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  • Strategy project: not just look at monetization methods but also at the overall pictures, the trends and what drives those trends.
  • massively multiplayer onlineTotalsmartphone penetration 1BDrivers for mobile revenue growth:Smartphone growth CAGR 2010-2015 is 19.8%Mobile gaming penetration in smartphones reach 41% and growing
  • IAP is anything that the user has to pay for after the initial purchase or download of your app.  It doesn’t matter if your app was free or paid to begin with.Some people prefer to separate downloadable content (DLC) from in-app purchases (IAP), however, unless you are providing the DLC for free, I also consider these as IAPs.Flurry has designated in-app purchases into three categories:Consumable — Items like virtual currency or special items that can help a player get through a game faster and ascend to the next level. These items are designated as “consumable” because once used, they can’t be used again. (68%)Durable — Items that can continue to be used in a game after purchase. This can also apply to additional levels or add-on packs in a game. (30%)Personalization — Items that don’t impact game play but can create a more personalized user experience. This could be something like clothes or outfits for an avatar (2%)Virtual currency - Allows user to collect virtual currency by performing certain actions in the game or app
  • Well is it different in gaming apps
  • Virtual currencies: Increase from 24% 6 months earlier
  • http://blog.flurry.com/bid/67748/Consumers-Spend-Average-of-14-per-Transaction-in-iOS-and-Android-Freemium-Games
  • Tokyo-based DeNA started in 1999 as an e-commerce company and transformed into a web service provider for PCs and cell phones since then, now employing over 500 people. The company name is a combination of “DNA” and the “e” from e-commerce.DeNA is engaged in the online advertising and affiliate business, e-commerce (mobile and PC web) and mobile portal services.The company’s biggest success is called Mobage-town, a combination of a virtual world, social network and gaming platform for cell phones. Currently, Mobage-town has 11 million members in Japan, which makes it the biggest mobile SNS in this country.DeNA opened a subsidiary, DeNA in San Mateo, California in January 2008, and plans to offer an English version of Mobage-town in the fall of 2008.
  • GREE is a Tokyo-based web services company that was founded in 2004 by then 26-year old Yoshikazu Tanaka. Before, Tanaka was responsible for operating the auctions operations for Rakuten, Japan’s biggest online shopping mall.The name GREE is derived from a sociological concept called “Six Degrees of Separation”. The company’s flagship product is called GREE Mobile, a mix of social network and free casual gaming platform.GREE started social network services on the fixed Internet but ultimately lost to Mixi, Japan’s biggest SNS. GREE’s fixed Internet platform is now practically abandoned.
  • Fremium version of Hungry Shark increases revenues by five times overnight.London-based developer Future Games of London says downloads of its Hungry Shark games on iOS increased to an average of 200,000 after it went free. It's now considering switching the entire output over to the model.It says the average transaction is now worth $3.26, based on in-app purchases costing from $2 - $5.Here are the headline results of the experiment.*  Month on month iOS revenue has increased 200%*  x5 overnight increase in revenue*  Average transaction value of $3.26 with IAPs, up from $1 paid app price.*  ‘Hungry Shark’ Enters Top 50 Grossing Games*  Daily downloads reach 250,000*  Total downloads for Hungry Shark series = 18.5m*  ‘Hungry Shark’ has reached No.1 in Free App charts in 48 countries*  FGOL MAU of 5.5 million across all games* Within 48 hrs ‘Hungry Shark Pt 3’ reached Number 3 in the US iPhone Free Games Chart (2nd Aug 2011) after release of free version.“The success of the Freemium model leads us to believe that we will be moving away from paid apps completely,” said Ian Harper, MD of FGOL.
  • That can change quickly has happened in the us.

Transcript

  • 1. MOBILE GAMINGCURRENT AND FUTURE BUSINESS MODELS Shani Shoham shani@2020.vc
  • 2. AGENDA 1 THE MARKET Sizing, growth & drivers 2 MONETIZATION MODELS Mobile apps & mobile games: Benchmark & trends 3 CASE STUDIES DeNA, GREE & Hungry shark 4 EMERGING TRENDS WP7 & multi-platforms 5 FUTURE RESEARCH Geography & demographics
  • 3. KEY HIGHLIGHTS 1 $3B MARKET. 24% CAGR Driven by smartphone growth and mobile gaming penetration 2 MONETIZATION MODELS – VIRTUAL GOODS/IN-APP PURCHASING DOMINATE 72% of mobile games on iOS (Top 200) use in-app purchasing 3 VIRTUAL CURRENCY IS THE BIGGEST DRIVER 78% OF DeNA mobile revenues are based on virtual currency 4 EMERGING TRENDS WP7, multi-platforms & contextual gaming
  • 4. AGENDA 1 THE MARKET Sizing, growth & drivers 2 MONETIZATION MODELS Mobile apps & mobile games: Benchmarking & trends 3 CASE STUDIES DeNA, GREE & Hungry shark 4 EMERGING TRENDS WP7 & multi-platforms 5 FUTURE RESEARCH Geography & demographics
  • 5. MOBILE GAMING – MARKET STATS400M USERS. $3B REVENUES. 24% CAGR # of gamers per platform Revenues & growth by segment
  • 6. MOBILE GAMING – A LUCRATIVE MARKET A BASE OF ENGAGED USERS FOR ADVERGAMINGFrequency of use of your favorite mobile game 4% 23% 49% Several times a day Once a day 49% A few times a week Once a week or less 23% Play their favorite game numerous times a dayDuration of use day (favorite mobile game) 1% 20% 50% <1 minute 1-5 minutes 6-10 minutes 50% 10+ minutes 29% Play the game more than 10 min.Source: MTV Networks, "Love Em or Leave Em: Adoption, Abandonment and the App-AddledConsumer," June 7, 2011
  • 7. MOBILE APPS – MONETIZATION MODELS & TRENDS IN-APP PURCHASING DOMINATES Total iPhone App Revenues 1 In-app purchasing In-app purchasing 2 Paid apps 28% 3 Freemium 48% 4 Virtual goods 5 Advertising 24% 6 Subscription Free with in-app Paid with in-app Paid only* Source: Distimo July 2011
  • 8. MOBILE APPS – MONETIZATION MODELS & TRENDS IN-APP PURCHASING DOMINATES 1 In-app purchasing In-app purchasing* Source: Distimo July 2011
  • 9. MOBILE GAMING – MONETIZATION MODELS & TRENDS 72% OF REVENUES ARE IN-APP PURCHASING 20% 52% 72%* Sources: Flurry analytics & Distimo, June-July 2011
  • 10. DRIVERS FOR IN-APP PURCHASE DOMINANES CTR & VIRTUAL CURRENCIES 35% of the 300 most popular free games in June use some sort of virtual currencies to monetize in the Apple App Store for iPhone.* Source: Distimo July 2011
  • 11. MOBILE GAMING – PAID GAMES - ANALYSIS LTV=$1.44. DECLINING ASP. 93% OF APPS - <1000 DOWNLOADS ASP of 300 most popular paid for games Paid apps download stat $2.50 0.10% 7.30% $2.01 $2.00 -16% $1.69 -15% 20.70% $1.50 $1.44 $1.00 $0.50 71.90% $- June 10 Januray 11 June 11 <100 100-1000 1000-50000 >50000 Expected value – revenue per game = $5803* Source: Distimo July 2011, iOS
  • 12. MOBILE GAMING – ADVERTISING- ANALYSIS LTV - $16-$33.5 Monthly advertising revenues per act. user Gaming apps – Duration analysis iOS $10.0 $9.5 7% 17% $9.0 11% $8.0 $7.0 $6.5 16% $6.0 $5.0 25% $4.0 $4.0 $3.0 24% $2.0 $1.0 Few days 1-3 weeks $- 1-2 months 3-6 months* source: Mobclix, January ‘11
  • 13. PAID-APPS VS. ADVERTISING BASED MODEL X2 MORE ARPU THROUGH ADVERTISING IN A SINGLE MONTH Paid-apps – One-time revenue per user Monthly advertising revenues per act. user iOS Android (E) iOS Android $10.0 $9.5 $2.01 $9.0 $8.0 $7.2 $1.69 $6.5 $1.53 $7.0 $1.44 $1.29 $6.0 $1.10 $4.9 $5.0 $4.0 $4.0 $3.0 $1.9 $2.0 $1.0 $- June 10 Januray 11 June 11* source: Mobclix, January ‘11
  • 14. MOBILE GAMING – IAP - ANALYSIS AVG TRANSACTION - $14. GAMING - TOP IAP CATEGORY Average price per gaming transaction Gaming - # of IAP per user* source: Flurry Analytics, July 11
  • 15. MOBILE GAMING MONETIZATIONSUMMARY1 In-App purchasing dominates In-app has gained significant momentum in the last 12 months2 Drivers: virtual currencies & CTR CTR is x8 higher. Virtual currencies drive users behavior3 Advertising still valid Source: Flurry, June ‘11 Video based advertising offers higher CTR. iPAD avg. eCPM as high as $1.754 Hybrid models Monetization mechanism should be considered based on the game advertising, freemium upgrades and in-app purchases, will allow more engaging games to maximize revenue
  • 16. AGENDA 1 THE MARKET Sizing, growth & drivers 2 MONETIZATION MODELS Mobile apps & mobile games: Benchmarking & trends 3 CASE STUDIES DeNA, GREE & Hungry shark 4 EMERGING TRENDS WP7 & multi-platforms 5 FUTURE RESEARCH Geography & demographics
  • 17. DeNA MOBILE – CASE STUDY VIRTUAL CURRENCY DRIVES GROWTHin Million DeNA Mobile Revenues ¥25,000.00 ¥20,000.00 Other 1% ¥15,000.00 Advertising 9% ¥10,000.00 Avatar related 12% ¥5,000.00 Virtual currency ¥0.00 78% 1Q 09 2Q 09 3Q09 4Q 09 Q1 10Source: Benjamin Joffe, Virtual goods conference, San Francisco 2010
  • 18. GREE MOBILE – CASE STUDYVIRTUAL CURRENCY DRIVES GROWTHUsers Revenue $133M 20M 2010.04-06 Digital goods (82%) Ads (18%) 2010.06
  • 19. HUNGRY SHARK– CASE STUDY 200% REVENUE INCREASE. 200,00 DAILY DOWNLOADS. From Paid-app to in-App purchase From $1 per download to $3.26 avg. transaction Daily downloads peak at 250,00 No. 1 free App in 48 countries Total downloads – 18.5 x5 overnight increase in revenueSource: Ian Harper, MD of FGOL August ’11, MobileEntertainment
  • 20. AGENDA 1 THE MARKET Sizing, growth & drivers 2 MONETIZATION MODELS Mobile apps & mobile games: Benchmarking & trends 3 CASE STUDIES DeNA & GREE 4 EMERGING TRENDS WP7 & multi-platform 5 FUTURE RESEARCH Geography & demographics
  • 21. EMERGING TRENDS WP7 EMERGESJan‘11 July ‘11 Growth 1 2 25% 2 1 78% 3 3 75% 4 6 61% 5 5 104% 6 4 242%
  • 22. EMERGING TRENDS MULTIPLE PLATFORM GAMERSSource: Newzoo BV, US National Gamers survey, Feb ‘11
  • 23. AGENDA 1 THE MARKET Sizing, growth & drivers 2 MONETIZATION MODELS Mobile apps & mobile games: Benchmarking & trends 3 CASE STUDIES DeNA, GREE & Hungry shark 4 EMERGING TRENDS WP7 & multi-platforms 5 FUTURE RESEARCH Geography & demographics
  • 24. WHY GEOGRAPHY MATTERS IN-APP IN CHINA – ONLY 34% OF REVENUESIn-app as % of total revenues (Top 200 apps)Source: Distimo, June 2011
  • 25. KEY HIGHLIGHTS 1 $3B MARKET. 24% CAGR Driven by smartphone growth and mobile gaming penetration 2 MONETIZATION MODELS – VIRTUAL GOODS/IN-APP PURCHASING DOMINATE 72% of mobile games on iOS (Top 200) use in-app purchasing 3 VIRTUAL CURRENCY IS THE BIGGEST DRIVER 78% OF DeNA mobile revenues are based on virtual currency 4 EMERGING TRENDS WP7, multi-platforms & contextual gaming
  • 26. SOURCES- PARTIAL LISTMintel - Mobile Gaming - US - May 2011Mintel - Mobile and Casual Gaming - US - December 2010PwC - Entertainment & Media sectorDistimo – Various reportsFlurry Analytics – Various reportsNielsen company – Various reportsEA – UBS Best of Americas Conference presentation – September 2011Activision – Investor day presentationZynga – S1Opportunities in the App ecosystem – Media AgilityCasual Connect Seattle – July 2011Mobile Game Monetization @ SGSGREEElectronic Arts
  • 27. MOBILE GAMINGBACKUP SLIDES Shani Shoham shani@2020.vc
  • 28. SMARTPHONES VS. FEATURE PHONES – US SAMPLESMARTPHONES OVERTAKING FEATUREPHONES PENETRATION
  • 29. FREEMIUM VS. PAID ACROSS APP STORES FREEMIUM DOMINATES ACROSS ALL APPSTORES* Source: Distimo July 2011
  • 30. PAID APPS - ANALYSISPRICING STATS SIMILAR ACROSS ALL APPSTORES
  • 31. APPS BUSINESS MODELS BY GEOGRAPHYNO SIGNIFICANT DIFFERENCE
  • 32. MOBILE GAMES BY PLATFORM TIME SPEND ON iOS – SIGNIFICANTLY HIGHER Time Spent per Month on Mobile Games by US Mobile Gamers, by OS, Q2 2011 (hours) 4.5 4.5 RIM BlackBerry Hours Feature phone 1 4.7 Windows Phone 7 Android 9.3 Apple iPhone (iOS) 14.7 0 2 4 6 8 10 12 14 16Source: The Nielsen Company as cited incompany blog, July 6, 2011
  • 33. WHY GEOGRAPHY MATTERS (1) DONWLOAD GROWTH IN CHINA EXCEEDS THE US* iPhone download growth volume 2011 vs. 2010
  • 34. WHY GEOGRAPHY MATTERS (2) CULTURAL DIFFERENCES EVEN AMONG SIMILAR COUNTRIES US vs. UK Mobile gamers - demographicUK (n=328) 18-24 25-34 35-44 45-54 55-64 65+US (n=486) 0% 20% 40% 60% 80% 100% 120%Source: PopCap Games, "2011 PopCap Games Mobile Phone Gaming Research" conductedby Information Solutions Group, Feb 28, 2011
  • 35. EMERGING TRENDS MMO & CONSOLE/ONLINE GAMES – SPENDING INCREASESMedian Amount Spent on Virtual Content Among US Gamers, by Game Type, July 2011 $80 $70 $60 $50 $40 Jul-10First-party $30 Jul-11 $20 $10 $0 MMOs Free-to-play games Console games with PC games with Casual games Social networking online play online play games $60 $50 $40Three party $30 Jul-10 $20 Jul-11 $10 $0 MMOs Free-to-play games Console games with PC games with Casual games Social networking online play online play games