Skip to content

How Do Free Games on Steam Make Money?

Hey there fellow gamer! Have you ever wondered how free-to-play games on Steam actually manage to turn a profit? As an avid PC gamer myself, I used to be puzzled by how top free games like Dota 2 and Warframe kept pumping out new content despite having no upfront cost.

The answer lies in some cleverly designed monetization systems that encourage players to spend money in-game. In this guide, I‘ll walk you through the main approaches Steam games use to generate revenue even when the barrier to entry is free. I‘ve also packed in some fascinating statistics, examples, and best practices for keeping players happy with monetization. Let‘s dive in!

An Inside Look at Steam‘s Thriving Free-To-Play Scene

Free-to-play (F2P) games have exploded in popularity on Steam over the past 10+ years. According to analyst group SteamSpy, an estimated 13% of all Steam games are now completely free. Considering Steam contained over 30,000 games as of 2022, that‘s a lot of free gaming!

Some of the most played and top grossing games on Steam are free-to-play titles. Juggernauts like Dota 2 and Counter-Strike: GO drive huge engagement and revenue despite no upfront cost. Here are a few advantages of going F2P on Steam as a developer:

  • Lower barrier to entry – More players will try a free game initially, helping build a solid audience.

  • Recurring revenue potential – You earn over time through things like in-game purchases rather than one-time purchases.

  • Viral marketing – Satisfied free players will spread the word and invite friends.

However, while F2P distribution removes the need to pay for the game itself, there are still costs involved in releasing on Steam:

  • Steam publishing fee – $100 one-time fee to submit any game to Steam, paid via Steam Direct. Ensures devs are serious.

  • Server costs – For online multiplayer games, servers are needed to host matches. This incurs ongoing costs.

So how do F2P games manage to turn a profit on Steam after accounting for these fees? Let‘s explore some of the sly but effective monetization strategies they employ.

F2P Monetization Model #1: In-Game Advertising

Placing ads in free-to-play Steam games is one of the more straightforward potential revenue streams. Here are a few common forms of in-game ads:

  • Banner/video ads – Static banner ads or short video ads can be displayed on loading screens, main menus, or other natural break points in gameplay. Developers earn money each time a player views or clicks on an ad.

  • Sponsored in-game billboards – In-game locations like billboards, posters, or building signage can be branded by real-life companies for ongoing advertising exposure.

  • Store discounts/promotions – Companies may pay to advertise special offers or discounts on their products via promotions in the in-game stores.

In-game ads are especially common in more casual F2P titles on Steam. According to market research firm NPA Group, in-game ads can drive $7-10 per 1,000 impressions (views) on average.

However, excessive or intrusive ads can also frustrate players. Keeping ad content and frequency reasonable is crucial. Now let‘s look at the real revenue workhorse for many hit F2P Steam games – in-game purchases.

F2P Monetization Model #2: In-Game Purchases

In-game purchases allow playing for free while charging power users and engaged players who want to deepen their experience. Transactions are usually for virtual goods that enhance personalization or convenience:

  • Cosmetic items – Skins, costumes, animations, particle effects, and other items that change appearance without affecting gameplay. Enormously popular, especially in multiplayer.

  • Convenience/time savers – Items that provide advantages like more inventory space, faster travel or resource collection, etc. Appeal to impatient players.

  • Loot boxes – Contain randomized virtual items when opened. While controversial, loot boxes are hugely lucrative in games like CS:GO. China restricted them in 2022.

  • Season passes – Offer access to expanded content and activities over a multi-month period. Fortnite‘s Battle Pass pioneered the concept.

  • In-game currency – F2P games use virtual currencies like V-Bucks in Fortnite as the transactional medium to purchase many of the above items.

Here is a breakdown of how much revenue some top free-to-play titles make from in-game spending:

GameEst. Annual Revenue
Dota 2$400+ million
CS:GO$400+ million
Fortnite$5+ billion
Genshin Impact$1-2 billion

As you can see, top grossing F2P games make absolutely staggering amounts yearly from in-game purchases alone. But earning smaller amounts can still be significant for indie developers – the average Steam game pulls around $30-40k lifetime revenue.

Battle Pass: The Next Evolution of F2P Monetization

The battle pass system has emerged as a highly effective monetization model that drives ongoing revenue through timed in-game purchase tracks. Here‘s an overview:

  • Players purchase access to a battle pass tied to a season or content update

  • The pass includes 100 levels that can be unlocked by playing and completing challenges

  • Unlocking higher levels earns progressively better customization rewards

  • Limited time availability creates FOMO and incentive to play enough to earn all rewards

This combo of behavior incentives and desirable exclusives makes battle passes powerhouses for boosting engagement and monetization. Valve‘s Dota 2 popularized the model in 2013, and Epic Games‘ Fortnite took it mainstream.

According to SuperData Research, Fortnite earned an astounding $1.8 billion in 2019 purely from battle pass sales and the related cosmetics. Over half of Fortnite players opt to purchase battle passes.

For developers, properly designed battle passes can produce enviable revenue by packaging compelling content into a progressed unlock track. They‘ve become ubiquitous in hit multiplayer games.

Other F2P Monetization Methods

While ads and in-game purchases rule the roost, F2P titles also leverage some other supplementary money making systems:

  • Subscriptions – Offer benefits, bonuses, and member perks for a recurring monthly fee. This converts engaged players into steady revenue.

  • Referral programs – Encourage sharing or inviting friends with rewards. More word of mouth leads to more players.

  • Stream sponsorships – Pay popular streamers/influencers to showcase the game. Converts impressions into players.

  • In-game events/seasons – Limited-time events with special cosmetics or challenges encourage engagement spikes and spending.

  • eSports elicits fandom – Having an eSports scene turns some players into super fans who spend freely to support the game and teams.

Diversifying monetization and incentives beyond pure in-game purchases helps maximize revenue generation.

Ensuring Ethical Free-To-Play Monetization

With monetization playing such a key role, how can F2P games avoid feeling exploitative? Here are some tips:

  • Avoid selling power – Let skill determine success, not dollars spent. Selling gameplay advantages breeds resentment.

  • Offer clear value for pricing – Players are happy to spend reasonably if they feel they receive fair value in return.

  • Incentivize through convenience – Convenience purchases feel rewarding rather than abusive.

  • Gate some rewards behind playtime – Don‘t let players buy everything immediately. Reward engagement.

  • Focus on impressionable cosmetics – Players enjoy looking cooler through optional purchases rather than power.

Making monetization feel fair and optional is crucial to avoiding a pay-to-win feeling that repels players. Ethical free-to-play businesses build goodwill rather than resentment.

Wrapping Up: The Potential of Free on Steam

Releasing as free-to-play on Steam opens up major opportunities to build an audience and generate ongoing revenue. Clever monetization systems make it entirely possible to turn a profit from a game that players can download for free.

Top F2P titles show the staggering earnings possible, but more modest amounts still help indie developers recoup costs. Through a player-friendly mix of in-game purchases, battle passes, ethical design, and reasonable pricing, F2P can be a lucrative path on Steam.

Thanks for reading this deep dive into how quality free-to-play games maximize their earning potential. I hope you found the breakdown of monetization strategies helpful or interesting as a player and consumer. That‘s all for now…enjoy getting your game on!



Michael Reddy is a tech enthusiast, entertainment buff, and avid traveler who loves exploring Linux and sharing unique insights with readers.