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Monetization Strategies: iOS + Android

  1. 1. Grotland New Media LLC Monetization Strategies: iOS + Android John Grotland Grotland New Media
  2. 2. Smartphone Growth by OS: 2010- 2015 4,500,000,000 4,000,000,000 3,500,000,000 3,000,000,000 Other 2,500,000,000 Microsoft RIM 2,000,000,000 Symbian iOS 1,500,000,000 Android 1,000,000,000 500,000,000 - Y2010 Y2011 Y2012 Y2013 Y2104 Y2015 Source: Gartner, April 2011
  3. 3. Tablet Growth by OS: 2010-2015 1,000,000,000 900,000,000 800,000,000 other cumulative 700,000,000 Microsoft 600,000,000 Cumulative 500,000,000 iOS Cumulative 400,000,000 Android cumulative 300,000,000 200,000,000 100,000,000 - Y2010 Y2011 Y2012 Y2013 Y2014 Y2015 Source: Gartner, Aug. 2011
  4. 4. Laws of Game Monetization 1. It’s the game, stupid.
  5. 5. Laws of Game Monetization 1. It’s the game, stupid. 2. Monetization = part of game development strategy, ≠ the game development strategy.
  6. 6. Laws of Game Monetization 1. It’s the game, stupid. 2. Monetization = part of game development strategy, ≠ the game development strategy. 3. Better to develop monetization plan at concept phase, not at beta or beyond.
  7. 7. Laws of Game Monetization 1. It’s the game, stupid. 2. Monetization = part of game development strategy, ≠ the game development strategy. 3. Better to develop monetization plan at concept phase, not at beta or beyond. 4. Proper monetization = commitment
  8. 8. Laws of Game Monetization 1. It’s the game, stupid. 2. Monetization = part of game development strategy, ≠ the game development strategy. 3. Better to develop monetization plan at concept phase, not at beta or beyond. 4. Proper monetization = commitment 5. Monetization is more than how to price
  9. 9. Revenue Models  Four revenue models dominate iOS/Android  Pay per download (PPD)  Freemium  Free-to-play (F2P)  Advertising/Offerwalls  Auto-renew subscriptions not there yet  odds are it will happen—likely Android first  Apple—polite “no” for now  Most rev models not new, just implemented with great rapidity in iOS and Android
  10. 10. Pay Per Download (PPD)  Original monetization method on iOS, Android  You buy it, you own it  In general, becoming a more difficult proposition  Competition, price sensitivity = revenue curve dropping  Free games with IAP intro in 2009 skewed market heavily towards freemium/F2P  $0.99 PPD game now seen as “investment”
  11. 11. PPD: Pros and Cons  Pros  Simplest game to build  Still can work for strong brands, console ports  Customers know what they are getting and understand the value  But there are “non-branded” games still make it work—AB, CTR, etc.  Cons  Difficult to make non-branded titles successful  Unless a well-known title (console game port), low pricing key to success  Not many tools for keeping rank high  Success these days typically requires extended commitment to title
  12. 12. Plants vs. Zombies
  13. 13. Final Fantasy Tactics: War of the Lions
  14. 14. Freemium  Freemium games are free to download  But can only play to a point before you have to buy/unlock the full (“premium”) version or discrete components with IAP  Can include other monetization features, such as virtual currency  Added to iOS in Q4 2009; added to Android in Q2 2011
  15. 15. Freemium: Pros  Low barrier to entry for customer; great way to get a mass audience to try a new game  Well executed Freemium game can generate 2X-4X revenues of PPD  Works well for non-branded titles and new IP
  16. 16. Freemium: Cons  Conversion dependent on branding and pricing; non-branded titles can do less money than if they were PPD  Necessary to balance how much free gameplay before conversion  Like PPD, not many tools for rank support  Like PPD, success enhanced by extended commitment to title  Frequent feature updates  Sustained marketing effort
  17. 17. Free To Play (F2P): High Replay Value = Stable Revenue • Currently generating ~50% of all games revenue on iOS; rapidly growing on Android Market – 16 of top 30 App Store grossing apps are F2P games (11/14/11) – Free to play games are free to download titles that have high replay value – High replay value combined with in-app purchase can create a more stable revenue base than PPD games
  18. 18. Free To Play (F2P) • F2P games allow players to play for free if they either will work for items or VC, or if they complete certain tasks effectively – But certain items/features only available to buy with VC – Successful monetization typically comes from small percentage of large base buying VC – 3%-5% conversion percentage typical for very successful games
  19. 19. F2P: VC, “Social”  Almost all F2P games use Virtual Currency (VC)  Players use VC to pick and choose items within the game  Typical to give greater value in VC the more real money spent  F2P games often put in same category as “social” games  Best when lots of people playing at the same time  But direct player interaction not necessary for success  many F2P games on iOS/Android don’t require customers to interact with each other—e.g. some of the more recent Glu games.
  20. 20. F2P: Pros  ARPU typically much higher than the standard PPD or freemium games (up to 3X-4X)  Works well for non-branded titles/new IP  Low barrier to entry for customer; great way to get a mass audience to try a new game  Social aspect, plus persistence on device deck, add a viral marketing component  Often have a much longer revenue lifecycle than other types of games
  21. 21. F2P: Cons  More expensive to develop than PPD and Freemium titles (initial dev cost ~2x-3X more expensive)  Requires back-end systems and servers, particularly for multiplayer and cross- platform games  Consistent need for game feature updating  Requires direct marketing to be involved in development process to help with social/viral marketing aspects
  22. 22. Zynga Poker
  23. 23. Vegas City iPhone: DL vs. Rev
  24. 24. Ad-Supported Games  Currently important on Android, where app stores not as successful as iOS  Angry Birds: $1MM/month ad revs on Android Q2 2011  Glu = many forms in Android games; some in iOS  Classic advertising (banner ads; jump out of game when clicked, CPM/CPC models) are still used, but…  Newer incentivized advertising/customer acquisition models becoming huge—higher CTR, revenue per CPM/CPC/CPD  “Rich Media” ads (like iAd)  Offerwalls (TapJoy, Flurry, etc.)  Video ads  Incentivized ads in Freemium, F2P games becoming important—can be traded for items, VC, etc.
  25. 25. Ad-Supported Games  Pros significant source of revenue if implemented properly and creatively No barrier to initial consumer adoption Useful to monetize freemium titles until conversion F2P games for consumers who don’t want to shell out $$ Continuing revenue stream
  26. 26. Ad-Supported Games  Cons Angry Birds Android exception to rule typically very low revenues relative to PPD for average games (10%-30%) Success requires massive download numbers Massive download numbers require serious, sustained marketing push Classic banner ads likely to become less relevant as Offerwalls, Rich Media and other forms gain popularity Poor reviews if not properly implemented Requires partnership with ad provider, inclusion of SDKs, etc.
  27. 27. Mix-n-Match!  More games coming out now with many monetization methods on iOS, Android  Can be very efficient, creative in maximizing revenue
  28. 28. Mix-n-Match! Examples  Chair/Epic—Infinity Blade: $5.99 to buy, includes a VC system-- earn or buy ―Gold‖ to buy virtual goods, XP to level up, etc.  Rovio—Angry Birds:  iOS: $.99 to buy, regular updates + added levels free to players, discrete virtual goods to purchase via IAP (plus Rio— sponsored)  Android: free with advertising  Glu—Contract Killers (iOS and Android)  F2P with VC system to earn and buy credits, discrete items, XP, etc.  Banner advertising  Incentivized Offerwalls (Android) , incentivized video ads (iOS)  Incentivized cross promotion of other Glu games
  29. 29. Infinity Blade
  30. 30. Gun Bros
  31. 31. Pocket God
  32. 32. Developer Considerations  Success on iOS/Android means embracing the ―Long Tail‖  ―Fire and Forget‖ game projects less common  Need to support 3-6 months after launch to determine traction  Success could mean years of consistent support  Post launch development, updates on title  Analytics, analytics, analytics!
  33. 33. Developer Considerations  Business, Process Structures have to change  Classic designer + producer roles driving game development not enough—new skillsets needed  Need to add Business/Data/Monetization Analyst role to drivers of game development process  Driving how to incentivize, monetize games  How to track, analyze customer behavior, make game tweaks to maximize player satisfaction, revenue  Development team structure must change  Need ―live teams‖ to quickly, efficiently make changes to games based on user analytics
  34. 34. Developer Considerations  ―Long tail‖ strategy can change nature of relationship with publishers on work for hire projects  Turns game development into more of a partnership; greater risk sharing  Agreements need to reflect that, with relationship beyond game launch spec’d out  Need to be more wary of partial upfront/rev share deals on one-off titles in this new environment
  35. 35. Final Thought Ed Dille of Fog Studios (quoting Clint Eastwood): “A man needs to know his limitations.” So, know what you are good at and focus on those things. Partner, hire and/or acquire for the things you aren’t.
  36. 36. Thank You! John Grotland Grotland New Media +1 (201) 757-2453

Editor's Notes

  • Talk a few seconds about your background, apologize for your PPT skills…Show of hands:How many have done iOSHow many pure WFH dev studiosHow many self publish
  • Note that this doesn’t count device churn, so my guess is that the final count will be around 3-3.5 billion by 2015.
  • You can see from this chart alone that there will be a significant number of tablets in the market, and these will be primary gaming devices. Note that this is Gartner’s forecast, and you believe that they are way underestimating the number of Android Tablets that will make it into the marketplace—someone is eventually going to get it right…
  • Reference Denis Dyack’s speech from earlier today…I’ve been seeing a lot of focus on monetization lately, to the point where there are whole 3 day conferences on it. Here are the facts: in a highly competitive, hit-driven business like gaming on a maturing platform, the best monetization strategy in the world won’t make a lousy game good, or a mediocre game great. So, what does monetization do for a good game (and you know what those are)? It will do is 1) extend the useful revenue lifecycle of a game and maximize the amount of money you get out of it from each player, 2) bring in more players by lowering the cost barrier to entry, and 1) give people lots of positive reasons to keep playing and spending money.
  • Corollary to Law 1. Monetization is part of an overall strategy to develop a great quality game, and should be considered along with audience, marketing, sales, launch distribution platforms and other key factors from the beginning. Recently I’ve worked with some developers and publishers that want desperately to turn existing IP that was originally a box retail product (like a console or arcade title) into a “social game” (meaning in reality—a free to play) in order to cash in like Zynga. Often the games themselves don’t lend themselves to being a freemium title or F2P, and actually monetize better as either a straight PPD game or as a hybrid model.
  • Way too many times have I come across developers and publishers that had not considered how they were going to price a game until very late in the development process. They haven’t decided if they are going to add in IAPs to the game at launch or later after launch, or even what the price of the game is going to be. I’ve even seen some who tried to move a game at alpha from a straight PPD to Free 2 Play, which adds cost, complexity and development time, often to no appreciable revenue advantage. Each type of monetization method you consider will alter the game concept in some way to accommodate how people play and pay in that type of game.
  • Back in the pre iOS/Android/Facebook days, titles were built in a “fire-and-forget” mode. You built the game, focus-grouped it, QA’ed it, packaged it and threw it over the wall, after which it was marketing’s problem and your team moved on to the next project. The extremely competitive atmosphere of the Android and iOS markets have forced more and more developers to figure out ways to lengthen what can be a very short useful game lifecycle for the typical title (a few days to a few weeks on iOS), by keeping games fresh in various ways, from adding new features and levels
  • Talk about promotion, virality, user engagement, replay, progression, getting player to commmit.
  • $0.99 acquisition price has become a major investment decision and a huge barrier to purchasePrice sensitivity—note story about Numba and how we thought it would be a $10 title, but ended up at $2.99 withing a few days after the store launched.
  • Pros:PPD is still the easiest way to get a game out fast and worked fantastically well before Apple allowed free games to have IAP, which opened the store up to Pricing pressure is difficultConsDifficult to make non-branded titles successfulTendency to drop precipitously after featuring on App StoreUnless a well-known title (console game port), low pricing key to successNot many tools for keeping rank highPrice drops can work, but typically only a short term effectTick off customers who bought at higher price = bad reviewsFeature updates have better long term effect on salesSuccess requires extended commitment to title, includingFrequent feature updates (e.g., Angry Birds, Cut the Rope, etc.)Sustained marketing effort (e.g., Lima Sky spending $20,000/month in marketing and advertising on Doodle Jump in 2Q-3Q 2010)
  • Note this slide is up to April—PvZ has added IAP since then. Plants versus Zombies shows that PPD titles can be successful even in an F2P-dominant world. A great game that is frequently updated can do well with PPD, even at $2.99. The download rank follows the grossing rank closely because the average purchase made on the Apps Store is about $2.50
  • Added stats on
  • Added stats on
  • Zynga Poker shows how constant game improvement via updates, plus effective customer acquisition, cross promotion and marketing between the iOS and Facebook versions, can make great product.
  • Vegas City is pretty typical of all of Digital Chocolate’s F2P games on iOS. None of the recent titles have been particularly successful, each likely accruing <$200/day. The wide range in gross ranking on a day-to-day basis is a result of the low IAP average combined with no connection between FB, iOS versions and relatively few customers playing.
  • Note that Infinity Blade and Rovio did not start out with multiple forms of monetization, but worked it in later.
  • Zynga Poker shows how constant game improvement via updates, plus effective customer acquisition, cross promotion and marketing between the iOS and Facebook versions, can make great product.
  • What is notable about Gun Bros is that gross revenue ranking, while good, is low relative to download ranking when compared to other F2P titles with similar DL numbers. That means consumers aren’t buying the high priced VC bundles, which can be seen in the top in app purchases section to the left. The #1 in app purchase bundle is 99 cents, as opposed to Smurfs’ Village (for example) which is $4.99. This means that Glu should be looking to rework either how VC is spent in the game, or what the value proposition is for their current VC bundles.
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