Mobile Mavens

Why in-game ads - native, video and brands - will unlock the next wave of F2P monetization

Why in-game ads - native, video and brands - will unlock the next wave of F2P monetization

For most of the existence of the mobile games industry, advertising has been if not frowned upon, then dismissed as being low value and poor in terms of user experience.

Now, however, incentivised video advertising appears to be hitting the sweetspot, both in terms of value for player and revenue for developer - cf the $3 million generated by indie favourite Crossy Road.

So, the question we asked our Monetizer Mavens was:

Do you think F2P developers and designers need to think more seriously about how to integrate adverts within their games' user experience flow, or will the top games always just be about IAPs?

 

Ben Cousins CEO ISBIT Games

Ben is a 15-year veteran of the games industry - he's worked as a senior executive, studio head, project lead, creative director and game designer at companies like DeNA, EA, Sony and Lionhead.

He started working on traditional games, but has been focussed on the free-to-play business model since 2006 - an extremely long time by western standards. During that time He's worked on a total of ten separate free-to-play games across five different platforms reaching over 50 million users.

IAP-based free games on mobile are huge now. The top guys spend over a million dollars a day on ads. It's basically impossible to beat these guys unless you somehow create a game with an amazing LTV and have access to hundreds of millions of dollars in UA money.

That means I've been thinking a lot over the last year about how you disrupt this particular model. I think the best angle is to remove IAP and beat the top games by creating a user experience completely unencumbered by spending friction and monetized with what you might call 'ads'.

Crossy Road is an examplar for successful in-game advertising

In my mind there are two ways to do this, and the Crossy Road/Flappy Bird model is definitely not one of them

1. Create a very retentive game, using your own IP, and spend a massive amount of time and effort (software development and business development) doing deep integration of 3rd party brands, so that rather than the crude banner ads we see in most mobile games, consumers are presented with ads in a way that has a much higher action rate and a higher corresponding LTV.

I think the best angle is to remove IAP and beat the top games by creating a user experience completely unencumbered by spending friction and monetized with what you might call 'ads'.
Ben Cousins

2. Be the owner of one of the world's top entertainment/toy brands and use very high quality (retentive) game apps to market your real-world products. Disney and Lego are starting to do this, but they are only scratching the surface of what is possible.

My daughter has on three occasions now asked to have money spent on real-world products that she learnt about from (completely) free iOS apps.

As I've said before, imagine a free iOS Star Wars game that is as addictive as Candy Crush or Clash of Clans but that has no IAP. You are talking about a Star Wars real-world-goods advertising platform with potentially 200 million eyeballs a day.

The problem with the Flappy Bird/Crossy Road model is firstly that the LTVs are so incredibly low that the upper limit on revenue is also very low. I know $3 million sounds like a big number, but everything is relative, and $3 million is not a big number if we are talking about the mobile games business.

Secondly, it requires a perfect storm of circumstances that are arguably more difficult to replicate than 'create a game with an amazing LTV and have access to hundreds of millions of dollars in UA money' - i.e. that you create a game that is amazingly fun, that goes viral with no UA spend, and/or is heavily featured by Apple.

Indies looking to replicate Flappy Bird or Crossy Road are going to end up writing one of those depressing Gamasutra articles about how they lost all their money.

Justin Stolzenberg Director, Product & Monetization Flaregames

Ben's last point is key to me - replicating the reach (i.e. inventory) of the singular hits in the crossy/bubbly/flappy genres is less predictable and arguably harder to execute as a "plan".

But even for IAP-driven games designing ads into the experience makes sense. Particularly the rewarded video format is received positively, especially when a view doesn't give you only hard currency but maybe access to a feature that couldn't even be purchased (e.g. an additional temporary boost).

Implementing advertising SDKs has been one of the most painful tasks for developers and QA.
Justin Stolzenberg

We ran some tests and found a set of player segments/points in lifetime where we can display ads nearly without loss in IAP lifetime value.

And the ad inventory can not only be used for selling ads, but also to drive traffic into your own portfolio - especially to support new launches this is substantial additional value beyond the increment in ARPDAU.

My biggest issue with ads is the immaturity of the market - ad serving/ad mediation, built-in segmentation capabilities, fill rates in RoW territories are all still years behind web-based advertising.

Implementing advertising SDKs has been one of the most painful tasks for developers and QA. Ad providers regularly speak about how you can just "drag and drop" their SDK into your code - that's bullshit.

My recommendation: if you want to include advertising, spend the extra time on preparing test scenarios and defining a robust implementation.

Eric Seufert UA consultant

Author of Freemium Economics, published by Elsevier in 2014: http://amzn.to/19zaPQB

Owner / Editor at Mobile Dev Memo: http://mobiledevmemo.com

When brand advertising comes to mobile ... it will absolutely dwarf the amount of money currently being spent on mobile app install ads.
Eric Seufert

One point that isn't really broached much (for whatever reason), is that brand advertising, when it comes to mobile in earnest, will absolutely dwarf the amount of money currently being spent on mobile app install ads.

The Catch-22 is that brands won't spend money on the most popular ad formats at the moment (intrusive, non-interactive interstitials), and developers won't spent development time creating the kind of native, interactive ad formats that brands want until there's money to be made (and that inventory can be filled programmatically).

Hopefully Snapchat's success in brand advertising - yielding up to $100 CPMs from its Discover product - will break this impasse and convince developers that native advertising is the more lucrative route to take with respect to integrating ads.

For games that are capable of generating very large user bases and lots and lots of ad impressions (and this still requires competence in UA), tightly-integrated native ad formats will almost certainly become a huge revenue opportunity in the mid-term future.

For the moment, standard ad formats can also generate significant amounts of money, but I think the next big innovation in F2P will be the ability to monetize a user base via high-value, native ad placements.

Ethan Levy Monetization design consultant, writer of FamousAspect.com

Not every game needs to be top grossing to be profitable. For many of my friends and clients at smaller studios, incentivized video ads have become a very meaningful portion of their overall revenue.

The best implementations of incentivized video ads are those that, just like in-game purchases, are thoughtfully integrated into the core game loop.

I hold up Game Hive's Tap Titans as perhaps the best use of video ads I have seen and would recommend any developer thinking of using incentivized video ads to study it.

Obviously, the value of video ads depends entirely on your reach. If you don't have a game with a significant number of players who enjoy spending time in it, then they won't help you much.

But if you take the time to do them right, incentivized video ads can be a great driver of revenue in F2P games.

Mark Robinson CEO DeltaDNA

With over 15 years’ data mining experience, Mark co-founded deltaDNA, formerly GamesAnalytics, to unlock big data to drive player understanding, introducing the concept of Player Relationship Management to build better games.

In terms of the economic model, most games rely on advertising for a significant part of their revenue in spite of the fact that it gets in the way of the player experience and impacts on retention. For some it's 20%; others 50%.

Certain players appreciate the ads – persistent grinders see it as a key part of the value exchange.
Mark Robinson

But we know certain players appreciate the ads – persistent grinders see it as a key part of the value exchange they enter into with the developers; novice players like the stream of rewards. But expert players hate ads as it gets in their way.

Many developers put logic into the game to divert in-app purchasers away from the ads. But when you are handling 8-12 different ad serve suppliers and trying to create logic to manage the ads well – it's a big ask.

The product placement approach is an interesting new treatment that won't disrupt the game play.

Like all things it's a balance. Knowing who is responsive and not responsive in your player base is the first thing … and I don't mean by territory, I mean by behavior. And then optimizing the impressions towards the responsive guys. That's where the economic model really starts to work well.

Mark Sorrell Consultant

I had just written almost exactly this. It's certainly true of Tap Titans, where the video ads go from awesome to irritating.

Certainly a model of monetising with video ads in the early game and IAPs later would be broadly logical. But that's nothing new.

Fundamentally new types of advertising product are what is required to really make the proposition to the player work, and brands that aren't direct competitors to the game hosting the ad are required to make that side of the integration work.

That said, Tap Titans does show that even with the current technology and commercial relationships, there is plenty of room to use clever design to boost ad revenue.

Jon Walsh President Upsight

I'd like to start by saying that ad revenue should absolutely be a critical part of ANY game's revenue strategy today.

The truth is that most games should be making most of their money from ads.
Jon Walsh

The truth is that most games should be making most of their money from ads. This is because, frankly speaking, it's easier to get a player to watch ads for virtual currency than it is to get them to spend money.

This is especially true if you haven't quite nailed your economy or have a game in a category that typically doesn't monetize well through IAPs (action, racing or puzzle games for example).

I liken where we are with ads today to where we were with free-to-play three or four years back, in the sense that developers were just figuring out that they had to be thinking about the economics of a game right in the design stage if they had any hope of generating material IAP revenue.

The same can be said for ad revenue now. We're just scratching the surface of what is possible in terms of generating significant revenue from ads and creating a better player experience.

AdVenture Capitalist generates most of its revenue from ads

I'm seeing more and more great implementations of ads that give players a choice of whether to see and ad, and that provide them with a genuine benefit for doing so at the right time in the game.

Big Bit's Race Team Manager (an excellent game by the way) allows players to watch a video to continue to progress in their racing series if they slip up on one of the ten races they have to complete. As a player this is seen as a great opportunity with a huge benefit for a small amount of their time and attention.

AdVenture Capitalist (perhaps the most ridiculously addictive thing I've ever 'played') also implemented a very creative ad solution that is certainly driving a vast majority of their revenue.

It is absolutely possible to generate 10 cents per player per day from ads and I've seen it done many times.
Jon Walsh

Players are given the opportunity to watch a video in exchange for having their revenue output doubled for the next four hours in the game. Brilliant.

Who wouldn't want to do this? Incidentally I also downloaded Royal Revolt 2 from a video ad that I watched in it, proving that the ads actually work.

To me freemium gaming is all about the fact that players can choose how they want to play a game, and of course how and when they want to pay.

The exciting thing about ads from a player perspective is the additional choices they can provide. When done right ads are a great way to allow players to progress further into the game without spending any money.

At Fuse we actually did a study of 6 million players where we clearly proved that rewarded video actually increased player retention, paying player conversion and IAP spending per player.

This makes intuitive sense when you think about it, because players that are given more currency in the game will play longer and have a greater opportunity to get more engaged and subsequently spend money on IAPs.

No game should be missing the opportunity to give their players a choice as to how to progress in a game, and engaging with ads is a great way to do so.

It is absolutely possible to generate 10 cents per player per day from ads and I've seen it done many times. This is literally game changing and can turn marginal revenue games into very financially successful ones.

I'm looking forward to seeing how creative publishers can get with ads and what they can give players in return.

Crossy Road is a good start, and kudos to developers like Hipster Whale, Big Bit and Hyper Hippo for their creative and effective implementation of ads that really benefit players.

With major brands shifting big ad dollars to mobile, the high engagement of games, forward thinking game makers and proper audience segmentation and dynamic player rewards, I'm sure we'll see major growth in mobile game ad revenue this year - and a lot more successful games as a result.

Wes Leviton Lead Designer Adrian Crook & Associates

Wesley Leviton is a lead designer and producer with a 15-year history of creating successful games across mobile, social, and console spaces. Wes is an early innovator in mobile gaming with a history of identifying, innovating, and incorporating emerging gaming trends.


Wes has worked for many major companies including Disney, Majesco, Sony of America, A&E, Hasbro, Warner Bros, and Ubisoft. His specialties include monetization strategies, live operations, game systems and mechanics, data driven design, user acquisition, and social game design.

For some titles, ad revenue can represent a significant source of income. Previous live games that I've managed have seen 50% or more of our daily revenue coming from more traditional offer wall-style ad support where the player can sign up for a magazine subscription, auto insurance quote, or credit card offer.

While the concept of ad-supported games is certainty not a new idea we continue to see innovation in this area.

Video ads in particular have become tremendously popular over the past two years and have really hit their stride recently as evidenced by games like Crossy Road.

I believe it's essential for producers and designers to consider how video ads will be incorporated into their product from the earliest stages of production.

There are a few key points that need to be considered when incorporating video ads:

  • How can video ads be incorporated into your game so that users opt in willingly?
  • What type of game mechanic can ensure that your ad rewards will deliver value to the player over the course of their lifetime?
  • Given the low expected value of each completed video view, what type of reward can you offer the player without disrupting your game economy?
  • For existing titles without video ads, can you incorporate video ads without disrupting existing game loops?

Two recent titles that have done an exceptional job of incorporating video ads are Tap Titans by Game Hive and King of Thieves by Zeptolab.

Tap Titans is an incremental game in the same vein as Cookie Clicker or Clicker Heroes where players simply tap the screen to perform and action while earning ever-increasing amounts of currency. This Skinner box style gameplay is a prime candidate for video ads integration as you can offer the player a significant reward without greatly impacting later gameplay.

In Tap Titans video ads are offered periodically when they player taps a fairy that appears on screen for a limited time. The value offered to new players for completing a video ad is tremendous and hard to pass up resulting in new players hoping for the opportunity to watch an ad.

King of Thieves has well-designed gameplay in terms of advertising

Unfortunately the reward for viewing an ad does not scale well over the course of a player's lifetime and eventually becomes worthless to the player. This feels like a huge misstep by Game Hive that results in lost revenue as the most engaged users begin to ignore videos ads completely.

In addition to being an all-around excellent game, King of Thieves really hits the nail on the head when it comes to incentivized video ads.

King of Thieves really hits the nail on the head when it comes to incentivized video ads.
Jon Walsh

Players must break in to another player's dungeon to steal their treasure. The act of breaking in is performed using keys to open a number of locks located on the door of the dungeon. Keys are essentially an energy system and can be purchased or earned over time.

To open a dungeon the player does not need to open every lock, but instead must pick the correct lock to open the door making the entry fee variable. This makes the act of opening a lock feel like a game of chance with each press offering the hope that it's the "right one".

Running out of keys while attempting to open a dungeon leads to a distinct escalation of commitment that leaves the player with three options. Give up (inconceivable!), purchase more keys, or watch a video ad.

To make video ads more enticing players are awarded 2 keys for watching a video ad. For the player that has already sunk a number of keys into opening a dungeon door the video ad is a no-brainer.

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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