The experts' guide to mobile games monetisation: Part one

• “The most important aspect of monetisation is balancing ensuring that you implement the right strategy and ad units to improve LTV without reducing retention is vital”
• “In my opinion balancing game economies and cultivating player motivations to convert to spending hard cash is the most difficult thing in our industry”

Mobile game's success relies heavily on how developers monetise them. While the mobile market has premium games at a one-off cost, much of the industry now revolves around the free-to-play model, meaning that developers must have a thought-out monetisation strategy that adds value to the game and generates revenue, all without alienating its players.

With so many different ways to monetise, knowing which models to follow and how to implement them can be a challenge. But we've got some expert advice…

Kwalee’s VP of mobile publishing, John Wright, is back with another series, this time to share his valuable insight on mobile game monetisation. In this first part of two, he touches on the core basics of establishing a game economy and the fine art of fine tuning in-app purchases.

The basics

In-game monetisation is a vital part of the mobile games ecosystem. I’ll start with the general basics and things you should all know before discussing more complex topics.

Monetisation for mobile games can be easily broken down into two main categories: Free-to-play and premium. 

Very simply, free-to-play allows you to download games for free to your device but has “micro-transactions” or advertisements that allow developers to make money after the fact, whereas premium requires an upfront fee to play the game. Traditionally, this was a one-time fee that allowed you to play the game without subsequent transactions. However, that has changed over the last few years.

Free-to-play is 99% of the industry, so I’ll stick to that for now. When we talk about free-to-play, we talk about various different types of monetisation and strategy. These can include:

• Rewarded video

Probably the most common ad unit in our industry. As a developer you have to think carefully about where to integrate this to get the desired effect. Understanding user motivations is key to monetisation, and this is no more true than with RV. This simply means placing the RV in the desired spot with a good enough reason for users to engage with it. Users then get a reward for watching a video or have some kind of multiplier applied (e.g. x2 a reward).

• Interstitial 

Depending on the genre of game, you will probably see a lot of these or none at all. It's what we refer to as a system-initiated ad unit rather than RV, which is user-initiated. That essentially means that there is a logic set up by the developer to serve X number of ads in a given time frame, normally referred to as “Ad frequency”, so they will show five ads to one user in 60 minutes at select breakpoints (the end of the level, for example).

• Banner

A small banner or static image that is normally displayed at the bottom of the home screen.

• Offer Wall

One of the traditional forms of monetisation in F2P games is essentially a micro-economic store that gives you rewards based on completing actions in other games, normally referred to as “Cost per engagement” campaigns. 

• In-app purchase

IAPs are the most premium, desired, and hardest type of monetisation to implement effectively. Ensuring you develop your game with the economy in mind and that users have the right motivations to spend hard cash is no easy feat. A good casual game would normally optimise towards 4 to 6% of paying users, meaning 1 in 20 people who play your game end up spending money in the game.

• Subscription 

Essentially, “subscribing” to a weekly or monthly IAP which gives you unique in-game content, bonus items or additional perks and multipliers on currency or rewards. The most profitable form of monetisation you can get.

• Cross-promotion 

Probably one of the most underutilised monetisation strategies you can do today. For those who have big game portfolios or back catalogues, this is a simple way of getting users from one of your games to another. The idea is that if you can time it correctly at the churn point, you can potentially double your users’ overall LTV by keeping them in your ecosystem. 

Remember, the most important aspect of monetisation is balancing. Ensuring that you implement the right strategy and ad units to improve LTV (lifetime value) without reducing retention (notably by ads spamming) is vital to your success as a developer. The growth loop defines the balance between your game's monetisation and user acquisition to scale DAU whilst maintaining x% of target profit.

Knowledge resources

Now, we've touched on the basics of monetisation, including the “general” ad units and ways to make money.

I'm going to try to refrain from going too much into ad monetisation. I've spoken about this heavily in previous series, and I think people are much more educated on the subject overall. I also have to confess I am much more experienced in ad monetisation than in-game economy and IAPs, but I'm going to try to give as much insight as possible.

I recommend following my friends, @Philip Black, @Jakub Remiar, and @Michael Kopelovich, for more key resources and knowledge on the topic.

Game economy and in-app purchases

In-app purchases, on face value sound simple. Oh, wait. We only have to create a shop and some kind of currency conversion system. No problem. 100 gems for 99c? 200 for $1.99 sounds about right? Wrong. In my opinion, balancing game economies and cultivating player motivations to convert to spending hard cash is the most difficult thing in our industry.

Let’s talk about player motivations for a minute. One of the most basic forms of this is difficulty balancing within the game and ensuring that the progression system increases difficulty at the right moments; this is what I call the Goldilocks problem.

Equally important is to say that this is different for every game genre, and arguably for every game. This is why it’s important to ensure that once your game has passed the MVP stage and the core loop has been correctly developed, you start to look at user churn while A/B testing difficulty. We have found in some games that making them harder improves the two most important metrics for us: Long-term Retention (LTR) and Percentage of Paying Players (PPP).

Equally important is how the difficulty increases over time. If you make it too hard too early, players churn. And if you make it too hard too late, players also churn.

Having a product analyst or game economist managing these tests over months of development is vital to success. Equally important is ensuring that you have correctly implemented enough metagame to keep the players interested and engaged outside of the core loop.

So, while your PA/GE is working on improving the core loop, your game designers should be focusing on that metagame. Again, this comes back to player motivations and giving people multiple reasons to come back and engage with your game. This could be secondary game mechanics, mini-games, additional progression systems, limited-time events, special items, or just the basic leaderboards. 

The last point that I would like to mention is community, or the motivation behind PvP or the “competition effect.” This is another one that is hard to implement and design but yields super impressive results when done correctly. Equally, PvE, which mimics the feeling of beating another person (or AI in this case), gives the player that feeling of accomplishment.

Because of the complexity of developing such a feature, especially around game matching and servers, I would normally say that this should be done after the monetisation tests have been completed and you know this game is going to launch. Otherwise you could spend a lot of money for nothing - the outlier would be if you’re Supercell or a comparable studio who knows this is a core part of the game to begin with.

Check back for part two, where John Wright shares more on monetisation with insights on personas and country specifics, as well as live ops and events.

                                                                                      Edited by Paige Cook