Virtual world and social game ARPUs

by Giff on July 5, 2009

coinsJustin Smith had an interesting slide deck at the Social Games Summit where he shared his estimates for monthly ARPUs (average revenue per user):

  • “good Facebook” – $0.30 – $0.40
  • “good MySpace” – $0.60 – $0.70

Some games can do much better. The Facebook game Battlestations shared some data in late 2008 where they appeared to have around a $1.00 ARPU, although their total user base was much smaller than the active player counts of the big Zynga or Playfish games.  Three Rings Puzzle Pirates, a virtual goods-based game outside of the socnet platforms, has reported getting a monthly ARPU of around $1.50.

I had been guess-timating an average social game figure of around $0.25, so was glad to see that the industry is hitting better numbers.

Within the virtual worlds space, there is quite a range.  My guess for Habbo Hotel gives them an ARPU of around $0.65 (based on a few data points: 2008 revenue of $74M, growth of registered users from 86M to 126M, and a guess that their monthly uniques grew from about 8M to 11.5M over the year).  Smallworlds disclosed that they were on track to hit a $1.40 ARPU. For IMVU, I estimate an ARPU of $1.62 (based on registered users of 35M, an active-to-registered ratio of 3%, and $1.7M monthly revenues from virtual goods).    Second Life (which Jeremy Liew estimated at $9.30) and the more “hardcore” free-to-play MMOGs tend to range between $5.00 and $10.00.

I should note that there is no definitive standard for what “ARPU” really means.  When I am working on P&L forecasts for ESC clients, I focus on a notion of “unique active players” who engage with the game/world at least once that month.  While I focus on conversion rates and average-spend-per-paying-player (or types of player), these ARPU guesses provide a useful sanity check.

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  • CR

    Regarding the preparation of a P&L, what are you identifying as COGS.
    As I am working on a model currently I was proposing a mixture of variable costs and fixed costs.
    We are using a third party for payment processing so this may be considered a component of COGS.
    I am thinking that anything which enables us to receive/process payments (or ecommerce related so to speak) may be considered COGS or some portion since without this I would not have revenues.

  • http://giffconstable.com giffc

    It depends on the purpose of the model, but if it's for your own business planning and analysis, I ended up caring less about accounting terms like COGS and G&A and just closely examining variable vs fixed costs.

    As for COGS, I would include anything that is directly tied to keeping the site running and fresh and tied to transactional revenue. Here are some: your art, community and helpdesk costs; your hosting and bandwidth/CDN and sys admin; your payment processing fees and any transaction fees you might be paying to a LiveGamer/Playspan; an amount for fraud; if you are selling integrated sponsorships, then implementation and sales commissions.

  • CR

    Thank you for this feedback. I had considered a couple of these items but the others will be great to discuss as I am preparing a model for the team here.
    Now I know where to come with these questions.

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  • steve

    is the ARPU per year or per month?

  • steve

    is the ARPU per year or per month?

  • http://giffconstable.com giffc

    per month

  • http://giffconstable.com giffc

    per month

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