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Annuity Revenue Models for In-App Purchases Can Drive Both Revenue And Retention

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Gamasutra

"Want to Increase Your Free-to-Play Game Revenue & Retention?  Experiment With Virtual Currency Annuities" is a new featured Expert Blog post by Isaac Knowles, a resident staff economist. A PhD candidate at Indiana University under virtual economy pioneer Ted Castronova, Isaac argues that annuities are a revenue model capable of growing both revenue and engagement:

An annuity is just a sequence of payments that a person receives in exchange for an initial investment. Interest payments by a bank into a savings account are a common kind of annuity. Insurance companies usually offer another type of annuity where you pay a large sum now (say $100,000), and then receive a guaranteed amount – say $5,000 a year – for the rest of your life. Annuities in free-to-play games work similarly: you pay a certain amount now in real money, and in return you get a guaranteed stream of daily payments in virtual currency over some specified time period. While annuities are still relatively rare in games, we’re starting to see some early, interesting examples…

Isaac then goes on to analyze the annuity model implemented in NetEase’s Eternal Arena.

Read the whole thing here, and feel free to ask Isaac follow-up questions in the post’s comments!

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