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5 ways in which mobile game monetization will change in 2016

William Grosso consults his crystal ball
5 ways in which mobile game monetization will change in 2016

William Grosso is CEO & co-founder of Scientific Revenue, a dynamic pricing and revenue optimization service for mobile games.

Next month, I'm honored to be a speaker at Pocket Gamer Connects London 2016, where I'll be talking about future trends in mobile game monetization.

So while I search through California department stores for a coat that's adequate enough for winters in England, here's a sneak preview of some leading trends for 2016 which I plan on discussing at Pocket Gamer Connects London.

  • 1. Massive International Smartphone Growth Leading to New IAP Tiers
  • 2. “Feeder Apps” to Drive Monetization
  • 3. Using Video Ads to Increase In-App Purchases
  • 4. Growing Awareness of Mobile Game Ad Fraud
  • 5. Goodbye Premium, Hello Shareware (AKA DLC)

#1: Massive international smartphone growth leading to new IAP tiers

With nearly 1 in 3 human beings forecast to own a smartphone/tablet by the end of 2016, the potential market for mobile games will be larger than it's ever been.

However, it will have to overcome one small problem: how to monetize games given the fact that few mobile gamers actually want to pay for what they play.

But as the global reach of smartphone games becomes clear, the major app platforms are quickly adjusting to meet varying demand, offering in-app purchase tiers which are sensitive to the local economy.

This represents a sharp, necessary departure from the $0.99, £0.49, €0.49 IAP model which makes sense in the US and the EU, but is largely unsustainable throughout the developing world.

To take a single example, consider India, with a smartphone market predicted to reach 300 million by this year, and to overtake the US by 2017. Thanks to some forward thinking from Google Play in that country, it's already possible to make Android-based IAPs in India for as little as 10 rupees, i.e. about $0.15 cents.

Apple has also introduced lower IAP tiers for iOS apps across the globe.


Those nickels and dimes will quickly add up to hundreds of millions of dollars in new revenue - and inspire calls to further spread affordable IAP pricing tiers around the planet, from Southeast Asia to Eastern Europe to South America, and eventually, Africa.

When that happens, mobile games will truly become a global phenomenon.

#2: 'Feeder apps' to drive monetization

As the cost of acquiring new users continues to grow year-over-year, publishers will continue to struggle with user acquisition.

Fiksu's Cost per loyal user index is an interesting metric that illustrates the problem - small and independent developers are being priced out of the advertising market.

In response, I believe we'll see a growing trend to develop 'feeder apps' -free, simple games whose main purpose (aside from casual fun) is to nudge new players toward the developer's key revenue-generating game.

(A trend recently noted by my colleague Lloyd Melnick.)

I think feeder apps will also encourage a welcome burst of new creativity: Freed from the need to think about designing IAP hooks into their feeder games, developers will have more room to take chances, and experiment with new types of gameplay.

#3: Using video ads to increase in-app purchases

During a recent chat, my colleague Gil Shoham of video ad provider Supersonic made an important counter-intuitive point: "Video ads increase IAP." Huh?

But it's true: When implemented correctly, putting video ads in a game causes an uptick in total in-app purchases.

That may seem paradoxical, because ad revenue and IAP are two entirely unrelated categories. That changes, however, whenever the developer gives players an incentive to watch ads in exchange for in-game rewards.

Doing this makes players more aware of the game's purchasable virtual goods, while connecting their activity with the game's internal economy. In effect, giving players small amounts of currency whets their appetite for larger (IAP) purchases.

<em>The Walking Dead: No Man's Lan</em>d is a good example of rewarded video driving business success
The Walking Dead: No Man's Land is a good example of rewarded video driving business success

I can personally attest that this is an effective monetization strategy: During dinner, I sometimes catch my own son watching ads on the tablet in his lap, mainly to earn gold coins from his favorite game.

Outfit 7 innovated this strategy with its Talking Tom game, and this year, the strategy was perfected by Hipster Whale for its phenomenally successful Crossy Road. Next year, we should expect to see a slew of developers applying the Crossy Road approach to their own games.

#4: Growing awareness of mobile game ad fraud

At a recent game developer conference, a colleague showed me the impressive ad monetization strategy in a new mobile game which was impressive for all the wrong reasons. On the surface, the game seemed to have no ads, but in fact, the developer had used an open source toolkit to put the video ad channel in a hidden panel, where it played on a continuous loop, entirely unseen by players.

The developer was maximizing advertising revenue, in other words, by making sure players never engaged with the ads themselves.

This devious hack illustrates a larger trend. The proliferation of mobile video ads have also increased the rates of fraud around them. According to a recent study of mobile ads, there were 2.57 fraudulent clicks for every legit click in early 2016, and even more fraud as the year went on.

As awareness of this problem grows, advertisers will begin trimming the amount they spend on ads in mobile games - causing mobile game publishers to earn even less from advertising. Though as I argued above, developers will still find value in mobile ads, if only as a means of driving IAPs.

#5: Goodbye premium, hello shareware

Notwithstanding exceptions like Minecraft: Pocket Edition, the rate of revenue earned from premium games continues to decline every year.

As the premium model completely erodes, developers will search for ways to replace it - especially for games aimed at kids, which publishers are very hesitant to monetize through in-app payments. After all, who wants to be the target of Kanye West's wrath?

The best solution is something we're likely to see more and more of in 2016: Free games with a few hours/levels of play, so players can decide whether they want to buy the whole game through a pay-once IAP offer which unlocks the rest of the game as downloadable content.

It's an 'IAP light' model that not only appeals to parents leery of making constant micropayments, but also core console gamers, who are generally resistant to IAP, but relatively comfortable with buying expansion packs.

<em>Monument Valley</em> is now free, but with paid DLC
Monument Valley is now free, but with paid DLC

Developers like Gamehouse are doing it with their Delicious apps, as are the creators of the acclaimed Monument Valley, which recently went free in hopes that players will buy the game's new expansion.

In a sense, unlockable DLC will be a return to the pre-Internet shareware model from the '90s, which helped turn Doom into a phenomenon, and helped make the industry into what it is today. As is so often the case, the future of games often involves reviving ideas from its past.

Much thanks to game designer colleagues Tahdg Kelly and Steve Sadin for their feedback (and occasional pushback) to these forecasts.