When is gamification predatory?

A 2015 study by Microsoft found the average human attention span is around eight seconds – a remarkably short time for marketers and advertisers to work with. Consumers no longer have the patience to engage with detailed content and, as a result, new strategies have been developed to speed up the delivery of messaging. The idea is to simplify message absorption, increase memory retention and drive cognitive engagement at-speed (e.g. Tik Tok style videos, listicles, etc.).

As part of this shift, there is now a strong focus on making marketing content that is two-directional. By engaging consumers and requiring a response from them, they are more likely to retain messages and become active in the purchasing process.

While there are many ways of creating two-directional content (e.g. live Q&As on social media), one technique that has proven to be highly successful is Gamification. Gamification asks consumers to participate in a game of chance or skill as part of the delivery of messages. An example is providing smart-phone users with playable ads. This creates a sense of competition that is designed to pique interest and elevate retention of important brand and product information.

Lootboxes

Gamification has been such a successful marketing tool that many companies now use it as more than just an advertising tactic – they are embedding it into the actual product consumption process to drive additional consumer-lifetime-value (CLV).

A great example is the freemium gaming space. Players are encouraged to purchase in-game items as a way of optimising their playing experience. To make things more enticing, players are often encouraged to purchase chance-based items known as lootboxes.

Functionally lootboxes are similar to basketball cards. Consumers have a chance of receiving some extremely rare/valuable items but, for the most part, will receive fairly generic items. This chance-based experience is highly engaging for consumers and encourages them to keep purchasing because they always have a reasonable chance of ‘winning’ something valuable.

Lootboxes have proven to be a great boon for the gaming industry. For example, almost half of Fortnite’s US$2.4 billion revenue in 2018 was generated by the sale of these types of in-game items (Forbes, 2019).

The ethical concerns

While lootboxes aren’t inherently problematic, a number of significant issues have been identified by academics in recent years. In particular, several papers have found lootboxes to have a similar impact on the human brain as gambling. The anticipation and emotional-high associated with unlocking lootboxes encourages players to continuously pay money (similar to slot machines).

In 2018, a study by Koeder et al. raised suspicions that certain developers/publishers actually alter the content of lootboxes before they are opened to help encourage additional spending. These types of predatory marketing tactics were famously discussed by Torulf Jernstrom (the CEO of Tribeflame) in his 2016 presentation: Let’s go whaling – Tricks for Monetising Mobile Game Players With Free-To-Play.

During the presentation, Jernstrom encouraged developers to target “whales”. These are gamers with a tendency to spend very large amounts of money on in-game purchases – particularly lootboxes. Critics of the presentation argued that Jernstrom was actually encouraging developers to exploit gamers who have a natural susceptibility to internet gaming disorder (IGD) – a recognised mental health disorder.

In a recent study, the UK Gambling Health Alliance (GHA) found that a quarter of young gamers spend more than £100 on lootboxes in an average game and a third do not feel they are in control of their spending (GHA, 2020). Perhaps most concerning, 15% of young gamers reported taking money from their parents to purchase lootboxes without asking permission and 1 in 10 borrowed money they can’t repay.

As a result, many researchers now consider lootboxes to be considered predatory monetisation, and are advocating for strict regulations to be put in place as a result.

The dangers for companies who use surprise mechanics

Historically, lootboxes have proven to be highly lucrative for game publishers. However, there are several high-profile examples where they have backfired.

In 2018, EA’s flagship title: “Star Wars: Battlefront 2” experienced massive consumer backlash after its lootbox mechanics left many feeling the system encouraged young gamers to engage in gambling-style purchases. The scandal saw EA shed US$3 billion in market value after Disney (the owner of the Star Wars license) demanded lootboxes be removed from the game.

A number of legal challenges were also raised against EA by governments around the world who questioned the legality of lootboxes in video games, leading to the now infamous quote by Kerry Hopkins, EAs Vice President of Legal and Government Affairs at the time, that “people like surprises”.

Although this scandal has not deterred the use of lootboxes across the industry, it has made game-developers a little more sheepish in their decisions. Consumer backlash has also triggered regulatory intervention in Holland, with the government declaring lootboxes should not be available in children’s games.

Some other jurisdictions are now also considering similar legislation, including: Hawaii, Australia and Belgium. Given that almost a third of EAs annual revenue comes from in-game purchases, this type of legislation could potentially be disastrous for the publisher.

Based on this case study, marketers would be wise to consider the long-term implications of using gamification to drive profit. While consumers certainly enjoy games and surprises, they don’t like being taken advantage of - and your brand equity may suffer as a result.