monetization – Alley Mobile

THE RISE OF THE SUBSCRIPTION MODEL IN THE APP ECONOMY

By Stefano Melucci | October 25, 2017 | Comments 0 Comment

If you have looked at the Top Grossing charts on the App Store (though that’s harder to do in iOS 11 than it used to be), you might have noticed an important change taking shape in the last few months. On October 1st, for the first time, the Top 5 grossing on the US App Store didn’t include any of the usual free-to-play games that have dominated for so long: Clash of Clans, Clash Royale, Candy Crush, Mobile Strike, Game of War or Pokemon Go.

Credit: Prioridata

The big winners in the free-to-play game market do not need to panic: they are still doing well (with 5 of them remaining in the top 10 on that date), but we can detect some interesting market trends from this new chart.

The first is that mobile consumer spend is diversifying from games into other popular content categories like dating, music streaming, and mobile video. Mobile video, in particular, is very hot, with a multi-billion dollar battle to turn the smartphone into a television as well as skyrocketing trends in mobile data traffic driven by video.

The other common denominator among the Top 5 grossing apps from the chart above is that they monetize their content with a subscription business model. It comes as no surprise that the subscription model can be very profitable for content providers and very convenient for regular consumers of a particular content portfolio. What is relatively new is the expansion of this business model inside the app stores, and consequently, the growth of its importance in the app ecosystem.

In fact, in June 2016, the App Store changed some of the rules around the subscription model for apps, mainly extending it to all categories of apps and reducing the fee from 30% to 15% for subscribers using the services for more than 12 months. Just last week Google announced it will follow the same rule for subscriptions on Google Play store starting from January 2018. This certainly can contribute to the growth occurring on both stores: Apple announced that 2016’s app subscription billings were up 74% year-over-year to $2.7 billion. Google announced that over the past three years, subscription spend has grown over 10 times on Google Play, while subscribers doubled in the last year.

So, if it makes sense for your app, you should definitely look into implementing a subscription model and taking advantage of the recent changes in the app stores. Although the fees are still higher than alternative web payment methods, the low friction in the purchase flow shows conversion rates that are 100%-400% better than usual account and credit card flows.

However, not all apps work well with this business model: you need a great product with a clear value proposition that continues over time. Examples are:

– Premium features (e.g., “Likes you” in Tinder Gold)

– Great and updated content (e.g., HBO NOW)

– Exclusive and personalized service (e.g., health and fitness apps like Runtastic)

– Utility apps (e.g., Dropbox etc.)

Recent research by Google Play outlines the details of what users are willing to pay for, how much they are willing to pay (by category of content), as well as useful insights on how to price your product and keep your users engaged. The Google Play dashboard has also recently added some useful reports to keep track of retention and churn for subscription services.

What about mobile games? Can games benefit from this rise in subscription business model in the app ecosystem? While subscription is definitely not a new model in the PC game space with many MMO (Massively Multiplayer Online) games like World of Warcraft, Elder Scrolls Online, etc., traditionally offering premium subscribers “unlimited access”. This model definitely presents challenges on mobile, with the predominance of casual gaming and its free-to-play model.

The coveted “Netflix for Games” approach that is pursued on the console market by Xbox Game Pass and Playstation Pass requires the bundling of a large number of popular premium games into a catalog. During the subscription, the catalog can be accessed (without limits) with ongoing additions and updates to the content. This is pretty hard to achieve in the mobile free-to-play space, although there has been some success in emerging markets with initiatives like Bemobi (now part of Opera) which bundles a number of premium titles along with full access to free-to-play games using a subscription model.

Another interesting approach exists for free-to-play games with very long player lifetimes and high user spending: offering subscription services either for exclusive features, an advantage in the game, or simply a discount on repeated purchases.

A great example of this is Supercell’s Boom Beach that recently started offering two different subscriptions: “Endless Reserves” which removes the time constraints related to training troops for $9.99/mo and “Extra Builder” which allows a player to build two buildings at the same time for $2.99/mo.

This model has yet to be replicated on Supercell’s most popular and lucrative titles (Clash of Clan and Clash Royale), so we can assume that they are currently testing the appeal of this model in the free-to-play realm to see its effect on the game economy. So far, judging from t he community’s reaction, it seems to resonate well with heavy users of the game. This approach could also be applied to their other titles: wouldn’t you consider paying a monthly subscription for the ability to open Chests instantly on Clash Royale?

Another successful example in the gaming space is Song Pop 2 by Fresh Planet, that offers a “VIP subscription” giving access to a bundle of features and eliminating ads from the game for $4.99/month.

It is too early to know if the subscription model will make headway in the free-to-play mobile games market, but it is certain that potential candidates need to meet the same criteria we listed above for other types of apps: high engagement and clear continued value proposition that can be proven to their users with a free trial period.

If your title satisfies the above characteristics it would definitely be worth exploring the possibility of venturing into a subscription business model, that notably offers developers a more reliable stream of revenues than IAPs and consequently simplifies your User Acquisition efforts.

As usual, do not hesitate to comment or contact us!

BUILDING A GREAT GAME: INTEGRATING REWARDED VIDEO ADS

By Stefano Melucci | October 5, 2017 | Comments 0 Comment

In case you’ve been living under a rock, or – understandably – just trying to screen out all news from the real world, there’s been a lot of buzz lately around rewarded video ads. According to a recent report released by Tapjoy, 79% of players prefer to have the option of rewarded ads in their games, and that number is broadly consistent with the user behavior we see in our titles. As you may recall, we briefly touched on rewarded ads in the most recent blog, so now let’s dig a little deeper and look at some of the best practices for implementing rewarded ads in your mobile game.

The format is increasingly popular in games and apps alike because it not only represents a non-intrusive form of advertising (the user ‘pulls’ the ad towards them rather than having it ‘pushed’ at them), but it also allows users to better enjoy the game, by progressing faster, collecting more virtual currency, or exploring new content.

Let’s first take a look at how the use of this kind of advertising in your game can actually improve your metrics (besides contributing to your bottom line). The graph below shows the daily retention for one of our games for three different cohorts of users: all users, payers, and users who never purchased anything but watched at least one rewarded video.

As you would expect, players who made at least one purchase have a much higher retention rate than the average (83% Day 1 retention vs. 54% in this case). Interestingly, rewarded video viewers also have much better retention than average (79% Day 1 retention in this example). This is also in line with empirical feedback from users who often ask for more opportunities to “earn” rewards in the game through ads.

For sure, you are wondering: do rewarded video ads cannibalize In-App Purchase Revenue? In our experience, if implemented correctly, that is not the case. Based on our findings, you should expect a 10% to 40% uplift in ARPDAU with no negative effect on your conversion rate to in-app purchase. The fact that this ad revenue is incremental to the in-app purchase revenue is illustrated by the graph below in which you can see the average number of video ads seen by viewers divided into two cohorts: all users and payers. It shows that payers also like to take advantage of this additional opportunity to progress in the game and have similar watching patterns as the average user.

So, what are the best practices for effectively integrating rewarded video ads in your game?

The first suggestion is to embed rewarded ads in the core loop of your game so that they become a natural part of the gameplay. Typical examples of reward mechanisms are: revive at Game Over (for casual games), additional life (for platformers or puzzle games), shorter timers (for building games), virtual currency, energy, boosters, etc.

Example of Rewarded Video in Get 13

The best reward mechanism for your game depends on the genre of your game as well as its resources and economy. It is important to be creative in the way the rewards are designed within the game in order to keep players motivated without disrupting the overall game economy. Rewards can also be a way to let users explore new content that they may later be interested in obtaining via an in-app purchase. For example, in our title Weed Firm: 2 Back to College, one of the customers that comes to the door brings a gift in exchange for watching an ad. This allows the player to get a sneak peek of content that would otherwise be available to them only much later in the game.

Another important aspect in the implementation of rewarded video ads is to find a balance between theprominence of the ad’s placement while simultaneously creating a sense of rarity around the offer. The goal is to create a sense of urgency amongst players to motivate them to seize the opportunity when it is presented in the game. The example above illustrates a creative solution to finding that balance; the customer who offers the rewarded video “gift” appears sporadically in the game.

As with any other feature of your game, it is important to track rewarded ad views and measure some important KPIs. In our analytics, we typically track every completed ad view as an event, together with some relevant properties (e.g. user level, the balance of virtual currencies, the ad network that served the ad, reward obtained, and so on). This way, it is possible to do an in-depth behavioral analysis about what kind of reward is most appealing to users, what the effect is on the overall economy of the game, etc.

At a high level, the main KPIs that you will want to track for your game are:

% of DAU engaging with Rewarded Video ads

Average views per player, per day

These KPIs can vary widely depending on your implementation: we have seen between 25% and 50% of DAUs engaging in rewarded video ads and between 2 and 8 rewarded video ad views per player. As a rule of thumb, you should target at least a 30% engagement rate and around 4 ads per day, per viewer. At Thumbspire, we work with our partners to establish specific targets based on their game’s genre and implementation.

In summary, rewarded video ads can be an important component of your game’s monetization strategy and they can also increase usage metrics in your game, provided you stick to some basic guidelines for the successful implementation of this feature:

Embed rewarded ads in the core game.
Give rewarded ads prominence while maintaining a sense of rarity around the offer.
Be creative in the definition of the rewards to prevent disruption of your game’s economy.
Track rewarded ads properly so that you can improve their effectiveness with the usual iterative process and A/B testing.

Hopefully these guidelines will be helpful in increasing the success of your game, but as usual, feel free to comment or get in touch!

BUILDING A GREAT GAME: AD MONETIZATION BEST PRACTICES

By Stefano Melucci | September 27, 2017 | Comments 0 Comment

In the first article of our Building a Great Game series we focused our attention on engagement and in-app monetization metrics: now it’s the time to look at the equally important component, ad monetization. In fact, as we already mentioned, the average overall conversion rate for IAP (In-App Purchases) is ~2% of the base over a 30 day period, so it is crucial to find ways to get some value from the other 98% of your players.

Many game developers are wary of integrating ads into their game. They fear that ads would annoy their players and negatively impact retention and engagement, but if done in the right way, ads can raise the ARPU (Average Revenue Per User) by 10% to 80%, even for games that are successfully monetizing with IAPs. To get started, let’s first take a look at the main ad formats, their characteristics, and the pros and cons of each type.

AD FORMATS

The oldest format is the Banner Ad, inherited directly from the web. Static banners are typically displayed on the top or the bottom of your game, either in menu pages or in the gameplay view itself. As you can imagine, this format can be pretty invasive, and it can also lower the perception of your game’s quality. It is not used much nowadays, but can still be an important component of your ad monetization strategy for very casual games.

Interstitial Ads are full screen (or almost full screen) images or videos that pop up at a certain point in your game. They are typically placed at “intermission points” like after seeing the “Game Over” screen or at a “Level Up” moment in the game. This format constitutes the bulk of ad revenue in most casual games, but as we will discuss below, it must be integrated carefully in order not to impact user experience.

Rewarded Videos require the user to opt-in to watch a full (15-30 sec) video ad in exchange for a reward in the game. They are becoming very popular in mobile games because they provide high CPM (Revenue per thousand impressions) and they fit well with the Free-to-Play model: giving non-spenders a way to progress faster in the game in exchange for some value they provide by voluntarily engaging with the ads.

Another format that has been getting some traction in recent times is rich media or “Playable Ads” which require users to interact with the ad, typically in a short game demo, which showcases the core gameplay inside the ad. This format can be displayed either as an interstitial or as a rewarded ad. They have the potential to achieve high CPMs but need to be utilized carefully because depending on the quality of the creative, the experience can be confusing and negatively impact your user retention.

From Left to Right: Banner Ad, Interstitial Ad, and Rewarded Video Ad

BEST PRACTICES

An easy yet valuable piece of advice is to integrate ads into your game, or you will be leaving money on the table! However, it is important to implement ads in the right way, and at Thumbspire we guide our developer partners to follow the best practices for games found in the same genre.

The most important rule is to prepare your game in a way that allows you to measure and dynamically control the ads in your game. Considering that for each format you will most likely integrate a few ad networks, it is important to control the order in which these networks will be invoked at every ad impression to maximize the average CPM of your traffic. This is the role of the mediation system – an intermediate layer that your game will invoke at every ad placement, deferring to it the choice of which ad network to forward the request to. There are a number of mediation systems on the market, and all of them have some automatic algorithm aimed at maximizing the CPM for every impression based on various parameters like device, location, etc. With mediation, you can also manually override the algorithm and force a pre-defined priority of ad-networks for a specific format in a specific geographic location (known as a “waterfall”). This can be useful if you want to take advantage of special guaranteed CPMs you might be offered by the ad networks in exchange for a guaranteed call order in the waterfall. From our experience, introducing mediation to optimize the return for your inventory can lead to an increase of 80-110% compared to your average CPM from a single network.

In addition to mediation, it is also important to put a system in place that allows you to measure and dynamically control the ads being served in your game. For example, if you decided to have banner ads in your game you might want to have a server flag that enables or disables them for specific cohorts of users, such as disabling them for any user who makes an IAP. You might also want to be able to control the frequency of your interstitial ads (for example, every 5 “Game Over” screens) and dynamically tweak it depending on the average game session length or even apply different frequencies to different cohorts of users. For rewarded videos, you might want to make the amount of the reward configurable dynamically so that you can tweak the economy of your game once you have a sense of the CPMs you can obtain. Hopefully, you get the idea: the level of control depends on how granular you want to be in your actions, but it is important to have the possibility to control and modify the ad implementation without the need of a new release for every change you want to test.

Finally, it is important to measure and track every ad impression at a user level in your analytics, so that by applying an average CPM per geographic area you can estimate the advertising contribution to the LTV (Lifetime Value) with the same granularity that you have for IAPs.

Stay tuned, as we’ll dive into more details on what to measure as well as target benchmarks for ad KPIs in our next blog post in this series. In the meanwhile, feel free to reach out if you have questions or comments!