Virtual world and social game ARPUs

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.

18 Comments Virtual world and social game ARPUs

  1. Pingback: Virtual world and social game ARPUs : The Electric Sheep Company Blog

  2. CR January 30, 2010 at 12:08 am

    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.

    1. giffc February 1, 2010 at 3:35 am

      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.

  3. CR January 29, 2010 at 7:08 pm

    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.

  4. giffc January 31, 2010 at 10:35 pm

    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.

  5. CR February 1, 2010 at 8:11 pm

    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.

  6. CR February 1, 2010 at 3:11 pm

    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.

  7. Pingback: Online Business Metrics « Blog | Vindicia Soapbox

  8. steve March 2, 2010 at 7:26 pm

    is the ARPU per year or per month?

  9. steve March 2, 2010 at 7:26 pm

    is the ARPU per year or per month?

    1. giffc March 2, 2010 at 7:31 pm

      per month

  10. steve March 2, 2010 at 2:26 pm

    is the ARPU per year or per month?

  11. giffc March 2, 2010 at 7:31 pm

    per month

  12. giffc March 2, 2010 at 2:31 pm

    per month

  13. Pingback: IPs y conversión de clientes « Ludosofía

  14. Pingback: What is the ARPU per month for Farmville? - Quora

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