When taking a look at the chart of most grossing mobile games in the Google Play-store and Apple´s App store we see that almost all games are based on the free-to-play(F2P) model. This model is based on giving users free access to the game in a basic format, where the user can spend money on in-game purchases that enhance the experience later on. This model is not new and has existed for a long time next to the traditional large sum upfront strategy, but is being applied more and more by game developers in 2016. It is currently still turning the industry around and makes both consumers and developers consider their positions and incentives surrounding financial questions in the mobile gaming industry. But what makes this model so successful? And how is revenue collected in this model where most players will probably play with spending almost nothing?
The success of the model comes from multiple factors. The ones I will expand on in this post are advertisement incomes and micro transactions. The fact there are so many variables to choose from when using the F2P-model is actually also one of the inherent success factors of the model, because it gives the developer the opportunity to focus on earning on some specific variables or accumulate revenue from a lot of variables at once. We will see that the income from mobile games is not just the selling of the actual information good, but also giving other companies the opportunity to target advertisement at a specific market segment that relates to their product. When focussing on generating a product with a long-lifetime value and a steady user-base spending on in-game purchases, a worry for developers is that in-game advertisements will cannibalize in-game purchases. In this post I will try to look at the two different forms of incomes and how they interact with each other.
Advertising in a F2P-game is very interesting for companies, since the free model usually creates a large base of users that play the game for free. In addition, the type of player that plays a certain type of game is usually very predictable, thus making the targeting of advertisement through this channel very effective for third parties.
The advertisement comes in two forms. The first form is where users get incentivised to click on an advertisement by receiving some (for the developer free) in-game currency, which they can spend. The other form is where the advertisement get pushed in front of the game, and the user has to click to leave the add and continue playing. The developer then get a small amount per click or view of the advertisement. A large user base in this way can sum up to a steady flow of income for the developer of the mobile game. The most important factor is to create a game that has a high level of positive user experience, where the user keeps playing the game and gets a psychological reward during the game. This can for instance be demonstrated by the hook canvas:
This shows why a user keeps playing and the game has a high level of player retention, so the adds keep being viewed for advertisement income.
Another point I found very interesting, is that the limiting of playability for a game by , for instance, incorporating a number of lives into the game actually makes the game more desirable to play. The mandatory taking of a break increases desirability to play for the gamer (Matrofailo, 2016).
Micro transactions are a second form of monetizing on a mobile game. This consists of users paying small amounts of money for expansions of the base game or in-game currency to speed up in-game processes. Because 5% of the user base is responsible for 95% of the revenue generated by mobile games.
This creates only a really small segment of paying users(named whales) in applications, and this user base is not very loyal to a certain game but tends to keep moving from mobile game to mobile game. In addition, data also indicates that 60.2% of a player’s total spending occurs in the first 24 hours after downloading a game. Players who are going to make a second purchase typically make it an hour and 40 minutes after the first. By day three (of 14 tracked), players had already spent nearly 75% of the total money they’d spend in-game, assuming they spent any (Extremetech, 2014). This makes creating a long lifetime value of the game for paying users not very interesting.
For designers this thus implicates that when designing a game it is important to capitalize on the paying users by creating incentives to quickly invest in the game early on for segments that are prone to spend on mobile games. In addition to this it is important to create a game with a high lifetime value so players keep playing for free and advertisement income keeps being generated. How to successfully design a mobile game this article on Gamasutra provides a lot of good insights and aspects: http://www.gamasutra.com/blogs/IgorMatrofailo/20160107/263164/5_Criteria_of_a_Successful_Mobile_Game.php.
A personal conclusion is that when designing a mobile game it is very important to look at behavioural and psychological aspects of the segments you are trying to reach with the game, since these influence financial success of the product just as much as quality of the mobile game itself can.
(Extremetech, 2014) http://www.extremetech.com/extreme/177409-only-0-15-of-players-account-for-50-of-free-to-play-game-revenue
(Matrofailo, 2016) http://www.gamasutra.com/blogs/IgorMatrofailo/20160107/263164/5_Criteria_of_a_Successful_Mobile_Game.php
