Vlad Suglobov0:09
Yeah, well nowadays to be able to get to the top-grossing charts you definitely have to make a game that sticks with the users and a game that people return to. Ideally they play for a longer period of time, maybe several months, then you have a lot of time to monetize the user and you can do it several times and then you can achieve high revenue per user, rise the ranks, and spend money on marketing. So that's the key. Not that it didn't work several years ago, but I think before you could actually be successful with a premium game. But it looks more and more that this time is over.
We do a simple thing when we spend money on developing a game either internally or externally: all the costs that are directly related to producing the game are capitalized on the balance sheet, and when the game is released they are written off evenly over a two-year period. And our games usually generate revenue well beyond even three years on the market, so this is a perfectly reasonable thing to do. The spike that you've seen in the capitalized development costs in the second quarter is due to the fact that several free-to-play games that we develop internally went into more active production stages within the company and the team assigned to these games grew larger, and the expenses on creating the content for these games went up accordingly. So that was reflected on the balance sheet. But the good news is that it means we will be releasing these games pretty soon.
Successful free-to-play games like The Secret Society and Virtual City Playground that we have in our portfolio, they have a lot of revenue generation potential even after the release. And this is the difference to unlockable games: with free-to-play games you're pretty much starting the main work after the game is released. So there is not that much pressure in terms of having a lot of these games on the market. It's more important to make sure we fully realize the potential of the games that we have put out to the market and that monetize well. So having a certain number of games by a certain time is not as important as making sure we know what to do with these games after they're released. That said, as we announced, we want to launch several more free-to-play games before the end of the year, and next year we're going to bring the total number to over 10. By the time we have more than 10 free-to-play games in our portfolio, I would say we expect that the largest part of the company's revenue would be generated by free-to-play games, of course.
What happened is that we released an update with new scenes to explore in The Secret Society, and this was a long-awaited update. A lot of people were waiting for it. The update revived a lot of users who had played to pretty much the end of the game, and then they went back into the game when they saw the new locations available for exploration. So that's one thing. Another thing is that we tried several marketing things where we made some special offers for our long-time users, and people reacted positively to these offers. The game went up on top of this update and these offers to new levels in the ranks, achieving number 15 position on iPad in the USA top-grossing games. Since then, basically, when this marketing offer was over, the game returned to normal sales levels, but we acquired a lot of users through this promotion. And we're looking forward to perfecting this type of promotions to get higher in the ranks, and at the same time releasing more updates with more content so that our players have more reasons to go back to the game and spend money in it.
Yes, as you know, we raised the money in the beginning of this year, and we raised the money specifically to develop more free-to-play games and also to more effectively market these free-to-play games. So it's only reasonable that we're seeing some negative cash flow as we invest the money specifically for these purposes. It's done in a controllable and responsible way where we monitor the cash flow every month. And it's a management decision, a conscious decision to have negative cash flow at this point, because we want to speed up the development. Our goal is to release the free-to-play games which will bring the company to the next level when we will get to positive cash flow.
