Everything started in 2010. When the terrain of mobile gaming was emerging as a fertile ground for developers and players, mobile games were ubiquitous. Just a year before, the release of a mobile game app you must have heard about – Angry Birds – came to light with an innovative business model that would revolutionize the entire mobile app marketing ecosystem.
In 2009 Rovio Entertainment, the tech company that made Angry Birds a winner, and its team of Finnish developers not only did come up with the idea of frowning angry red birds but also with a ground-breaking business intuition: in-app purchases on the iPhone and in-ads support for Android where – indeed - players are known to be less likely to purchase items. After its release, the app went to the top of the App Store, selling thousands of copies in a few weeks and baffling developers and Apple itself.
At the time, other apps such as Candy Crush, Clash of Clans, Farmville, Crossy Roads, and Cut the Rope struck as a roaring success on the App Store, breaking out the hyper-competitive mobile game environment. What did they have in common at first? They were all free-to-download apps and free-to-play mobile games counting on secondary purchases and advertising inside.
Then, it was in 2011 when the successful shift from paid mobile apps ruling the app store to free-to-play mobile games took over the world of mobile marketing. But what is the key to success for app developers when it comes to free-to-play mobile games if they cannot count on paid installs?
Here comes the importance of off-the-wall monetization strategies trying to guarantee a free-to-play experience for users while transforming their time and engagement on the app into a form of value. And here comes the importance of setting up a good business model for in-game advertising to generate revenues and not ruin the game experience.
If you have always wondered how app developers can profit from players that are not paying for their installs, this article will tell you everything you always wanted to know about it (*but you never dared to ask).
In-game advertising: how free-to-play mobile games can generate revenues
When app developers launch a free-to-play mobile game on the market, the real challenge is to face the multiple financial efforts that players may not see. Development costs can be high, and developers need to make the ends meet and find resources to guarantee a quality product while virtually ensuring that users will not pay to download the app they have crafted.
Indeed, what app developers monetize when customers utilize free-to-play mobile games is precisely gamers’ exposure to the ads served inside the app. The only price players need to spend while using free-to-play mobile games - without even being aware of it- is their attention to the ads displayed. There is also a series of data on their devices that will help with measures and analysis to optimize advertising operations. In-app advertising, working as an app monetization strategy, involves three main actors: advertisers, publishers, and game players.
In-app advertising for free-to-play mobile games: the main actors
App developers of free-to-play mobile games enter the game playing the part of publishers to generate profits from their gamers’ exposure to ads. To do so, they need to sell virtual space they want to fill with ads on their apps. In this way, users will be exposed to them and help publishers generate revenues without spending any money. However, publishers would not exist without someone willing to buy this space. Here come into play advertisers (other app developers) that wish to promote their app by showing their ads to potential new customers.
To do so, advertisers need to provide a third-party partner with a budget, target, and the most effective creative ad formats to capture users’ attention. In other words, they need to make sure that ads are suitable for the type of space and the type of audience offered by publishers. Ad networks are what make this possible as a special platform working as a bridge between publishers and advertisers, finding out the most suitable integrated publishers for advertisers’ needs based on all the parameters advertisers have fixed.
Over the last few years, this process has completely become automated thanks to Mobile DSPs (Demand Side Platforms) that enable programmatic advertising by utilizing A.I. (Artificial Intelligence) and machine learning algorithms. These software platforms have transformed all the negotiations between advertisers and publishers into an auction-like process where advertisers bid for the space publishers offer in a real-time context. Moreover, machine learning algorithms help optimize the bidding process based on data gathered from users.
Hybrid monetization models for free-to-play mobile games
Talking about in-app advertising, monetization by ads is the model utilized by hyper-casual games. In the gaming environment, hyper-casual games are convenient, lightweight, and easy-to-play options. Indeed, despite having short-length sessions, they are particularly immediate, and playable as soon as the app is installed. The advertising-focused model adopted is the core mechanism of the appeal generated by these apps, which tend to go viral by catching even those who do not usually go for games.
However, in-app ads are not the only model publishers can count on to increase revenues and guarantee a free-to-play mobile game. It adds to this model at least two other monetization strategies that publishers can combine with the advertising process: in-app purchases and subscriptions.
At the base of a freemium game economy, in-app purchases are claimed to be the leading model for users longing for a premium in-game experience with free-to-play mobile games. Indeed, within its logic, users do not pay to install and play a game but have to purchase inside the app with microtransactions or in-game purchases. Therefore, players are going to pay real money to receive consumable or permanent items, time-limited offers, boosts to speed up the game, bundles, war-timers…Sharing the same logic, subscriptions for free-to-play mobile games offer extra content to players that in exchange pay regular fees (weekly, monthly).
It is crystal clear that both subscriptions and in-app purchases can work well only with engaged players that are willing to spend inside the app and pay for items or game boosts that speed up the game. Conversely, it may not work at all with non-payer customers that need to be addressed by in-app ads. Hybrid monetization models can be applied, as Angry Birds did, to catch both payers and non-payer users – for instance, as in the case of iOS and Android players, respectively.
Different monetization models serve different purposes; therefore, hybridization becomes considerably relevant because it lets publishers adjust their monetization strategy to users’ needs and their in-app behaviors. Furthermore, hybridization in mixed models shows another important role in combining in-game ads with in-game purchases.
Indeed, in-game purchases may become problematic and unfair for their resemblance to pay-to-win models where they seem to veer to. Indeed, in a fair game, players are neither supposed to speed up the process nor should be able to win a game simply by spending their real money on items and other crafts.
However, as we know, app developers of free-to-play mobile games would not manage to carry on without a form of profit. As in-app advertising avoids asking users to spend their money to keep playing, it strikes us as the best compromise to both reward publishers (by helping advertisers promote their apps) as well as ensure a high-quality and fair game experience.
To wrap up, there is no such thing as the best monetization model for all the apps on the market, but different models fit into certain genres and types of apps. In-app advertising enables developers to monetize their apps while guaranteeing players free access to free-to-play mobile games. Which helps manage in-app purchases and microtransactions as available but potentially annoying and problematic options.