Virtual World Freemium Business Model Template
Originally published: 03/02/2017 14:32
Last version published: 03/02/2017 14:38
Publication number: ELQ-43593-2
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Virtual World Freemium Business Model Template

A business model excel spreadsheet to help companies make business decisions and understand how variables interact.

Are you interested in knowing how virtual worlds make money, handle their costs or balance paid customer acquisition against viral growth? And understanding how all these variables are interconnected?

If so, this model will suit you perfectly. Download our Virtual World business model below, which includes 10 worksheets.

We have used this model with our other partners, so they can develop business models of their own.

It is a very indicative model. For example, it is possible to have 20x or 2x returns, according to the different inputs used, the team's potential, objectives or the appetite for risk. Ultimately, the model’s objective is to help entrepreneurs make decisions and understand how the different inputs interact.

Though the model was initially developed for the virtual world, it can also be a good starting point for a freemium business.

Keep in mind that this model is aimed to be used as a starting point.

Use it as the basis of your model, but have fun with the numbers, change the metrics and see how their interactions affect the bottom line revenue. If you try different market variations, for example, you will easily understand when the market is too small!

Average revenue per user (ARPU)
The metrics used to drive the model are only indicative- there are no certainties. However, there is a basis number to keep your eye on: the average revenue per unique user per month (ARPU). This is further explained in the objective section below.

The model is free, so anyone can use it as it is, or make changes. If you believe there are any improvements that should be incorporated, I’d love to get your feed back to make an even greater model. You can send your comments or questions on the discussion feed below!

If you’d like additional help in making your own model and would prefer to have a more private discussion, do get in touch with me as

You can also sign up to my newsletter. Its free and is sent every Thursday, telling you about our casual gaming articles of the week, great presentations and twitter accounts to follow!

- Matthew Warneford

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Further information

The ARPU is driven by a great variety of variables. For example market size, growth rate, funnel conversion, subscription price, micropayment conversion, and more. Almost all metrics in the model have some relevance on the ARPU; it is a very good indicator of the health of a world.

A very helpful attribute of the ARPU is that we can have a look at other worlds and easily estimate their ARPU’s. What we would find is that a successful casual world can generate a revenue per user and per month, of 1$ to 2$. However, we can’t expect to excel on a $2 ARPU right after the launch. You need a period of time to determine what types of products your users want to purchase and how you want to increase conversion rates of players to get them to subscribe and increase their micropayment expenditure.

In the template, the ARPU starts around the $0.30 mark, and increases up to $1-$2 region over a period of 20 months. The improvements come about from the AB testing on items below:
• Funnel conversion
• Subscription and micropayment conversion
• Increasing micropayment spend
• Reducing churn
• Increasing repeat visits

The manual inputs that give us our own ARPU increase over time (which you may also change to see how your model reacts to it) are those in the yellow cells on the World model tab.

The model isn’t perfect, but I hope that it serves as a helpful starting point for founders of virtual worlds or freemium startups. Below are three improvements I’d like to implement:

- The traffic: the model should be able to model entering new areas, changes to the daily traffic flow and synced to marketing spend

- Funnel: I'd like a more purified modelling of the steps, from the moment invites are sent to the sign up stage. I'd like to see how guests convert to players, how homepage visitors becomes guests, and so on. These measurements are critical to running and improving your world, because if they are not tracked you wont be able to know if your conversion rates are improving.

- Paid acquisition: The model could be smarter about when and how the paid acquisition is increased. For example, paid acquisition should be kept low until the LTV becomes larger than the cost to acquire. Having this to be automatic would be greatly helpful.

4.2 / 5 (18 votes)

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