The game costs nothing to start, then sells you things inside it.
The download is free but the income depends on a small number of heavy spenders, so the design is tuned to find them and keep them spending.
Nothing at the start. Inside, the shop sells time-savers, power, characters or cosmetics, usually through a virtual currency. Because the game is free, how much you spend is up to you, and to how the game is tuned to nudge you.
Give the game away; charge only the players who stay. In Korea, piracy and PC bangs (internet cafés where people played PC games) made a boxed copy worthless, so Nexon sold the sword instead of the game. The industry's central question flipped from 'is this worth £40 to most players?' to 'how do we retain millions and convert a few whales?', whales being the small number of players who spend the most. Facebook proved players would buy virtual goods against a card already on file. When Apple let free apps sell things inside themselves on 15 October 2009, the last friction went: one tap, against a card Apple already held. Design followed the money: energy meters, timers and dual currencies built to make waiting cost something, with economies tuned for the whales who carry the free majority.
When purchases are optional extras that don't change how hard the game is, spending limits are set on the device, and you can enjoy the whole game without ever buying.
Nexon's QuizQuiz (Korea, October 1999) is widely credited as one of the first free-to-play games funded by an item shop rather than a purchase price. MapleStory (29 April 2003) reached 100,000 concurrent players within weeks, and Dungeon Fighter Online (August 2005) would out-earn Star Wars, Harry Potter and the Avengers combined at the box office, by Nexon's own account. Zhengtu Online's gear drops became a rigged reward wheel, a 2007 scandal that previewed the industry's gambling problem. FarmVille (19 June 2009) engineered inconvenience (wilting crops, draining energy) and sold the cure: $1.07 billion of Zynga's $1.14 billion revenue came from virtual goods. On 15 October 2009 Apple allowed in-app purchases in free apps, and 'free' became the most profitable price in gaming; Candy Crush Saga, Clash of Clans, Game of War, Puzzle & Dragons and Coin Master followed. Regulators noticed once children became accidental big spenders.
On 15 January 2014 the FTC announced that Apple would refund at least $32.5 million to parents billed for their children's unauthorised in-app purchases.
Age-rating boards only flag that a game sells things: ESRB's 'In-Game Purchases' notice (2018), PEGI's in-game purchases descriptor (2018) and Australia's 'in-game purchases' consumer advice.
Rules aimed at specific mechanics, such as loot boxes and gacha, are covered under those entries.
Historical prices and revenues are in US dollars at the time unless marked A$.
Apple's App Store guidelines update on 15 October 2009 allowed free apps to offer In-App Purchase for the first time.
Zynga's FY2011 10-K: $1.07bn of its $1.14bn revenue (93%) came from selling virtual goods.
A 2017 study of 776 million Apple digital purchases found the top 1% of spenders generated 59% of all spending, with in-app purchases making up 61% of the total.
Dungeon Fighter Online had earned over $20 billion in lifetime revenue by 2022, which Nexon says is more than the combined lifetime box office of Star Wars, Harry Potter and the Avengers.
Covered in Video Games & Money: Ep 17 · F2p asia, Ep 22 · Social, Ep 24 · Mobile f2p.
