In Six common mistakes when moving to live-service games and free-to-play, Ben Cousins argues that cosmetic-only monetization is a mistake:
The games that make billions from cosmetic-only economies typically only succeed because of the sheer numbers of players. On a per-user basis they actually have very poor monetization, relative to games that use more aggressive methods. This is because for a multiplayer game that is built from the ground-up to be about dominating other players, the proportion of the audience who are interested in self-expression via cosmetics is rather small.
He’s right. Traditional HD developers choose cosmetics because there are no core design implications. Designers can layer cosmetics into nearly any game at any stage of production. But for it to “work,” the game needs to achieve massive scale (low ARPU), and even still, it’s risky. It’s no wonder that very few mobile games in the top 100 grossing use exclusively cosmetics-style monetization. But I also think Ben misidentifies the challenge of cosmetics in his piece. I agree; they are certainly not about self-expression (at least the successful ones). However, male-centric multiplayer games are about domination, which is why cosmetics are viable instead of unviable.
Former “Cam Girl” Aella best sums this up by describing what it takes to get tips on stream. She writes,
Men want a few things, and probably one of the biggest is winning a competition.
You see, you’re not just trying to get a guy to pay you – you’re trying to get a guy to pay you in front of a bunch of other guys. This is a super key. A man wants to feel attention from an attractive women on him, and this is made even more satisfying when it’s to the exclusion of those around him. He is showing off his power by buying your happiness.
High-level cosmetics in multiplayer games often signal domination whether or not the cosmetic is attached to skill. Apex Legends is particularly effective at this. Consider low and high-level banners:
The stat tracker element directly shows a player’s time commitment to the game. We can also see the more exotic colors and shapes communicating danger—sort of like how the poisonous dart frog communicates danger with color.
Finisher animations are particularly humiliating since both the player performing the finisher and the one being finished must watch. It’d probably look like this if you could ever animate domination in a single five-second animation.
None of this should be shocking; we are political beings.
While these might be good observations, we need a falsifiable hypothesis about cosmetics. And to an economist, this means a model! This allows us to make more predictive statements about how a new cosmetic will or will not sell.
Consider a basic model of cosmetic demand:
Player Cosmetic Utility Choice Model: Getting a Better Cosmetic
Player Cosmetic Utility Choice Model: Getting a Worse Cosmetic
Horizontal or Vertical Progression
Progression is a powerful toolkit, even for cosmetics. One way to combat the inflation problem is essentially printing more money. And by this, I mean introduce higher and higher rarity. Riot, for example, introduced Ultimate II skins (3250 RP).
Alternatively, the horizontal way to attack this problem is to add cosmetic vectors. Dota 2 has mastered this with things like chat lines and ping cosmetics as customizable vectors. Of course, this too will face challenges when players collect more items in the given cosmetic vector.
Cosmetics is a hard road to follow, and inflation is always chasing developers. It’s essential to think carefully about mitigation strategies and how to grow cosmetic vectors over time as you would any other element of a live service.