User acquisition costs of $2 for mobile games are unsustainable, says Applifier's Jussi Laakkonen
Big boys with deep pockets are strangling the industry
That's the view of Jussi Laakkonen, CEO of cross promotional network Applifier.
"I think we'll see a lot of disillusioned mobile developers at GDC next year," he says.
"User acquisition costs are now key for the industry, but with companies such as Zynga and GREE buying up all the available traffic, they're driving up prices to an unsustainable level."
Only way is up
His point is backed with numbers.
Laakkonen says that the cost of buying a user (paying directly or indirectly to get your game downloaded) now ranges from between 75c to $2 on mobile.
Using basic maths, at the top end, if you convert 5 percent of your audience into buying in-app purchases, this means you need to be generating over $40 in terms of a user's LifeTime Value; something beyond the reach of most mobile games, which peak at around $20 LTV.
Of course, in time such cost could become sustainable on mobile, just a similar user costs are sustainable in terms of the US Facebook market.
For that reason, Laakkonen says he's still very interested in Facebook as a gaming platform.
Of course, given that the Applifier network has generated around 150 million installs on Facebook, compared to 10 million on iOS and Android, it's an attitude that plays to the company's strength.
Its network operates as developers place ads around their Facebook games or in their mobile apps, gaining you a 'install' credit within the system when gamer clicks on it. You can use these credits in and around other developer's games, ensuring that players stay within the Applifier network and increasing the usage of its games.
Mobile from scratch
Yet despite Applifier's success on Facebook, things have been slower on mobile.
Laakkonen confesses there's been less crossover with Facebook clients using the network on mobile than expected.
"We starting from scratch," he says.
Mobile is also a more mature ecosystem in terms of the options available to gain users, whether through banner ads, rich video or the various incentivised schemes and daily app promotions.
"Part of the problem is many of these solution require a SDK, so developers are overwhelmed and we're yet another SDK to integrate," Laakkonen points out.
And the myriad of options means that - aside from spending heavily - there aren't any silver bullets for success.
"Applifier is one tool in the toolbox. It won't increase your traffic 10 percent overnight, but it will get you an extra 1-2 percent daily, every day," he states.
In a sector that's booming fast, with many companies experiencing growth of over 100 percent, that might not seem like much.
In a world of $2 user acquisition costs, however, it's worth considering.