“Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Mark Robinson, CEO at deltaDNA.
The mobile game sector has really been through the wringer. Can you imagine describing the gaming economy to potential investors?
You tell them about a fantastic new idea for a game that will cost millions to produce. To recoup the investment, you plan give the app away for free but use in-app purchases to let players pay for progression, such as procuring weapons, premium currency or content. Hopefully, about 1% of players will pay using in-app purchases.
Add user acquisition costs into the mix and it soon becomes clear why advertising revenue is so vital. But reluctance by developers to serve ads, alongside a crisis of confidence as to what ad strategy is best for their game, has left many within the industry in turmoil.
Here’s the problem: Game developers, who are at the heart of game companies and serve as their founders and CEOs, didn’t get into game development to show ads. They got into game design because they thought they could make cooler and more amazing gaming experiences, and not once did the idea of advertising figure.
However, hard-bitten investors want to know how game developers plan to monetize the remaining 99% of players who aren’t going to spend in the game.
“We’ll serve 'em some ads,” they say. “Not too many, as they might leave, and not too soon in the game, as they might become payers and we don’t want to frighten them off because retention is vital.”
But this isn’t the reality. Research shows that players are getting comfortable with ads, particularly rewarded ads where players receive an in-game award for watching a video ad, yet developers still often take a very light touch because they fear tumbling retention figures and negative reviews.
But fans of the "Angry Birds" franchise, for example, have become so accepting of reward ads that when Rovio removed ads from "Angry Birds Transformers" for any player who had spent money on the game, the move was met with an outcry from fans who paid for progress but had come to rely on those video ad rewards as an important supplement, rather than an annoyance.
Some of the most popular free-to-play games, including "Tiny Troopers" and "Trial Xtreme 4," are taking very aggressive strategies by showing ads right from the first session and serving high volumes of interstitials. Yet their iOS store ratings are not adversely affected, with 4.5 and 4 stars, respectively.
The question is, are these ad strategies the symptom or the cause of the results being achieved? Surely, if developers are seeing substantial amounts of cash rolling in from advertising, they’d realize they can increase revenue and retain their players?
Until recently, ad networks held the power, hindering the ability to understand the impact of advertising on player behavior. Ad data is kept in silos, away from player data so the reconciliation of monetization and retention can’t happen.
Promotional eCPM rates quickly diminish because of programmatic buying and the difficulty the developer has in manually maintaining effective ad network cascades in individual games. But the tide is slowly turning, and it’s being driven by the mid-sized games companies.
The big guys have used their power of numbers to negotiate good deals with the networks or directly with advertisers. Now mid-sized game developers who don’t have that influence are using programmatic mediation to dynamically show ads from the best performing ad networks and manage ad frequency based on understanding the effects on player data.
As a result, I expect equality, more consistency in eCPM rates and an increase in supply as game developers more confidently increase the frequency of ads in free-to-play games.