Micro transactions


What is a micro transaction?

Micro transactions are virtual in-game purchases and can change how users play or how their character looks - whether that’s loot boxes, new skins, power-ups, or in-game currency. 

How micro transactions became so popular

Video game microtransactions emerged alongside the rise of service games, which are games that users play continuously. Compared to a single player, often story-driven game which is played through once and then it’s done, service games never end - requiring developers to continue supporting the game with new content, balancing tweaks, and ongoing live operations. Given the continuing costs to maintain games, ongoing revenue from micro transactions are necessary. 

In addition to service games, micro transactions are especially important for monetizing free-to-play games, or F2Ps. The free-to-play model first become popular in Asian geographies like Korea and China, but has since become the norm on mobile, where casual players aren’t generally willing to buy games for an upfront fee. Over the last 15 years, free-to-play has also taken over much of the PC and console markets, with titles like League of Legends and Fortnite. By removing the cost barrier, F2P lets developers get their games in front of more users, then monetize the most loyal players by offering micro transactions. Unlike a $60 premium game, these games don’t have a hard “cap” on how much they can earn from any one user.

Types of video game microtransactions

There are three distinct types of microtransactions in gaming: 

  1. Consumables: Items that players use up and need to repurchase, like in-game currency or energy. These tend to be the main revenue-driver for a game since engaged users are likely to buy them again and again.
  2. Non-consumables: One-time purchases that permanently unlock features, like characters or cosmetics.
  3. Subscriptions: Recurring, often automatic purchases that provide users with benefits over time.

If we look at Clash Royale, for example, we can categorize the micro transactions in the game by consumables, non-consumables, or subscriptions. One of their popular items is packages of their in-game currency, Gems. When engaged users want to buy in-game upgrades or items, they use this currency to do so, enhancing their gameplay. There are other items players can choose from, too, like skins and cosmetics. So in this case, the game uses consumables (like their Gems) and non-consumables (those skins and cosmetics). 

What are the benefits of micro transactions?

Micro transactions have a few major benefits for game developers:

  • Earn ⁠⁠ongoing revenue. Whether players are paying to unlock a new level or continuously buying energy, there’s always new money coming in from micro transactions to cover your game’s operating costs. 
  • Increase your game’s reach. Being free to play and reducing the cost barrier to entry means you can get your game in the hands of more people, expanding your potential reach. 
  • Serve your audiences: Free-to-play games mean that you can cater your game to any audience and find the optimal way to serve that audience - it’s possible for a developer to earn the same in revenue with wildly different strategies. Casual games, for example, can have broad reach, lower ARPU, and higher conversion, while midcore strategy games can tailor their gameplay to a smaller but devoted audience who spends more time (and money) on their games. 
  • ⁠⁠Improve the player experience. You control what micro transactions to offer in your game - and striking the right balance (which we get into later) offers players advantages, like customizing their experience and progressing at their preferred pace. With the right micro transaction strategy, players aren’t paying to win or feeling taken advantage of. Instead, they’re customizing their experience, unlocking advantages, and continuing to play in a way that fulfills their motivations and meets their willingness to spend - whether that’s getting the satisfaction of doing raids in Clash of Clans or unlocking a new champion in a MOBA. 

Balancing your micro transaction strategy

With any of these micro transactions, balance is key. Done right, micro transactions can help you drive significant revenue without greatly harming the player experience. Done wrong, they can lead to annoyed gamers at best (see Star Wars: Battlefront II’s launch) and unethical behavior from game devs at worst. 

Supercell is the legend of mobile gaming - and a lot of this is down to how they treat their players. It’s hard to keep a game going for over a decade if your audience feels like you’re taking advantage of them. In many of their games, the “core” or “moment-to-moment” gameplay isn’t what they monetize, but rather the pace of progression is. That means players can continue raiding other bases in Clash of Clans as much as they like, but if they want to progress quickly, they can monetize through micro transactions. 

Supercell’s sales strategy (providing regular discounts to high value micro transactions) and generous battle pass give heavy discounts to players who don’t want to spend too much on the game. That means low or moderate spenders are able to keep up with the game’s new content alongside the highest spenders. Regardless, matchmaking means that players can play against others who are at a similar stage, so spending money can’t win your raids for them - in fact, skill in battles is considered so fair, there is even a thriving Clash esports league. 

Let’s apply this idea to each type of micro transaction:

  • Your consumables should feel valuable and meaningful without pricing them too high so as to put off players from purchasing. 
  • For non-consumables, avoid that "pay-to-win" scenario by ensuring the items you offer don’t create a power imbalance in the “skill” portion of your game. 
  • And with subscriptions, use them alongside a mix of other IAPs to drive long-term engagement from your most dedicated users. 

Who completes microtransactions in gaming?

The fact is, very few players actually use micro transactions. A recent Swrve report following 10 million players over 90 days showed that only 2.2% of them completed any purchases in F2P mobile games. But that small percentage often represents the most loyal and engaged players. To this point, during the Apple vs Epic trial, it was revealed that 70% of game revenue on the App Store comes from less than 10% of players. They’re the ones who contribute significantly to a game's financial success. 

However, that financial success can look a bit different when you realize one important feature about video game microtransactions: developers only keep 70% of what players spend on in-app purchases; the app stores take a 30% cut of each transaction. That means if a player spends $10.00 on a micro transaction, developers only see $7.00 in their bank accounts. 

Sell video game microtransactions directly 

The good news is that there’s a way to bypass these commission fees and maximize micro transaction revenue. And that’s through web shops or online gaming payments. By selling micro transactions on the web instead of in-app, you’re opening a direct line to players while cutting out the 30% commission that Apple and Google take. 

Playtika, for example, has a robust direct-to-consumer strategy (D2C) that includes web shops and dedicated sites for their games. These D2C channels increased 6.8% YoY in Q3 2023 for a total of $161M. Meanwhile, the company’s total revenue decreased 2.7% YoY, with iOS and Android micro transaction revenue decreasing 5.6% YoY. These D2C channels helped offset the loss of revenue from in-app micro transactions by driving direct revenue free from that 30% commission. 

A few examples of video game microtransactions you can offer on a web shop include:

  • Web exclusive items
  • Buy-one-get-one deals
  • Volume-based discounts (spend $50 to get 10% off) 

These unique incentives turn what was a cut-and-dry in-app purchase experience into a web-based, vibrant community hub that encourages repeat visits (and therefore more micro purchases).

Build a web shop with Stash

If you want to maximize your micro transaction in gaming revenue, talk to us at Stash. We’ll help you set up a web shop that increases your margins, drives traffic, and gives players an experience they’ll love - and keep coming back for.

More caSh witH sTash