Mobile Gaming Monetizations
While there is limited data on how popular monetization models are among developers, revenue data indicates that in-app purchases are, by far, the most effective single monetization model, but that hybrid models are also very popular and effective. Below is a brief overview of each model, including a brief look at an attempt to monetize player data that turned into a scandal.
Despite a thorough search, we were unable to find direct numbers for the popularity of different monetization models. However, a chart from Statista (screenshot here, if needed) provides the following percentages for mobile monetization model revenues in 2017:
- Video ads (31%)
- Display ads (19%)
- Native ads (3%)
- In-app purchases (43%; but see below)
- Paid or subscription (4%)
This data effectively combines the question of how many game apps use the method in question and how effective they are. While the data is slightly older (July 2017) than our usual two-year cut-off point, it represents the best information available and we find little to contradict it (apart from sources that indicate that in-app purchases have become even more dominant; see below). Other available data on the popularity and/or effectiveness will be included under each monetization model below, as available.
- In the Paid monetization model, players pay for a new game at the time of download. In some cases, the game allows a limited preview before requiring payment. The primary difference between this and the Subscription model (see below) is that Paid is a one-time purchase while subscriptions require smaller, recurring charges.
- A variant on this model is to offer the game with ads and offer the player an ad-free experience in return for a reasonable purchase price (typically $0.99).
- This model is generally ineffective (see above), as 82% of mobile gamers prefer in-game ads to paying for an app up-front, and only works if the game "has a strong value proposition and little to no competitors providing the same characteristics and quality within the genre."
- Many apps generate revenue via in-app advertisements. These can take many forms:
- Banner ads, which appear in some part of the screen that will not unduly ruin the user experience. Due to their low viewer engagement and damage to the user experience, these are slowly dying out.
- Interstitial ads, which are like banner ads but appear on the full screen "between separate user flows," such as at the end of a game level. These require some thought to avoid intrusive interruptions that will annoy the user.
- Native ads that "have been adapted to the feel of an app" to integrate seamlessly. They have a high click-through rate, but there are questions about how effective it is to essentially trick a user into clicking on an ad that seems part of the app itself.
- According to Chartboost, "the current dominant business model for free-to-play mobile games is to combine in-app purchases with advertising."
- In-app ads grab 80% of impressions and have a click-through-rate (CTR) 2.8x higher than ads on websites.
- In the US, game downloads due to paid ads increased by 15% in 2018.
Rewarded Videos and Ads
- In the Rewarded Videos monetization model (which may include non-video rewarded ads, though these are less common due to lower engagement), players are offered in-game perks in return for watching short video ads.
- 74% of mobile gamers say they are likely or very likely to watch a video ad in return for in-game perks or currency and some experts argue, "Rewarded video is more engaging than any other online advertising format."
- In the subscription model, users usually enjoy a free period to use the app immediately after download. After that, they must pay a recurring fee to continue using it. This has several advantages over other monetization models:
- The publisher gains a steady, predictable flow of income.
- Paid users are more likely to use the app once they start paying.
- There is little degradation of the user experience.
- There are two variants on this model:
- The first is to create an episodic game and sell the individual episodes at a reduced cost to the player; this works best for games with a linear story arc or with well-defined levels.
- The second is to package a bundle of games together and offer access to the whole bundle for a subscription, as in Amazon's Unlocked program or Apple's Arcade gaming service.
- However, this model requires "a compelling app with a clear function and user experience" to be successful.
- In a Freemium model (aka the in-app purchase model), the user can access the app's basic game for free but can purchase in-game power-ups and features (e.g., items and new texture maps) that are either unavailable otherwise or would require significant time investments ("grinding") to acquire otherwise.
- These purchases sometimes take the form of buying in-game currency (coins, gold, etc.) which can then be used in the app store.
- As noted in the Tamoco blog, "There’s a balance to strike here. The user must feel that they are getting value for their hard-earned cash. But they must also keep playing the game to pay more money. That’s why it’s essential to keep the game or app interesting for non-paying users as well."
- In 2018, over 95% of all consumer spend on mobile gaming came from in-app purchases according to one estimate; another suggests a more modest 70-80%.
- However, only 2.2% of players will make in-app purchases and 46% of revenue comes from the top ten percent of spenders.
- As users interact with an app, they generate data. This data can be anonymized and quantified, providing valuable insights into customer behavior, aka Big Data.
- This model of monetization is, on the surface of it, less likely to be used in a gaming app due to a lack of salable data being collected. However, there has been at least one instance of a game, Farmville, whose publisher sold user data to Cambridge Analytica to create 30 million psychographic profiles. That transaction relied on Farmville players signing away their Facebook data and caused a scandal when discovered.
- Between the technical issues, the scandal, and the strictures imposed by the European General Data Protection Regulation (GDPR), it would likely be very difficult to monetize a game by selling user data. Even so, the fact that it has been used before makes this model worthy of at least an "honorable" mention.
- Many apps use a combination of two or more monetization methods. We find no data that allows us to determine how common this is; however, it is common for industry watchers and other experts to suggest it to potential mobile game developers.
- As an example, Minecraft is popular enough to enjoy a Paid monetization model, but also allows players to purchase coins for in-game mods and texture packs.