The problem with free-to-play games is that the industry is leaving money on the tablet, argued CloudMade's Christian Petersen at the Edinburgh Interactive Festival.
"Overall revenue has grown by a factor of three but the number of game sessions has grown ten-fold over the past two years," he said.
"And the gap between the two is getting bigger."
Monetise more
With less than 2 percent of gamers buying in-game items, the vast majority of players don't spend money and most gamers leave a free-to-play game within the first couple of days. Only 1 in 20 will still be around after two weeks.
"Users leave if they don't buy in-game items," Petersen said. "Does freemium deliver retention and optimal monetisation?"
Of course, CloudMade has a solution. As a location-based service provider, its new offering is called Sponsored Locations.
It combines free-to-play mobile games with the massive marketing budgets of retailers.
"US retailers spend $21.5 billion on advertising. Currently less than 1 percent of that is spent on mobile, but it could be 10 percent, if clear return on investment can be proven," he said.
Moving your feet
Sponsored Locations works as retailers sponsor free in-game items, but only when players come to one of their locations.
"Mobile isn't good for getting people to sign up for offers etc compared to desktop or tablets," Petersen said.
"We needed to find something that mobile is really good for."
In this case, he reckoned that an additional 4 to 6 percent of users can be monetised.
CloudMade's model is that developers integrate its SDK. It handles the advertising demand, giving 70 percent of the revenue to developers.
Petersen says it will charge retailers 1.25 to +3.50 per player visit, depending on the type of store.
"Retailers like Sponsored Locations because they get positive branding by being in the game, it directly drives consumers to a store, and they get trackable data," he said.
As for the launch of the service, Petersen said it would be going live with a "very large game publisher next month" and exposed to 50 million users by the end of 2012.
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Contributing Editor
A Pocket Gamer co-founder, Jon is Contributing Editor at PG.biz which means he acts like a slightly confused uncle who's forgotten where he's left his glasses. As well as letters and cameras, he likes imaginary numbers and legumes.
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