problem with a

secondary Market you just don't have

that currency lever um and that's true

of of Counter-Strike that's true of

League that's true of all these kind of

kind of games but at least they're hyper

competitive and they've turned into

sports um whereas for us we're we're

kind of more about simulation and and

kind of uh either building games or or

kind of consuming games um so so yeah I

would say that's kind of the biggest

challenge of having a secondary Market

in addition it's what we talked about

which is um if purchase behavior is

driven in some part

by secondary Market or you know

perceived value that kind of stuff then

if the economy gets away from you and

you don't have enough visibility into

the economy you can really destroy the

the product so uh I don't know if you

remember Gaia Online um but Gaia Online

was huge it was a it was kind of this

for for and and you had avatars and all

this stuff I worked there for like one

or two months okay well then uh I don't

know if you were there before or after

they completely decimated their economy

um but there was a time when they

completely decimated the Eon the economy

they essentially sold sold a machine

that produced currency um and that

created massive inflation and because of

the massive inflation you know Gaia

completely tanked and so there's a this

big component of managing controlling

the economy you know Eve online CCP

games they they I I remember hired a um

I don't know if they still have them but

they have um uh

economists who who manage the economy

steam I remember had hired uh an

economist and scientist to analyze the

steam economy and so um these are kind

of complicated problems because they're

complicated systems but at least there

are some metrics and kpis that if

companies do have secondary markets they

can look at you know they can look at

gold in the system or currency in the

system

that that's currently alive you know

they can look at the GDP and transaction

volume um all that kind of stuff uh last

thought um in terms of taking a rake um

yeah we take a rake and we feel we have

to because without taking a rake so so

you know a rake is a Sync It's a sync

for the currency if we don't have any

kind of sync then a lot more currency

stays in the system and it drives

inflation uh and inflation is really

scary for us because then as new users

join our platform everything becomes

exorbitantly expensive for them uh but

old users who are very rich because

they've been trading between each other

uh they end up kind of driving the

entire top end of the economy right

because everything's highly inflated and

so for us our secondary Market we take a

30% rake off the marketplace um we

actually tested a 10% rake and a 30%

rake and we actually saw virtually no

difference in transaction volume just a

much lower rate take rate you know um

rake uh we take a 10% rake when with

direct peer-to-peer trading um and we

take a 30% rake uh with secondhand grabs

so

um we definitely take a rake and I find

that it's very important to do so uh

otherwise you're going to start

experiencing massive inflation to your

point when you mentioned kpis and

metrics so I I can understand it's very

important that you're kind of trying to

keep a pulse in terms of your economy if

you have a secondary market for example

and there's C probably you know maybe

outside the scope of this discussion but

probably a lot of things that you should

be looking at but if you don't have a

secondary Market um how would you like

to a product manager that may be

listening that is overseeing a game with

a Cosmetics based economy like what are

some of the kpis or metrics or things

that you would track you in order to let

you know whether the Cosmetics that you

have in your game is performing well or

not uh what should PMS be aware of

that's an interesting question because

you know for us we think about it a lot

in terms of secondary market so so the

nice thing about having a secondary

Market on the flip side is we can easily

see what the community wants and what

the community doesn't want by virtue of

the value of the items and the cosmetics

in the secondary market so we kind of

track the price of every single item in

the game relative to volume um I would

say without that then you really only

have the kind of the primary Market data

and so you're looking at you know how

many users end up purchasing you know

this item obviously it depends on your

merchandising strategy if you're using a

Goa system vers a direct sale but

basically you know how many people are

are are kind of buying this item how

often are they wearing it you know

what's what's kind of like the wearing

or equip rate um you're uh you're

looking at um kind of conversion uh and

and depth of spend so so if you're

looking at a gacha for example you're

looking at the depth of spend on a gacha

and when when do players stop so do they

stop when they reach a certain item

because that item is the desirable item

um or do they stop because they've Rage

Quit because there's no not a good pity

mechanic or you know the the the rates

are really poor and and painful um so so

I would look at things like that but

there's no better indicator than Topline

so you know you do some sort of live Ops

event um that has

Cosmetics how much revenue did you

generate per user you know from on an

arpu basis from this kind of cosmetic uh

sale there's there's no better high

level metric than that um and guidance

than that but then within that you're

looking at depth of spend on you know

again if you're looking at aacha you're

looking at conversion rates um and

you're looking at equip rates and going

back to the very beginning of our

conversation there were a bunch of

topics and issues related to Cosmetics

that you had mentioned is there anything

important that I left that I haven't

asked you about I I forget there was a

long list that you

described um so so the question is uh

like kind of dangers of Cosmetics you're

saying or

oh well I I forgot you you mentioned a

list of issues but yeah maybe we could

talk about that what what are dangers of

selling Cosmetics then I think Cosmetics

are a are a pretty great

augmentation in in terms of Revenue um

and player engagement if you can get

them to work the big challenge is

getting them to work

and the reason why they work is because

people care about the way they present

themselves

in your Universe which means they have

to care about your universe and they

have to care about others in the

universe because otherwise why do you

care about presenting yourself in a

certain way you know Cosmetics will

rarely almost never work in any

meaningful way in a single

player game it's

just there's there's just no obvious

reason why you would spend

Beyond I don't know a few bucks or maybe

a 100 bucks on cosmetics in a single

player title and don't know of any

single player title that monetizes

really well or well at all through

cosmetics and so you

know I've seen some kind of Junior game

designers or or PMS think that they can

just kind of roll out cosmetics and

people will start to buy them and that's

simply not true people buy Cosmetics

because they care about their status in

that Universe which means they need to

care about that Universe they need to

spend time in that Universe they need to

care about other people and what other

people think inside of that

Universe um so I would say the the

pitfall of Cosmetics is thinking that

you can just roll them out and there

will be demand uh that is far from true

well Anton I think that was the last

question that I can think of do you have

maybe a final message or a way in which

if people are interested in reaching out

to you where where they could uh contact

you in some way sure yeah well uh I

guess I'll share that pocket worlds um

we are uh growing pretty quickly and

we're hiring pretty quickly um we were

about 120 people today uh we're building

out an office in Austin so if anyone's

listening out of Austin they should

reach out to me um they can reach out to

me at antono worlds.com or Anton bur on

Twitter uh and in general we're hiring

so if you go to pocket worlds.com

careers uh you'll see a bunch of open

positions there um you know our our goal

is to build a platform where on one end

we have creators building games and

experiences and deploying them with one

click directly into high-rise and then

on the other end you know our mission is

to connect the world through shared

experiences so we're all about hey how

do these experiences uh help people

connect with each other help them to

socialize with each other I mean this is

why people care about Cosmetics inside

of our world because we're entirely

designed uh around uh having a social

experience within uh a world that

contains games and game like uh

experiences so yeah if anybody's

interested in in that in in kind of

accomplishing what we're what we're

working on and trying to accomplish uh I

welcome them to reach out great well

thank you so much for your time Anton I

kind of feel like we've only scratched

the surface in terms of Cosmetics um and

selling cosmetics and free-to-play games

so um maybe we could actually do a

deeper dive in certain areas and if you

if you can join me again perhaps to

co-host with some other folks to discuss

these things I'd love to have you join

me in the future yeah I'd love to and I

I'd also love to learn from uh from from

other folks cool well with that uh to

our audience thanks for making it this

far and we will catch you next time

thanks Anton yeah

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