When Will Mobile Advertising Become Part of Mobile Gaming Companies’ Media Strategy? Part 2

Part Two

In part one of our series, we explored digital audience measurement use cases in mobile gaming and advertising, as well as mobile app installation ads vs. brand advertising. In part two, we dive deeper into the need for mobile gaming to have a media sales model, why mobile companies should invest in mobile advertising, and how mobile advertising can be a monetization mechanism for mobile game publishers. Let’s dive in!

Mobile Gaming Needs a Media Sales Model

One of the bigger questions around mobile gaming is the media sales model – or rather, why hasn’t it kicked off in the mobile gaming space? There are many reasons for this. First, as long as there is VC money and hunger for quick growth – even speculative – it is less important to optimize all the aspects of monetization. Second, download revenues for some games and apps, and more importantly the advent and success with in-app and in-game purchases, has provided impressive revenue numbers for a number of mobile gaming companies on our top list. As long as those mechanisms work, why bother thinking about anything else?

The truth, however, is that only about 0.5-10% of the average user base for mobile games with in-game purchasing allowed, actually spend any money within the games. Moreover, the number of gaming sessions with in-game revenues represent only about 0.1-1.0% of all the sessions of a certain game. Most of these sessions occur in the evenings or during morning commuting hours, as our analyses below depicts.

The cost of mobile ad downloads is going up all the time. This means that the usual strategy of “buy an app download and monetize via a small share of the user base spending money within the game” does not work so well any more. Customer retention is equally if not more important than acquisition. According to Michael Essany from Mobile Marketing Watch, “Many of the biggest and best companies in the world have teams of people devoted to the retention of customers rather than acquisition. While marketing has certainly changed, the fact that it’s much more expensive to acquire a new customer than to keep current ones remains the same.”

Why Mobile Gaming Companies Should Invest in Mobile Advertising?

We believe that mobile gaming companies should invest in advertising. Big gaming companies are not the only ones who understand that the competition in the top-end of the mobile gaming market is intensifying. It’s harder to fight for user time, and dollars, with in-game spending. Download or in-game revenues are not enough to drive profitability for most mid-tier and long-tail mobile gaming companies. Mobile in-game advertising could provide additional revenues.

It is also easy to dynamically allow mobile advertising only for those users who are not spending money within the game. Mobile advertising provides means for revenue generation for those otherwise zero-revenue users. The new innovations around mobile advertising, including video advertising, premium placements, and interactive full-size native formats, means that user experience is not drastically compromised with mobile advertising. It could even be the case that some premium ads might even actually improve the user experience.

Mobile Advertising Can Be a Monetization Mechanism for Mobile Game Publishers

Publishers frequently ask me about mobile advertising as a monetization mechanism for mobile game publishers. Naturally, our numbers are needed in the execution of the sales (of their mobile audience), so we have our own eggs in the basket, too. But, for this reason it is encouraging to see that mobile gaming companies are finally considering advertising as a viable option – or complement to download and in-game revenues. The whole ecosystem around mobile advertising needs this. As more premium inventory becomes available, more advertisers will see new opportunities to invest and drive ROI. That is what we all need to move that 5 percent of ad allocation towards 10 percent. As Dave Madden from Electronic Arts said, “We are starting to do deals with Madison Avenue agencies and brands. Brands are trying to figure out how to get to this young, engaged mobile consumer with an experience that they will welcome. It’s like ESPN in the old days. They started with direct response ads, and now it’s Budweiser advertising.”

At Verto, we have the honor of working with many of the world’s top gaming companies who use our data services, such as Verto Content Watch. Content Watch provides daily data for tracking the total addressable market per game genre, competition, churn/retention, and uses benchmarking and insightful funnels to understand what people do prior to and after playing a certain game.

Want to know more about our thoughts on mobile advertising or learn more about our mobile gaming data? Get in touch with us at sales@vertoanalytics.com. We’d love to hear from you.