Mobile Games: Climbing the Uphill Monetization Battle

By Tim Cronin

In March, VentureBeat writer Dan Takahashi moderated a panel on mobile monetization at the Game Developers Conference where he called mobile monetization the “Achilles Heel” of the gaming industry. In his words, “with more than a billion users on mobile, it seems like it should be easy to make a ton of money by collecting pennies. But the struggles of big publishers – many of whom appear to be running in place even as they grow – suggests that this is a very hard nut to crack.” Hard, indeed. As much as consumers are “hooked” on mobile games like Scramble With Friends and Angry Birds, getting millions of downloads, playing sessions, becoming a viral ‘hit’ and winning awards is one thing; monetizing is another. That’s where a lot of gaming publishers and app developers struggle.

But there’s a light at the end of the monetization tunnel. According to the International Data Corporation’s newly published report, “Worldwide Gaming-Optimized Handheld, Smartphone, and Tablet Gaming 2013-2017 Forecast,” the number of paying smartphone and tablet owners will surpass the number of paying GOH (categorized by Nintendo’s 3DS and Sony’s PlayStation Vita) gamers worldwide in 2013 and rise at a rapid rate through 2017. And total mobile/portable gaming revenue is expected to hit $23 billion in 2017. Those are some pretty staggering figures and line up with the findings of a survey conducted by Frank N. Magid Associates, which found that 59 percent of US tablet owners played mobile games on their devices. The study also indicated that US mobile gaming revenue will come from a combination of paid downloads, in-game purchases of virtual goods and in-game advertising.

Just look at what Rovio, the maker of hugely popular Angry Birds, has done. According to its 2012 financials, Rovio had a record-breaking year with reported revenues of nearly $195 million due in large part to its games and consumer products – that’s up 101 percent from $97 million in 2011. While monetizing mobile games may be tough, it’s an uphill battle that can definitely be won. It just requires some ingenuity in terms of how publishers and app developers think about monetization. So how can other publishers and app developers climb the uphill monetization battle with their mobile games and replicate the monetization success of Rovio?

Keep users interested with fresh content.

To monetize a mobile game, publishers and app developers have to not only create games that are fun, cool and entertaining, but they’ve got to make sure the game “hooks” users through fresh content. It may seem like a no-brainer, but if a game can’t keep users engaged and coming back repeatedly, they’ll surely click or tap right out of the game and into another game. Once they are addicted and can’t help but come back for more (and tell their friends about it, too), users are much more likely to pay a fee for more content and content that’s different and exclusive. Producing content that users want and will be willing to pay for can make all the difference in whether mobile games have the “sticky” value that will get users to fork over their money in-app.

Freemium works. Just do it right.

As important as it is to excited, entertain and evoke that inner competitor in mobile game players, it’s also important to get them to spend money on attractive in-app purchases. For example, allowing a gamer to purchase extra lives or levels keeps them playing and spending in your app. In-app upgrade purchases also allow app developers and publishers to monetize off a single user multiple times. According to app analytics firm App Annie, worldwide revenue for freemium apps (apps that are free to download and then have in-app purchases) on iOS have more than quadrupled over the last 24 months. While the monthly average spent on in-app purchases is low now, mobile game developers who focus their monetization strategies on quality, content-driven in-app purchases can really build off of this expected increased mobile spending.

Zoom in on video ads.

We all love movie trailers. They’re usually action-packed, packed with daredevil stunts and introduce viewers to the main characters and the storyline. Although not as lengthy and detailed as film trailers, mini video ads used to promote apps and games are becoming an increasingly popular way for app developers and publishers to acquire new users and monetize via in-app purchases. Last year, Flurry revealed that one of its AppCircle Clips customers found that consumers acquired through video ads used apps 43 percent more often and played 23 percent longer per session than normal users acquired through traditional banner ads. These numbers point to the value of video ads – they tell a compelling story and increase click-through rates, video plays and overall revenue for app developers and publishers.