monetization methods under a microscope
Introduction
No mobile game is 100% Free-to-Play. This is the same business that exists within its own economy, so it needs to earn money.
Monetizing a player is a way to make a profit that will cover the cost of attracting him. Building a competent monetization strategy is a very difficult task for a game developer (or publisher). Some spend years before their game finally starts making a profit.
In this article, we'll look at the main types of user monetization, problems that can arise, and key metrics to pay attention to when developing a game.
Main types of monetization
Purchases
Purchasing an app
The most obvious and easiest way to monetize. The point is that the game is only available after purchasing it.
There are many examples of such games, here are a few of them:
The main problem with this approach is the need to carefully monitor the average CPI (Cost Per Install). Many users may not like paying for access to the game, which will negatively affect installation conversion.
You can read more about this here: Key Marketing Metrics
The price of such games is usually low, so they rarely pay for themselves only through a one-time purchase. We are gradually moving to other types of monetization.
In-game purchases
This type of monetization is found in a large number of popular games. Its essence is simple: the user is invited to buy something inside the game.
There are many examples of in-game purchases:
In-game currency — coins for which you can buy boosters, lives, buildings or skins.
Life – If a player loses, he can purchase additional lives to continue playing.
Energy – analogous to lives, but limits the playing time, requiring you to wait for energy to accumulate.
Boosters — amplifiers that provide temporary benefits (double experience, endless lives for a while, etc.).
Skins – visual improvements.
The advantages of this approach are obvious: the user brings us money, we are happy. But there is, as always, a nuance. The trick is balance. Moreover, both in the game balance and in the offer balance.
The nuance of game balance is that you need to create a need for the user to take advantage of the offer to buy something in the game. Two extremes that are associated with this:
The game is so difficult to complete without purchasing that most users simply leave it in the first days. To do this, you need to track Retention Rate.
Retention Rate – the number of users who returned to your application the next day (or every other day, week, month or year). You can also track this metric by users who do not buy anything in your game. Users not returning to the app is a problem because the user may need to play a little more before they decide to make a purchase. That is, imagine what you would do if you downloaded a game, and in order to play it normally, you need to pay from the first day? You would most likely just close it and continue searching for your game.
The game is so easy to play that the user simply does not need to make any purchases. That is, the player does not face the difficulties that could prompt him to buy something from you in the game. To track this, they look at the metrics %PU, PPU and AOV.
%PU – percentage of paying users. PPU – Number of purchases per user.
The balance of offers is also important in such games, since there are also two extremes:
The offer is so expensive that the user could buy it, but he does not have the money for it. %PU will also help us here.
The offer is so good that with one offer for $1, he solves all the problems in completing the game. This will help us track PPU and AOV.
AOV – Average check.
If in-game purchases are your type of monetization, then the integral metric that can be used to calculate your Unit economy (what is Unit economics) and determining the health of the product, will be ARPPU.
Examples of games with this type of monetization:
Since payments are most often introduced by so-called offerwalls, that is, walls that you either cannot go beyond or it will be very difficult for you to climb without payment, many studios decide to first set up a friendly balance of the game, and then gradually tighten it.
The offerwall itself is nothing more than an artificial complication of the game so that the user makes a payment.
But where do they get the money if the project starts without investment? Most often this is advertising. This type of monetization will be discussed further.
But first, let's look at another type of monetization, which most often goes hand in hand with advertising.
Subscription
Nowadays, I don’t think anyone needs to explain what a subscription is. The same Yandex.Plus is a subscription type of monetization.
One of the most common subscriptions in games is the so-called “No-Ads” – refusal to view advertising for money.
Here the Retention metric comes into play, since if the user does not use the application, then he does not pay a subscription for it.
Examples of games:
In the case of No-Ads, the developer’s task is to smoothly increase the pressure of advertising in the game so that the user is forced to pay for a subscription in order to feel comfortable continuing to play.
Advertising
This is a type of user monetization when we show him an advertisement for a third-party application or product inside our game and receive money for each ad shown.
The main metric for this type of monetization, in addition to Retention, is eCPM (effective Cost Per Mile) – the price for 1000 ad impressions.
The price of advertising arises from competition for the user.
There are several main competition systems and advertising networks that purchase advertising:
Hidden competition. The essence of the algorithm is as follows: each network that participates in competition sets its own price for the user and the maximum one is selected from them, to which the impression is given.
Waterfall systemor reverse auction system. A system where we start with the maximum cost per impression and go through all advertisers, gradually reducing the cost per impression.
Hybrid. A combination of these two systems, where we first determine who we would give the impression to, with hidden competition, and then try to outbid this price with a reverse auction system.
Income from these types of advertising is highly dependent on the competition of advertisers in the market, which is why it has a seasonality, since marketing departments do not buy advertising in the same volume all year round.
There are a lot of methods for optimizing advertising impressions so that each impression is as expensive as possible, but this is a topic for a separate article, for example this one: Mobile Ad Monetization
There can be two problems with advertising within the application:
A user may want to go to a competitor after viewing their advertisement. Therefore, when using this approach, it is very important to monitor the Retention Rate, and react in time when it begins to drop significantly. Also, to prevent the user from having such a desire, many advertisers ban their competitors when displaying advertising in their application.
The user may come across some unwanted content (advertising for casinos, betting and other businesses that are considered something bad in society). Banning publishers also helps here.
Now let’s look at what types of advertising there are.
Motivated views
Examples of games:
Rewarded Videos
Displaying advertising to the user for a reward within the game. In fact, the mechanics are very similar. The user also needs to be motivated to receive a reward for viewing advertising.
With this type of advertising, the same problems arise as with in-game purchases, only the percentage of users who watch the advertisement is higher, but the cost per view is also lower. eCPM is calculated exactly for 1000 ad impressions, because it is with this calculation that this metric becomes convenient for using specific values in speech.
However, this is the most expensive impression among all types of advertising, which will be discussed below, since such advertisements most often last from 20 to 30 seconds, that is, the user can fully consider the advertisement + he has the motivation to watch to the end, since in the end he will receive there's a bonus for that.
The main metric worth monitoring here is RVPU (Rewarded Videos Per User) – the average number of Rewarded Videos views per user.
It doesn’t make much sense to count the conversion into an ad viewer here, since almost everyone watches such ads.
There is also another type of advertising that is shown in applications, which is similar to Rewarded Videos.
Offerwall Advertising
In fact, it is very similar to Rewarded Videos, as I said at the beginning, but with one exception: the user is given a choice of what he wants to do to receive this or that reward.
In this type of advertising, the user needs to not only look at what another game offers, but also install another game, and maybe even complete some task in another game. Depending on the complexity of the task, the reward naturally increases.
On the other hand, such advertisements are called CPA Marketing, when the network is paid not for displaying advertisements, but for the fact that the user has reached a certain level in the game.
When implementing this type of advertising, you need to monitor the Retention Rate more than ever, since the user not only watches a competitor’s advertisement, but also installs his application and plays it.
But the mechanisms for combating user churn are similar.
But when a game doesn’t make enough money to pay off, then unmotivated views come into play.
Unmotivated views
Compared to other types of monetization, the developer does not need to implement anything, they just need to make sure that advertising is not shown too often or too directly, so as not to cause too much irritation for the user, which can lead to a decrease in product metrics.
The price per impression is even lower than for motivated impressions. The main metrics for success with this type of advertising are: Retention and Playtime – the average time spent in the game by one user.
It exists in many games, and not only, so I think examples are unnecessary.
Interstitial Ads
Advertising that is shown in full screen upon completion of a level, start of a level, or at a random moment.
One of the most annoying types of advertising among players, as it affects the in-game process. Although many developers who introduced this type of advertising report that the impact on the Retention metric is minimal.
With this advertisement, everything is simple: it is shown for 5-10 seconds on the entire screen, then you have the opportunity to close it.
Banner Ads
Show ads on the edge of the screen throughout gameplay.
The cheapest advertising among all types of advertising, as users in the modern world develop banner blindness, which is why advertisers leave the Bunner Ads market.
You can read more about cost-per-impression trends in this article: Lower mobile ads eCPM – new reality?
In total, you can derive an integral metric that determines the success of your application as
ARPU (Average Revenue Per User) – the average amount of money that a user brings in within the game.
And for Bunner Ads the syllable is decomposed into
Other
There are also other types of monetization, such as audio advertising, product placement, etc. But their representation in mobile games is so low that they are not covered in this article.
Conclusion
So what should you choose?
Choosing the type of monetization is very much related to the mechanics and product metrics that your game has. The more casual the game is, which is why its Retention decreases, the more the choice should be given towards advertising monetization, since the user will not have time to get carried away by the game so much that he will make a payment in it.
The more hardcore the game, the more the choice should be given towards in-game purchases, since most often the price for attracting a user in such games is high, which is why the user needs to have a very large ARPU in order for it to pay off.
PS
Monetizing a game is a complex thing and requires an integrated approach and a lot of time to set up, so the best way to understand what is right for you is to experiment.
This article is just an overview of what can be done to make a profit from the game; of course, for each point you can write another article (and more than one), which reveals each type of monetization in more detail.
And if you want to read even more about analytics and the development of mobile game analysts, welcome to the channel https://t.me/analyst_in_jungle
