As new year rolls into view, there's no escaping the headline trend of 2011: the rise of the free-to-play release.

The freemium model wasn't discovered this year, but 2011 saw it transcend on mobile from the 'risky' option employed by the few to something most developers – wisely or not – were rushing to plug into their titles.

The reason, according to Victor Milligan, CMO ad exchange specialist Nexage, is that studios are now confident they can monetise free releases effectively.

The methods they use to do so are still evolving. He says, 'innovative and savvy' developers won't stop searching out new ones – but it's hard to imagine the paid model every recapturing its former dominance.

Having recently lifted the lid on its own deal to monetise Backflip Studio's library, we caught up with Milligan to see how Nexage views its role in the increasingly competitive mobile ad market.

Pocket Gamer: How did the deal with Backflip come about?

Victor Milligan: A key part of our market strategy is to win marquee brands – like Rovio – based on outperforming the market, then leveraging those wins in the mobile gaming space - and we are executing this plan.

Other market leaders, like Backflip Studios, see the proof that we can bring significant demand to them, understand the mobile gaming market, and deliver eCPM and fill rate performance.

We call on and maintain a dialogue with numerous top game developers, and that's how our relationship with Backflip Studios began; we are now supporting its free OS titles and creating the monetary opportunity to enable it to grow its customer base.

What can Nexage offer over its rivals?

Mobile game developers are extraordinarily innovative and business-savvy. To further innovate and grow their businesses, we believe they need three primary values from exchanges – values to which we are showing clear market and technical leadership.

Firstly, they need the most advanced, complete and reliable technology in the market. There is a direct and profound relationship between the quality and reliability of mobile ad technologies and our customers’ business performance, and that relationships is coming into sharper focus.

We announced private exchange, are scaling at 70 percent monthly growth, and delivering 18+ months of uptime. And we will accelerate this pace of innovation so that our customers gain a sustainable strategic advantage.

Secondly, they need the most liquid market. The greatest value we can deliver to publishers and developers is to bring them demand – we understood this early. We are driving liquidity with over 125 demand sources, including DSPs, ad networks and other buyers.

Bid volumes on our Real-Time Bids (RTB) exchange are growing – as a baseline – 71 percent per month over six months as more and more online (demand side platforms (DSPs), native mobile DSPs, vertical DSPs and other buyers come on board. Our publisher and developer customers enjoy this advantage that directly reflects on revenue performance.

Thirdly, they need the market’s only integrated RTB and mediation platform. There are two ways one can think of advantage: top- and bottom-line performance. With our unique Nexage Exchange, our customers gain both.

We create unparalleled efficiency by aggregating demand across DSPs, ad networks and other buyers so the technical and operational cost and complexity is grandly minimised; we create top-line advantage through the liquidity of all of the buyers plus our unique integrated yield optimisation capability that dynamically maximises CPM performance while driving fill rate.

You say revenue models are shifting away from traditional paid games. Do you envision a future where all apps go free-to-play?

We really don’t know, but clearly the trend to leverage ad revenue, virtual goods and other methods to drive customer acquisition and revenue gains is becoming dominant.

Consumers love free-to-play games; game developers are winning because of it; and the important bridge - the ability to deliver a reliable and growing revenue stream - is in place.

Will the way these free games monetise continue to evolve too?

Absolutely. Again, game developers are incredibly innovative and savvy. We expect non-pay-to-play revenue streams, such as ad revenue, virtual goods and even brand merchandising to expand and evolve.

I am sure game developers are thinking of other revenue streams that give their customers the ability to enjoy the greatest game experience for free.

Any other deals with developers in the pipeline?

Yes – and deals that we believe further extend our leadership in the market. We recently signed other large game developers and will be announcing those deals in the very near future.
Thanks to Victor for his time.