Video games have changed the world as we know it.
It is a bold statement but consider it for a second. The gaming industry has already surpassed Hollywood, with the television industry being its only rival for the top spot. In just 14 years, the gaming industry has grown from $8 billion to a staggering $160 billion.
But that’s not the only way video games have influenced change. A study published in 2016 has found a direct correlation between playing video games and the rising interest in computer science. Playing video games helped children become more familiar with computer technology. As a result, many of them were inspired to pursue a career in the IT field. A field we now know is shaping a new world.
For many young developers, making a game is the main motivation to pursue a career in programming. While many branch out into different areas of the industry as they advance, a few of them decided to set out and create a game of their own.
Many developers spend hours dreaming of forging a perfect experience, vast and vivid worlds in their own image and to their own liking.
But coding alone isn’t enough to publish a successful game. The costs of developing a game are high. To publish a successful one, you need to have a strategy to recoup them. That’s where ad monetization comes in.
Simply put, mobile ad monetization is a process of making money from showing ads in mobile games and apps. This enables developers to keep their products free of charge for everyone. Instead of charging their users for a download or special features, developers show ads to their users. In return, they earn money from the advertisers.
Good implementation requires developers to carefully consider how to implement ads in various forms but still not affect the gameplay in a negative way.
There are several distinctly different ad formats that developers can use to monetize their games. Some of the most popular ones include:
Rewarded video ads offer players the chance to unlock certain game features. These may include additional lives or level progression unlocked by watching a video ad. They are currently the most popular ad format, used by 82% of developers. They are equally popular among players, as well. In fact, 52% chose rewarded video ads as their preferred method of “paying” for the game. You can read more about them here.
Interstitials are nowadays also mostly video ads. However, unlike rewarded video ads, they are not optional or rewarded. They are usually placed during a natural pause, between two levels, and take up the entire screen. However, due to their disruptive nature, they are less prevalent than rewarded ads. They also require more careful implementation to prevent user frustration and churn.
Banners are rectangular text ads, images, or videos that are often placed at the top or the bottom of the screen. They are easy to implement and work well with casual games as they do not disrupt their flow.
Offer walls are similar to rewarded video ads. They let players opt-in to take one of the actions offered that can earn them in-game benefits and rewards. They resemble a shop and let players complete surveys, try other apps, watch video ads, or make an in-app purchase in a different game to unlock rewards.
Some less commonly used formats include rewarded interstitials, app opens, audio ads, native ads, rewarded surveys, etc.
Dong Nguyen has made $50K from Flappy Bird's in-game ads in just two days. Meanwhile, other games like Candy Crush Saga made over $4.2 million per day in 2018.
And the trend of increasing mobile games ad revenue doesn't seem to be slowing down anytime soon. In fact, mobile games made up 71% of total app revenue on Android and iOS in 2020.
Popular AAA titles usually recover their development costs and quickly turn a profit. But for smaller, indie game developers, game monetization is a slightly rockier road.
Quality of the game plays a significant part in that, but so does a good game monetization strategy.
In addition to showing ads, there are several other monetization strategies to consider. You should choose them based on the type of game you are developing, your audience’s expectations, and several other factors. But first, you need to understand why mobile game monetization is a good idea.
Let’s take a not-so-distant history lesson and talk about premium games first. Not so long ago, game monetization was a straightforward affair. You pay an upfront fee for the game, whether boxed or in the form of a game code, and are free to play it for as long as you want with no additional fees.
However, with the emergence of the Downloadable Content (DLC) format, the premium game monetization model has changed forever. The same concept of selling additional content evolved to various game monetization formats we know today.
Premium game monetization still works for most AAA titles sold at retail. In fact, it still makes up for the bulk of PC and console sales. However, when it comes to mobile game monetization, premium games are a tougher sale. That's because mobile users are less inclined to buy a game before having a chance to play it.
According to recent data, free apps make up 97% of distribution on Android (via Google Play) and 93.7% on iOS (via Apple App Store). Compare that to 2008, when paid apps made up the majority of distribution with 75%. You’ll realize the tides have massively shifted in favor of novel monetization models.
Mobile game monetization models can be divided into three main categories:
We’ve already covered how ads in mobile games and apps work. Now let’s look into the other available monetization models and how they compare to ad monetization.
This model focuses on selling items, features, and content inside the game. This can include buying in-game currency, unlocking new characters, accessing exclusive levels, gaining unique upgrades, obtaining exclusive cosmetic items, and more. They can further be divided into consumable and non-consumable benefits.
Everyone who owns Netflix or Spotify is familiar with this model. You pay a monthly fee to unlock certain products or features. In the mobile game world, a subscription gives players access to specific content or full game content with no ads. Standard subscription models include:
The beauty of these monetization models is that you don’t have to limit yourself to just one. In fact, the most successful games rely on several methods to capitalize on different types of players: casual and hardcore ones.
However, if you attempt to combine different game monetization models, make sure to define the primary one. It may be either a subscription fee or in-app purchases. Combining models popular with different types of players will help you diversify your revenue.
With that in mind, here are some of the most popular hybrid monetization models:
The In-app purchases serve as the primary model, with ads opening up the revenue stream from casual gamers.
However, if you choose to follow this model, you have to be wary of how many ads you show. That's because loyal and paying players might find them disrupting.
In case you decide against using ads for some reason, then consider this model. A combination of in-app purchases and subscriptions offers a broader monetization system than using in-app purchases alone. With in-app purchases serving as the primary model, subscriptions open up new possibilities. They allow people to pay for a premium experience through a battle pass or VIP subscription.
This hybrid capitalizes on all three models if you want to throw the widest net. This will help you monetize on the broadest player profile. It will also open up various possibilities, allowing you to use multiple formats. This may include ad-free subscriptions, in-game boosters, rewarded videos to unlock various perks, and more.
However, in-app purchases should serve as the primary model, and finding the right balance between all three will be crucial for the smoothest gameplay experience for everyone.
The best approach is to plan for monetization in the early stages of game development. The most common error developers make is planning their monetization strategy once their game is finished.
However, different game monetization models might impact the final product differently. Some monetization models may directly affect the gameplay, level progression, features available to the players, difficulty, and more.
Therefore, a successful game monetization strategy needs to be woven into the game’s DNA from the very beginning. Finding a suitable monetization model for apps and games is crucial for the game's financial success and long-term appeal.
There is no “one-model-fits-all” solution. The best game monetization strategy will vary from game to game based on various factors. This may include the game’s target audience, platform, replay value, and more.
If making money from mobile games is the primary source of revenue for the developer, they need players who will keep playing. You need to please your players first and then determine if the model is sustainable in the long run. Therefore, to find the best game monetization strategy, you’ll need to analyze your player profile and demographics. Casual or puzzle game players will not react to ads in the same way football game players do.
The data points to one conclusion: people who play games on mobile devices are keen on downloading the product for free. They are also more open to microtransactions in various forms, even if they interrupt the gameplay.
Different primary monetization models will entail employing different strategies.
If you plan on making money with mobile games through a subscription-based model, you need to make sure you can keep publishing engaging and entertaining content for years to come.
If you want your game to be freemium from the start, consider the best way to integrate the revenue stream into the gameplay.
The monetization process can be challenging for many developers. One of the most popular questions asked by aspiring entrepreneurs and game enthusiasts alike is, "What am I supposed to do?" There's no correct answer!
That doesn't mean it isn’t worth thinking about though. There are many different strategies that you could use to reach your goals quickly or with less risk involved. You can read more about developing your strategy here.
You should always start by figuring out precisely what your financial targets will look like to not have any surprises along the way.
Don’t feel pressured to use one model or the other just because someone else had moderate success with it. Think of your game first.
If you want to make money from your game, you must understand how people will pay for them.
There are many different monetization formats to choose from Each one opens one door and closes another.
To help you decide which format is best for your game, we introduced you to the most popular models and the fundamentals of how they work!
We hope our knowledge will be able to guide you into making the right decision about what kind of ads or purchases work best with your users. The goal is to provide them with a positive experience playing your games.
If you are looking for an experienced partner to help you develop a winning game monetization strategy and offer ad monetization help, contact us for a free consultation.
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