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'Cards Against Humanity': A Pay-What-You-Want Success Story

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'We're doing this really weird model where we own all of our IP, and we make everything ourselves, and we sell it direct to the customer," explains one of the co-founders of this wildly successful game.

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Borrowing its name from the phrase "crimes against humanity," Cards Against Humanity famously bills itself as the "party game for horrible people." This self-description is tongue-in-cheek, of course, but, it has also become the height of irony.

After all, how horrible can people be who volunteer to pay for a product that its own company is happily giving away for free?

The Cards Against Humanity sales approach is a take on the Pay-What-You-Want (PWYW) pricing strategy that leaves the sticker price for a particular good up to the customer. Often companies will list a suggested price, but it's ultimately the buyers' decision to pay as much or little as they choose.

And it's worked to surprising effect -- from software shareware to restaurant chains to music releases. In a 2007 interview with David Byrne in Wired Magazine, Radiohead lead singer Thom Yorke talked about the success of his band's PWYW download for the album In Rainbows: "In terms of digital income, we've made more money out of this record than out of all the other Radiohead albums put together, forever - in terms of anything on the Net. And that's nuts."

Sure, a number of fans paid little or nothing at all, but plenty of others paid the going iTunes (NASDAQ:APPL) album rate and beyond. And when considering the online PWYW model takes the cut away from the studio or distributor or any middleman for that matter, it's easy to see how the creator can come out on top.

When Cards Against Humanity launched in May 2011, it was with a two-pronged sales tack. The game's co-founders -- eight Chicago-area friends since elementary school -- released their card-based, R-rated derivative of Apples to Apples on Amazon (NASDAQ:AMZN) and set the price at $25. The first shipment in June took just a month to sell out. Subsequent shipments saw increasingly accelerated sellout times -- a week, then three days, then, finally, 24 hours.

Alternatively the full game of cards was made available through the Cards Against Humanity website as a free PDF download under a Creative Commons license. All the creators ask is that you don't steal their name or else "we will smash you."

The game is composed of black question cards that ask things like "And what did you bring for show-and-tell?" or "What's that smell?" and white cards that answer "Grandpa's ashes" or "Obesity" or "My inner demons" or far, far filthier. Players are challenged to present whatever they believe is the best white card in their hand.

Though consumers can get the milk for free, they still opt, in many cases, to buy the cow. Cards Against Humanity merchandise holds four of the top-10 spots on Amazon's bestsellers in toys and games; the original deck of 550 cards is number one.

It wasn't until the holidays rolled around last year that the company tried out its PWYW promotional experiment. A special expansion pack of 100 holiday-themed cards was released, allowing buyers to name their own price.

According to company statistics, just under 20% of people took full advantage of the freebie. The average price was $3.89 and approximately 57% paid $5. Additionally, the site got a 516.7% boost in Web traffic.

Total sales (after credit card fees and shipping) reached $295,831.10 and the company profited $70,066.27 -- every penny of which, unbeknownst to buyers at the time -- was donated to the PWYW encyclopedia that is Wikipedia.

This kind of accounting transparency is an anomaly for Cards Against Humanity. The company normally keeps it financials close to the vest. In fact, the one question co-founder Max Temkin wishes interviewers would stop asking him is how much money the game has made.

"I know why people ask us that. It's because we have not really opted in to the traditional publishing system for games or anything else," Temkin said. "We're doing this really weird model where we own all of our IP, and we make everything ourselves, and we sell it direct to the customer, and we're continuing to build infrastructure to allow us to own even more of those dependencies."

However, it has been estimated that the game has generated $12 million in revenue, and in the past year alone was downloaded 1.5 million times from its website.

This holiday season has seen a new brand of pricing stuntery on behalf of Cards Against Humanity. The company's Black Friday event hilariously flew in the face of convention by actually hiking up the price of the game for that one day.

"Today only! All Cards Against Humanity products are $5 more," the Amazon ad read. "Don't miss this once-in-a-lifetime sale!"

The promotion was not only a press and social media hit, but a sales one, too. The company says it sold more product than last year on Black Friday and then got another bump the next day on "Regret Saturday," when the game dropped $5 to it's regular price.

Currently Cards Against Humanity is making the PR rounds with a 12 Days of Holiday Bullsh-- gimmick. For $12, the company will send people 12 gifts over a period of 12 days. Looking at the website, it appears buyers have received gifts through day three, which include a parody video of a local commercial for "Dave's Xmas Xporium" and a literal lump of coal.

But what would surely make the Christmas lists of many investors is a financial stake in Cards Against Humanity. The founders told The Grid Chicago that venture capital firms, licensing companies, and corporate game manufacturers have all been trying to throw money at them in exchange for a percentage of equity or sales.

It's not happening, at least not this year.

"It's always so clear that [potential investors] are trying to get their buck out of us," said co-creator Ben Hantoot. "We never were in a position where compromising our business by bringing in outside influence was something we seriously considered."
No positions in stocks mentioned.

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