Mobile Gaming Monetization (2)

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01
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Part
01

Hyper-Casual Mobile Game Monetizations

Despite an exhaustive attempt, we were unable to locate any data on the number of apps that use each monetization type. We hypothesize that this is due to two factors, the reasoning for which will be made more clear in another brief in this project.

First, the number of hyper-casual games is constantly in flux as new games are produced on a daily basis, which makes keeping count of the games, let alone counting their monetization schemes (which would likely require downloading every single game to see how it is monetized), virtually impossible. Second, every source on this matter concurs that hyper-casual games are overwhelmingly monetized with in-app ads.

Therefore, we will present the data as it is, which primarily looks at revenue rather than downloads.

Paid and Subscription

  • Of the dozens of articles on the subject read in the course of our research (of which those in our source list below are merely a representative sample), it is telling that none refer to paid or subscription-based hyper-casual games.
  • We infer that this is because there are no examples of successfully marketed games with this monetization model; hyper-casual gamers aren't willing to pay for a game when there are so many calling for their attention which are free for download.

In-App Advertising

  • Fully 70-90% of all hyper-casual game revenue comes from in-app ads (IAA), which — as noted in our intro above — are nearly universal in hyper-casual games. This revenue can be broken down by ad type:
    • Interstitial (50%)
    • Rewarded (30%), which overlaps with rewarded video (see below)
    • Banner (20%)
  • As noted by Game Analytics, "Unlike mid and hard-core game titles that rely on in-app purchases and user loyalty to monetize their players, hyper-casual games gain returns through in-app advertisements and high volumes of downloads."
  • The need for downloads is why 60% of in-app ads are for other hyper-casual games. Since hyper-casual gamers almost universally have multiple game apps at any given time that they switch between depending on their mood, there is little risk in redirecting them to other games.
  • In-app ads are not only the most common method for monetizing hyper-casual games, they actually led to the proliferation of the genre.
  • Because hyper-casual games tend to have very short-term LTV (lifetime total value), low customer retention rates, and quick ROAS (return on advertising spend), developers and advertisers have had to develop advanced tools, as detailed in another brief in this project.

Rewarded Videos and Ads


Freemium/In-App Purchases

  • The amount of hyper-casual gaming revenue share from in-app purchases (IAP) has declined rapidly over the last year and a half, from 69% in June 2018 to 44% in December 2018, to between 10-30% today.
  • Game Analytics notes that IAP serves a secondary function in monetizing hyper-casual games, adding to revenue derived from in-app ads rather than replacing it.

Part
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Part
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Hyper-Casual vs Other

For reasons that will be made clear in our findings below, experts believe that the proliferation of hyper-casual games has reached a saturation point, making it very difficult for new games to stand out and gain a lasting audience. Because advertisers have become aware of this and are shifting to new models of purchasing ad space, the decline of hyper-casual revenue share for IAA will continue. Therefore, we suspect that the share for IAP will reverse its recent decline in hyper-casuals; this, however, would require a shift in publishers' models from creating new games quickly to creating new games designed to hold players' attention longer. Likewise, we expect the share for rewarded videos and ads to grow. We do not find the same market forces pushing on other forms of mobile gaming and do not find any sources which would lead us to expect a near-term shift in models.

Hyper-Casual Gamers Have Short Attention Spans

  • Hyper-casual games tend to have very short-term LTV (lifetime total value), low customer retention rates, and quick ROAS (return on advertising spend) compared to other games. In fact, hyper-casual gamers install ten times as many apps as other types of gamers.
  • As noted by AppsFlyer, "This reality forced developers to find technological solutions for making monetization decisions in real-time, with the understanding that every minute counts, starting with the very first engagement."
  • An iterative process that uses A/B testing on ads can achieve up to a 25% uplift in ad revenue.
  • As a result, third-party advertising providers have developed advanced solutions, including "ad attribution and holistic LTV combining IAA [in-app ads] and IAP [in-app purchases], proficient waterfall management, user-level ad revenue, advanced automation, AI-based install predictions, and other custom features."

Players Don't Mind Ads

  • Increasing retention rates by building engaging games that customers will want to play repeatedly is still key to successfully monetizing any game, especially hyper-casuals.
  • Developers are currently "more worried about player enjoyment and progress than they are about player retention" and see ads as a "necessary evil."
  • Fortunately, a University of San Fransisco study found that, provided the game experience does not suffer, in-app ads do not contribute to players leaving a game.

Hyper-Casual Games Are Dominant In Downloads


Hyper-Casual Ad Revenue Share is Declining

  • Only 2% of the player base for mobile games will make in-app purchases, and while 74% claim they would interact with ads and videos in return for an in-game reward, less than 30% actually do so.
  • However, hyper-casual's IAA share per app has dropped from nearly 35% to about 27% over the last year, while mid-core games have risen from 27% to 37%, with corresponding increases in hard-core and casino IAA share to about 28% and 11%, respectively.

Advertisers Are Becoming Savvy

  • Some experts warn that hyper-casual ad revenue may have peaked in part because advertisers have become frustrated at how poorly most games perform from an advertising standpoint. As explained by Mobile Dev Memo, "[A]s soon as advertisers have visibility into what this new inventory from a newly-launched game is worth to them, they very quickly blacklist (stop advertising in) that site (the specific game) and no longer buy inventory from it. But that doesn’t necessarily impact the hypercasual gaming studio’s revenue, as it will launch another game the next week that must likewise be explored and the advertiser will again have to blacklist it. This game of whack-a-mole is the business model of hypercasual: to continuously publish new titles that very quickly aggregate large DAU-bases and sell that inventory at a premium because it is new."
  • Advertisers are beginning to recognize how this works against them and have begun blacklisting whole studios and using programmatic media buying in place of buying traffic on a cohort basis.

Part
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Part
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Case Studies - Monetized Mobile Games

Below are three case studies of the successful monetization of mid-core and hard-core mobile games. We have selected each to illustrate points uncovered in the other briefs in this project. Due to the nature of the topic, we have not attempted to use only examples from the past two years.

Fastlane: Road to Revenge

  • When game publisher Space Ape began development of Fastlane: Road to Revenge, they settled on an IAP monetization model but realized that this was not a reliable source of revenue. They feared that simply adding ads (e.g., banner ads) on top would ruin the gameplay, and so determined to integrate them into the gameplay itself.
  • After extensive beta testing, they decided on rewarded video ads. As explained by Nicolas Boulay, Head of Growth for Space Ape, "We found that we were able to have both IAP and ads co-existing in a way that optimizes the user experience and Lifetime Value (LTV), and pays off in terms of revenue."
  • As a result of this hybrid strategy:

Alto's Adventure

  • Alto's Adventure, first released in February 2015 by Snowman, has remained popular for over four years due to its "pristine sound effects and serene music that captures the isolated adventure of downhill snowboarding."
  • When initially released on iOS, the game was monetized on a paid model, costing $4.99 and lacking any ads or IAP. However, when the game was ported to Android, it was monetized with ads and IAP: "According to [Snowman co-founder] Ryan Cash, the reason they decided to go with the free to play model on Android was because other developers were only seeing between 5 and 15% revenue on Android compared to iOS."
  • The Android game plays a 15-30 second ad every few games, but also offers some IAP options:
    • Should the player die during a longer game, they are offered the option to continue for watching a video.
    • The player can receive additional in-game coins to upgrade their snowboarder by watching ads or purchasing them from the game's store with real money.
    • The player can also choose to turn off the ads in return for purchasing the game for its original $4.99 price.
  • Alto's Adventure also retains player interest by offering unique, procedurally-generated mountains and randomized objectives.
  • Thanks in part to this flexibility, the Android version of the game beat the iOS version's 30 million downloads despite being released a year later.

Game of Sultans

  • When Chinese company Machinist decided to launch Game of Sultans in the US, it recognized that it would face some stiff competition.
  • For monetization, they created "four different ad engagement creative variations, each offering players rewards for achieving progressively deeper gameplay milestones," and used extensive A/B testing to determine the best placement of the ads.
  • They determined that placing the ads where they were required for users to reach the intermediate stages of the game were the most effective, neither scaring away early players nor limiting themselves to the smaller pool of advanced players.
  • They also tested the effectiveness of gallery ads (aka, interactive ads) versus video ads and found that the gallery ads generated an 11% higher conversion rate.
  • So informed, they optimized their ROAS (return on ad spend) goals and achieved their retention targets of 10% 7-day retention and 6% 15-day retention. Game of Sultans consistently ranked in the top 15 RPGs on Google Play and Machinist is now among the top 20 Chinese game publishers for revenue.



Part
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Part
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Case Studies - Monetized Hyper-Casual Mobile Games

Below are three case studies of the successful monetization of hyper-casual games. We have selected each to illustrate points uncovered in the other briefs in this project. Due to the nature of the topic, we have not attempted to use only examples from the past two years.

Gram Games

  • Gram Games, based in Turkey, has increased its rewarded video ARPDAU (Average Revenue Per Daily Active User) by nearly 40%.
  • The company used extensive A/B testing throughout its production period and after launch, optimizing their monetization performance and boosting their games' LTVs (lifetime total values). They also partnered with Facebook Audience Network to embed rewarded videos into their games.
  • Gram Games CRO Eren Yanik noted in an interview that the video integration points in a game "is something that is always on the agenda. If the presenter of the idea has not included it in the main pitch, we still ask where rewarded videos will kick in, where interstitial videos may kick in — we need to have a preliminary idea of monetization."
  • Yanik also said, "For rewarded videos, we work to improve adoption rates through changes we implement within the game, such as making them part of the core gameplay, giving the player a chance to cast a new spell, ask for new lives/orders for progression, etc. By changing [the] UI and making it more accessible also helps boost adoption."
  • This resulted in the following KPIs (quoted verbatim):

Aquapark

  • Aquapark is a hyper-casual game from Voodoo that has achieved viral status with over 100 million downloads globally. While we were unable to determine the revenue history of the game itself, it is notable that Voodoo sees annual revenue of $55 million.
  • Voodoo partnered with Playworks, which developed "an interactive end card that reached an IPM (app Installs Per Million impressions) of 75, over 2 times the hyper-casual average, in addition to creating a playable ad."
  • However, much of the game's success has more to do with Voodoo's commitment to adding depth to the original core gameplay. Adding shortcuts, jumps, and other mechanics dropped day 1 retention marginally, but increased day 7 retention from 11% to 14% and cut CPI from $0.39 to $0.28.
  • Making the player avatar more realistic and other gameplay improvements dropped CPI further to $0.16 and boosted day 1 retention to 47%.
  • IronSource notes the importance of creating engaging gameplay to the success of Aquapark's monetization in a saturated market: "There is no secret ingredient to virality: getting to that optimal final product requires short sprints that focus on small but high impact tweaks to the gameplay."

Tuber Simulator

  • Tuber Simulator, produced by YouTube celebrity PewDiePie, managed to knock Pokemon Go out of the #1 free app slot when it launched in September 2016.
  • Tuber Simulator is monetized by allowing players to watch rewarded videos in four distinct placements which are seamlessly integrated with the gameplay and offer rewards useful at those points in the game; however, it's likely that the humorous and meta nature of the ads themselves were key to the monetization scheme's success.
  • For example, one ad offer shows the player's avatar strapped to a chair, in a scene that invokes the final act of A Clockwork Orange, with the caption, "Scientists force you to watch an ad, but now a new quest is open to you! What a bargain!"
  • Outerminds co-founder Ghislain de Pessemier explains: "We’re making fun of the ads themselves. Every time you’re watching an ad, there’s kind of a joke. It’s as if the game is super meta about advertisements."
  • The ads achieved an 80% engagement rate and, as noted in Money Nation, generated $5.3 million in the game's first month.
Sources
Sources