TGN - CS-N Gaming News - Valve's Pricing Experiments Result in Time Travel and 40x Increases in Sales

Speaking at the WTIA TechNW panel, Valve's Gabe Newell offered up a surprising wealth of information regarding sales, Steam, and penetrating the Russian market.

On the subject of the Russian market, Newell quickly silenced some of the skeptics who said that Russia spells doom for any developer for how high the piracy rate is there. Newell, however, said that behind only Germany, Russia is now Valve's second largest "continental European market." A fact surely helped by the recent steps Valve has made to make purchasing games much easier through Steam in that region, even partnering up to allow people to directly add funds to Steam through physical terminals within Russia.

As for sales, Valve has been conducting a number of experiments on you, whether or not you knew about it or not.

But then we did this different experiment where we did a sale. The sale is a highly promoted event that has ancillary media like comic books and movies associated with it. We do a 75 percent price reduction, our Counter-Strike experience tells us that our gross revenue would remain constant. Instead what we saw was our gross revenue increased by a factor of 40. Not 40 percent, but a factor of 40. Which is completely not predicted by our previous experience with silent price variation.

But what accounts for this massive increase in sales? A sales increase by a factor of 40 is no laughing matter and Valve knows this. They have just one explanation: time travel. Well, almost. It's merely a matter of time-shifting revenue. Taking sales that would have been made over a long period in the future regardless, and condensing them into a much smaller frame of time.

Then we decided that all we were really doing was time-shifting revenue. We were moving sales forward from the future. Then when we analyzed that we saw two things that were very surprising. Promotions on the digital channel increased sales at retail at the same time, and increased sales after the sale was finished, which falsified the temporal shifting and channel cannibalization arguments. Essentially, your audience, the people who bought the game, were more effective than traditional promotional tools.So we tried a third-party product to see if we had some artificial home-field advantage. We saw the same pricing phenomenon. Twenty-five percent, 50 percent and 75 percent very reliably generate different increases in gross revenue.

When Valve made Team Fortress 2 a "free to play" title, they found that other sales of TF2 related items increased by a factor of five. He noted that the difference is saying that something is "free to play" and not simply "free" as it "implies about the future value of the experience that they’re going to have." Partners of Valve stated that they have a 2-3% conversion rate of people who purchase a micro-transaction item on a free to play game, compared to the 20-30% conversion rate that Team Fortress 2 has going for it.

tl;dr valve made shitton of money offering sales rather than fucking over consumers with price, also time travel discovery.