Making money from games has always been a challenge for game developers, and it has only been getting more difficult over the last several years as consumers demand more for less. Just ten years ago we lived in a much simpler age where consumers were conditioned to pay money for goods. People paid for an orange, they owned the orange and they ate the orange. This concept worked great for early games like Risk and Chutes and Ladders. The game designer was a sculptor of a fun product, and if someone wanted to own the game to play at their leisure, they would buy it.

Things became a little more complicated when games became digital content. The human mind has a much more difficult time attaching value to a virtual product. For example, although most people wouldn’t consider stealing games off store shelves, many of these same people are willing to download the game for free from a “peer-to-peer” network. And studies have supported this by demonstrating a direct relationship between people’s guilt for stealing and the physical nature of the good.

The Web makes this even more confusing. As a game developer focused on online game development for many years, I know that it is incredibly difficult to convince a consumer to pay money for a Web game. Fantastic Contraption aside, it’s not a regular occurrence where consumers will pay a fee for game content online. No matter how much money or sweat you put into a Web game, consumers can’t get past the hurdle to pay for it in a direct way.

Much of this relates to the concept of “price anchoring.” People in general are lazy about choosing what to pay for and how much to pay. No one has the time or brainpower to evaluate the satisfaction value of one game against every other possible diversion so they cheat and accept a general “anchor” for what different media should cost. New games in stores cost around $50. Downloadable games cost around $10. IPhone games cost anywhere from 1-$3 and Web games are free. Notice that this has very little bearing on the amount of work that went into the games, the length of the game or the fun you will experience playing it. A team of artists, programmers, designers and managers could spend thousands of hours working on a Flash virtual world, and yet, no one would consider paying for it.

Web game developers, therefore, have to resort to a variety of complicated mechanics to make money. Initially the widely accepted model was to put advertisements into games. This has worked for some developers and Web sites, but in most cases the ads didn’t pay significant revenue and it was dependent on fill rates of networks.

The next breakthrough was to convince people to play free Web games, and then spend money on a longer, more robust download version of that same game. The simplest example of this are games like Popcap’s Zuma that have a free Web trial and a longer version for sale as a download. You can then take it another step further by cross promoting similar content. Arkadium has had a lot of success selling the downloadable game Mahjongg Dimensions Deluxe from its social Facebook game Mahjongg Dimensions even though both are full featured and slightly different games. Even Core games do this. Dragon Age Origins developers created a very expensive and extensive Flash game that it used to promote its game sold in stores.

The latest monetization mechanic for Web game developers is microtransactions, and it has been the most versatile yet. The game itself will be free, but players can spend real money to purchase upgrades and new features. Games like Bloons Tower Defense 4 and Zynga’s popular Facebook game, FrontierVille, have done this to the extreme where extensive store upgrades dominate the game experience.

Microtransactions have changed the landscape for Web developers because it allows them to create a wide variety of new price “anchors” for users. You can ask yourself, why does it cost $2.00 for a chicken coop in FrontierVille? This is an entirely arbitrary value, but a user will not necessarily compare that price to the price of a movie ticket, or the price of a new downloadable game. They will compare this price to the price of other objects in the store. If a cow costs $0.50, then they may decide that this is a totally reasonable price structure.

There is no denying that it’s an extremely convoluted system to make a profit off Web games, but at very least Web game developers are starting to be able to see some monetary value from their hard work.

Tom Rassweiler is the Manager of Game Development at Arkadium, a leading game solutions developer in New York City. Since the company inception he has managed a growing team of programmers in New York City and Simferopol, Ukraine. For the last six years Tom has worked on over a hundred web and downloadable games, focusing on how to keep game development affordable and quick with growing competition and production costs.