One of the most desirable features of a smartphone has nothing to do with the hardware itself.
The best part? A good number of apps and mobile games are free.
Great for me, the end user, you’re thinking, but what about the developer? How are companies supposed to bring in revenue when they’re giving away their software at no cost?
There are several different ways studios make money in this new age of mobile games, in which global revenue is expected to grow from $63.2 billion in 2018 to $91.2 billion in 2021, according to research firm Newzoo.
Here are a few of the major strategies used by mobile game makers.
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Pay as you go with ‘Freemium’ games
One approach is to give away the mobile game for free but offer in-app purchases for more premium features. In the industry, this is aptly referred to as a “freemium” model.
Depending on the game, you may opt for microtransactions – the term for in-game purchases in which players can pay for online goods with real money, sometimes as little as 99 cents – to unlock new levels, items and power-ups, or character costumes. In other cases, you can play for free until you fail a level a few times – and must wait a few minutes to play again – unless you pay a buck or two to speed up the process. Some titles let you pay to remove ads (more on this later). Other games let you buy virtual, in-game currency with real money, and then decide what to purchase inside the game.
The highly-successful Angry Birds games, for example, are all free to start. “A few years ago, Rovio moved away from the premium model, which is where customers pay a one-time price for a game at point of sale,” explains Ville Heijari, chief marketing officer at Rovio, based in Helsinki, Finland. “Instead, we pivoted to a free-to-play model, as we saw better potential in building content for our games over several years, keeping them fresh and reacting to the feedback of our communities.”
With the studio’s latest game, “Angry Birds AR: Isle of Pigs,” the franchise has seen a whopping 19 games to date over the past decade, not to mention feature films, plush toys, and other merchandise.
“The combination of in-app purchases and advertising enables us to service a wide audience of players globally,” adds Heijari.
For apps in general, in-app purchases make up about 40% of revenues, according to mobile tracking form AppsFlyer. Paid-for apps account for about 50% and advertising revenue, about 10%, the firm estimates.
Can a game developer still charge money for an iOS or Android game, like $2.99, and be successful at it?
“Yes,” says Heijari, but “far fewer players are purchasing these games than are downloading and playing free games. Free-to-play is the preferable business model when building games as a service for massive global audiences.”
Ads in mobile games can pay your way
Advertising is a second option embraced by iOS and Android game makers to monetize their work.
Ads are a viable alternative for game publishers who don’t want to charge for their releases because game players are accustomed to ads online and on TV. “Games that charge money upfront only make up “about one percent of all game installs,” estimates Rafael Vivas, president and CEO of Lion Studios, a San Francisco-based mobile game publisher. “Even if it’s only a dollar or two, gamers know there is so much free content out there, so they’ll look elsewhere.”
Only 16 months old, Lion Studios has more than 12 games in the App Store (for iOS) and Google Play (for Android), and has enjoyed more than 1 billion downloads to date, says Vivas. The bulk of the studio’s success is tied to its physics-based games, “Happy Glass” and “Love Balls,” and most recently, “Mr Bullet – Spy Puzzles.”
Lion Studios almost exclusively monetizes games through advertising, including banner ads at the bottom of the screen, a full-screen interstitial between levels, and if a level is too difficult, gamers can skip it if they watch an ad, Vivas says.
But can you really make good money through in-game ads? “Absolutely,” maintains Vivas.
Temporarily-free games and apps
Another strategy is to temporarily give away a paid game or app for free, perhaps by partnering with one of the “Free App of the Day” apps or websites.
There are several reasons developers consider this. Most mobile game developers see a huge surge in downloads since it removes the one main barrier of entry: price. Then, if the user has a good experience, they’ll spread awareness of the game and tell others – and by that time the game will likely be back up to its regular price, which should help bring in some money.
“The purpose of my site is to help users find good iOS games and apps, because there are now more than two million of them at the App Store, explains Tiernan Quinn, owner of AppPicker.com. “That’s just too many, and there is no real decent search function at the App Store, in my opinion.”
The Ukraine-based site gets about 300,000 unique visitors a month, says Quinn, with popular sections like “Top iPhones Games Gone Free” and “Top iPad Games Gone Free.” Updated daily, each section lists temporarily free games ranked by price drop and ratings.
“The two main ways game studios make money is with the freemium model or advertising,” confirms Quinn. “Try before you buy just makes sense.” And while many App Store user reviews complain about in-game ads, most understand it’s a necessary evil, says Quinn.
Another word-of-mouth approach to promoting downloads is sharing promo codes on social media – something Quinn says he encourages developers to consider.
A few other ways studios monetize games:
- Some developers have such a wealth of games or apps they make a small percentage of them available for free – mostly the slightly older offerings – which can help further spread brand awareness for the company or premium games.
- While Apple and Google have strict rules about it, some free apps may request personal information from users, usually via surveys and questionnaires, in exchange for getting content for free. That said, privacy and security experts warn against providing data.
- While some games are given away for free, they could be monetized through merchandising sold outside of the game – if the brand is super successful. Or perhaps a game is strictly a marketing vehicle to promote a Hollywood movie available the same week?
On a related note, Apple recently announced Apple Arcade, a subscription service designed for iOS (iPhone, iPad), Mac, and Apple TV. For an estimated (read: unconfirmed) cost of $10/month, gamers will have access to more than 100 premium games (including some exclusives) for the one monthly service fee.
Apple says there will be no ads or microtransactions with these games. Apple Arcade will launch in fall 2019.
Follow Marc on Twitter: @marc_saltzman. Email him or subscribe to his Tech It Out podcast at www.marcsaltzman.com.
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