Mobile Games: A Flawed Industry

Posted on June 22, 2015 by Eric Benjamin Seufert

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(This is a guest post by Michael Velkes, the VP of Marketing at Plamee Games.)

With over 2MM apps across the various mobile app stores, discoverability is close to impossible. User acquisition strategies are just not enough anymore, and it’s been a while since burst campaigns were viable. When looking at all these parameters, one question comes to mind: has the app gold rush finished?

Fiksu, one of the leading mobile advertising networks in the mobile gaming industry, recently reported that the average user acquisition cost for free-to-play games touched the $3 price point in 2015. This is expensive for users downloading free games, especially considering that only 2% of those users ever buy anything, and those users are paying an average of $15-$30 for in-app products. There is a big gap between the costs for developers and the revenues they earn, and in my view, this seems like a flawed industry.

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So why is everybody making games and apps?

On one hand there are casual and mid-core creators such as Supercell, Glu, Ubisoft, while on the social casino side there are companies such as Playtika, GSN, Dragon Play and Big Fish. These businesses generate thousands of organic installs and build amazing products, which compensate for their high user acquisition costs. Therefore, their eCPI (effective Cost Per Install) drops to an amount which makes it worthwhile to invest in these expensive users.

On the other hand, there are more than 200,000 hardworking developers that raise funds and spend capital and precious time developing apps, hoping for positive return on their investment and scaling their companies.

So what is the magic that these developers need in order to achieve these goals? Is it a lifetime user value that will be higher than $3, which would make their return on investment (ROI) positive? Is it performance marketing masters that will be able to drive installs for lower costs? Or, is it an amazing 30-day retention metric that will help increase all KPIs?

There is not one complete answer, but a combination of different tactics sewn together. Proceeding with a 100% user acquisition strategy is not the solution. The costs are higher than ever and users have lower life time values due to tough competition, saturation of games, bidding wars on sufficient ad spots and lack of originality.

Currently, many companies are trying to battle these trends as they differentiate themselves with innovative methods such as big data decisions based on user behavior, improving KPIs through ongoing product optimization, and sending the right messages to the right players at the right time. Costs-per-install, however are still steadily rising every year. Developers continue to try and improve various aspects, but users will still not be valued at more than $3, even after 365 days. And even if this happens, it’s not a scalable model.

There is, of course, still room for developers to win in this market and there remain ways to succeed and reach your goals in this industry, even as an indie developer. Here are a few methods that can help you achieve better results and be on the right side of the ROI.

1. Organic growth – In a short calculation, cost per user is $3, and user lifetime value is around $1-$1.5 (for average products), which means that for every user you buy, you are losing $1.5-$2. If this was the only way, I’d say this is a flawed business model. Fortunately this isn’t. We have app stores where users don’t have to see an advertisement in order to download your app.

You can improve this metric through ASO, strengthening your word-of-mouth buzz and, for well backed companies, building a strong brand. Keep in mind that this is one of the most important KPIs you need to monitor and optimize and is your gateway to success.

Start by improving your app’s description, researching keywords, building a strong viral loop into your product, rewarding your users for inviting friends and doing everything in your capabilities to have people talking about your product with their friends and family. If you’re able to implement some of these tactics, then you might begin to achieve higher amounts of organic users for each paid user.

2. Retention optimization – You have started to drive installs to your app, now comes the bad news – only 10% of them will still be in your app after 10 weeks. Do you want to be a 10-week success? The answer is most likely no, which means you need to improve your primary retention metrics, such as 7-day retention, 14-day retention and 30-day retention which will then continually improve your long term retention.

Improve your product by adding mini games, communicating with your players (push, in-app, email) and building a strong community with an equally strong social media presence. This way you will not only drive users to your app but also keep them engaged for longer, which will increase revenue and user lifetime value.

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3. Platform partnerships – One of the key ways to drive high volumes of installs (organically) is through platform partnerships. Platforms help with product improvements and especially with getting featured in their marketplaces worldwide.

A small feature can help drive more than 100K installs and a good feature placement can drive more than 1MM installs. Taking this into consideration is a great boost for your business.

But always be aware. You should never take this for granted in your marketing plan. Platforms look for specific companies which fit their vision and nothing is ever guaranteed. My tip would be to introduce yourself, your company, your vision and your goals, share road maps and add as many unique platform integrations as possible to start off on the right side in order to build your relationship with the relevant platform.

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4. Adding marketplaces – In the highly saturated marketplaces such as the iOS App Store, Google Play and Facebook Games, it is very difficult to stand out, and discoverability is becoming increasingly hard. Look out for new platforms to upload your app, such as the Amazon and Windows stores. If you can navigate the Asian marketplaces, there are more than 50 stores in China alone and many more in countries such as Japan, Korea and South East Asia. The less the store is saturated, the higher your chance of getting noticed, driving installs and increasing organic rates for your overall performance. Do your research, find the right contact and push your game onto that platform as fast as possible.

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5. Publishing – Lately there has been a shift in the industry with some popular studios such as FunPlus and others expanding beyond in-house production to serve as mobile publishers of and partners with small-medium sized studios.

More and more publishing companies have been looking for the next hit game company that has the perfect mobile product, but just not enough manpower or money to market the app. They let the developer focus on their product and they focus on distribution. This is usually a revenue share deal which is very charming for a developer with no marketing experience and no capital to spend. Publishers take advantage of their experience, distribution capabilities, user base and relationships to drive an app as far as possible and hit a revenue return that the developer could never reach alone.

6. Data, Data, Data – Recently everybody has been talking about predictive and automated marketing and big data decisions. What is it and why is it so important? The answer is very simple – the more data you have, the more successful you will be and your decisions will be more accurate.

Find where your users are in the flow, segment them, configure automated messages, publish new sales, and retain them by personalizing your messaging, all in order to keep your users engaged and happy. It’s important to understand your first time user experience, giving the user the right message and package which will fit best for their needs.

Always remember that not all your users are equal. Once you fully understand this, you can then start sending messages according to your segmentations. Dig deep and understand more — it’s fascinating and very useful.

7. Ad monetization – In-app mobile advertising is booming. Businesses are using their ad space on mobile and monetizing their apps as much as possible. Companies such as Ketchapp, Hipster Whale and even Zynga, who reported income of $153 million in 2014 are seeing ad monetization as an important channel for revenue, sometimes even before in-app purchase.

These days, ad supply and demand is a crowded market, you can find companies such as Facebook, Google, Vungle, Applovin, Chartboost and Adcolony for Video and interstitials ad units, looking for your mobile in-app ad space.

In addition, Supersonic ads and Fyber offer a mediation platform for you to optimize between the different platforms and find the best performing tools for your app. Again, do your research, find the right partner for you and implement the SDK you feel will do the best job for your needs.

To sum up, the mobile game ecosystem is a tough market, expensive and highly competitive. The various ways we can overcome these issues are by constantly adapting our growth models and understanding that the industry is dynamic.

If you manage to accomplish the tips above, however, you are already one step closer to user and revenue growth.

About Michael Velkes:

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Michael Velkes is VP Marketing at Plamee. A leading mobile games studio, publishers and technology provider formed in 2014 and part of Playtech, the gaming and financial trading industry’s largest listed software, technology and services company.

With more than 5 years in the mobile gaming space, Michael has seen the eco system from various angles, as a publisher, advertiser and agency sales which gives him the experience to look at the 360 picture at all times.

Today, Michael leads the user acquisition, monetization and retention teams, all in order to drive growth for Plamee.