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A game app developer's guide to monetization

Industry experts at the recent Apps World in London share their thoughts on what works
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The most popular gaming apps challenge players to chase after pigs and aliens, destroy fruit and even play god. For the developers who make them, there's an even bigger challenge: finding a path to profitability.

Much of the research around smartphone use shows the majority of consumers are highly reluctant to pay for an app, let alone something that's primarily for fun as opposed to a business or productivity tool. There's enormous competition to attract players to gaming apps, and the debate over in-app purchasing and in-app advertising becomes even more heated when players probably want to spend more of their time scoring points than receiving a marketing message. These were among the issues discussed at last week's Apps World Europe, which took place in London and featured a session on monetization strategies for mobile game developers.

Tag Games makes social-mobile games including Funpark Friends.

"The key learning is it's actually really hard to make money," said Paul Farley, founder and managing director of Tag Games Ltd., in a phone interview with FierceDeveloper from the conference. Farley was among the participants in the panel discussion. "No longer are you a developer, but a developer, publisher and now also a retailer. Customer acquisition is an issue, among other things, but the rewards are there if you can do it."

Which pricing model works for you?
One of the key decisions for developers is whether to simply offer games for free, treat the game as a "premium" app and charge for it, or a "freemium" model whereby the game is free but players would be required to pay for various enhancements. Will Luton, a gaming industry consultant based in the U.K., said that while some developers may start out by giving a gaming app away and later trying to charge, it's very hard to switch between models.

"There's some examples of titles that have done it, mostly those with existing virtual currency, but there's lots of complexity around how it's done and how you manage player backlash," he said. "I'd suggest all devs put consumable in-app purchases (IAPs) in their apps, regardless of if they intend to charge upfront or not. It gives the greatest flexibility."

More specifically, Luton suggested developers consider what he calls the "Four Cs" of IAPs: content, competitive advantage, customization and convenience. Each of these have their pros and cons, however, For example, some users may be willing to pay for special content that enhances the gaming experience, but these could be more one-off purchases rather than the kind of recurring revenue developers would probably prefer. Allowing users to pay for a competitive advantage, meanwhile, could unbalance the game, Luton warned.

"Customization, which usually means (offering) avatar dressing or something similar, works best when users can share with and view customization of friends, due to a phenomenon known as social proof," he said. "Convenience falls in the realm of letting a player do something quicker or easier--commonly this is energy mechanics."

Farley said Tag Games has tried similar things. "Most people will pay to speed up the experience of open up content that's only available for purchasing," he said. "With customization, it might be about letting them choose the color of their car. What we've learned is that what would be perceived as having value from the developer is not always what the audience would see as having value." Even something simple, like buying specialty stickers for one of Tag's racing car games, has gained traction, he said.

Matt Gillis

Matt Gillis

Matt Gillis, senior vice president of global monetization solutions at Millennial Media, said it's better to start early and ensure that monetization tactics like IAPs are tightly integrated into the fabric of the game, rather than looking like users were seemingly forced into it after the fact.

"Developers do not necessarily have to 'make a move' to freemium," he said. "It can be part of an overall monetization strategy from the beginning."

Making the IAP process smooth and giving a real show of the outcome is very important, added Luton. This is all about good game design--making the title fun and enjoyable and the player feeling satisfied in making a payment. "It's still very early for IAPs right now and we'll see bags of creativity--it's rapidly moving," he said.

Luton had high praise for IAP experience on iPhones. "Generally iOS is still killing it," Luton said, noting Facebook and Android still have some improvements to make. Gillis said Windows Phone from Microsoft should not be ignored, either.

"It's worth thinking about your approach to monetization based on the platform," said Luton. "For example, up-front paid is almost commercial suicide on Android--some games can do it, but very few-- [a] better [option] is ad-supported with IAP.

Gillis pointed to SongPop, a gaming app from Fresh Planet which offers users the ability to play for free since it is monetized with advertising. Additionally, there are in-app purchase opportunities in the game so users can unlock new song packs, send messages to friends and even buy the songs they hear. "It is clear to me that Fresh Planet took a very holistic approach to monetization when they were developing their game."

Developers also need to think about how they can leverage popular platforms, and their own apps, to gather and analyze data, Farley said. He noted that Zynga has been particularly successful in tailoring its marketing activities based on what it knows about its customers. That's one of the reasons Tag Games recently hired a data scientist to get greater insights into buyer behaviors.

"It's giving you as a developer inside knowledge into how people are playing the games--what they are doing, what they aren't doing," he said. "There might be things you thought would be popular but aren't. Prior to that, most games were designed by some creative visionary, but the more you can find out what people are actually doing, you can give them what they want." This can make paid services much more viable, he added.

Can in-app advertisements work for your app?
As for the dreaded in-app advertisements? Farley sounded reluctant. "If I've downloaded it, I don't' want to be sold to every five minutes," he said. Tag Games is far more interested in cross-marketing its own products or possibly looking at product placements within gaming experiences. A player might see a McDonald's restaurant in the game's virtual world, for example, and by clicking on it receive discounts or coupons.

Luton agreed and called these "offer walls," acknowledging that this is still a risky area for most developers. "You need to consider hard the options and how they're integrated," he said. "Adverts can have a hugely negative impact on player perception."

Most of the developers that are monetizing with in-app purchases experience the same challenge-- 5 percent of their users account for 95 percent of their revenue, said Gillis. For example, Beeline Interactive made a dramatic pivot with a game like Smurfs' Village from charging a one-time download fee to a freemium model. Since then, they have followed on with many other titles leveraging in-app purchases. 

"I think the key learning is that freemium and ad-supported models can be complementary so that developers can monetize 100 percent of their users, rather than just five percent," he said.

Even though few can match the marketing budgets of the largest game app makers, Farley said developers shouldn't completely give up on the idea of premium games. There are still a few that can charge as much as $20, which can actually help them stand out within app stores and increase their discoverability.

"It's like vinyl LPs--there's still a market for it," he said. "I think it's all about experimentation, trying different things. We have options. You don't have to go through a publisher; you don't have to go premium. You can do what's right for your product which is, after all, unique."