The mobile gaming industry is huge. Consumer spending in app stores now tops $170 billion annually and it’s growing at about 18% yearly. If you want to see just how much money is being spent on mobile games, compare spending on apps to movies:
In 2021, only 38 movies topped $100 million in revenue. During the same time, 233 apps saw more than $100 million in spending.
In the US alone, mobile game advertising accounts for $6 billion in ad revenue. Mobile game developers have a significant opportunity to leverage mobile game monetization models.
What is Mobile Game Monetization?
Not only has advertising spending increased over the past few years, game publishers now have more monetization model opportunities than ever before. App developers and revenue streams include new ways for app monetization.
Top performers in the mobile gaming industry have reached record heights. More than 60 mobile app games have accrued more than $1 billion in lifetime sales — including some well-known titles and others you may have never heard of.
Here are the top ten highest grossing mobile games of all time according to Pocket Gamer:
- Honor of Kings: $12.5 billion
- Monster Strike: $10 billion
- PUBG Mobile: $8.7 billion
- Clash of Clans: $8.4 billion
- Candy Crush Saga: $7.7 billion
- Puzzles & Dragons: $6.3 billion
- Fate/Grand Order: $6.3 billion
- Pokémon Go: $6.2 billion
- Fantasy Westward Journey: $5.4 billion
- Roblox: $4.4 billion
The Top 5 Mobile Game Monetization Strategies
App developers use several different monetization strategies as part of their business model. Here are some of the ones that drive the biggest revenue streams.
Microtransactions are one way app developers are earning money. Game currency and in-app purchases are now mainstream in the gaming experience. Many publishers are earning significant revenue from free games in the Apple and Android app stores by allowing players to purchase virtual items.
Roblox, for example, sells more than $100 million of virtual goods annually. The platform, designers, and creators are generating revenue. 22-year-old Samuel Jordan earns nearly $80,000 a month from selling virtual items he designs within the Roblox platform.
In-app purchases (IAPs) help developers launch freemium models, making gameplay available for free for users and then monetizing game currency, virtual items, and premium features. Once payment information is added to mobile app stores, it’s easy for players to respond to game ads or offerwalls and spend money in apps.
Mobile ad spending is the fastest-growing area of advertising and a significant ad revenue generator for app developers. The vast majority of games in the iOS App Store and Google Play store are free to download, but feature game ads and app advertising.
Some ads often support in-app purchases driving revenue, with other placements including direct-to-consumer ads. The biggest mobile ad spenders for many apps are other game developers, trying to encourage gamers to download another product.
To learn more about monetizing your mobile app using in-app ads, check out The Ultimate Guide to In-App Advertising: Tips, Exchanges, Payouts & More.
In-app ads are favored by advertisers. Recall of in-app ads reaches as high as 47%, exceeding results from desktop and mobile web ads. Analysts say one of the key reasons is that users are more engaged with apps when using them, especially for gaming apps. Even when ads are displayed, they tend to get higher levels of viewing than in other passive forms of media.
Diversified Ad Formats
Multiple types of ad formats are used in mobile game monetization, providing different ways to generate revenue.
- Banner ads: Banner ads, or display ads, generally run at the top or bottom of the screen. There are also native ad banners that overlay gameplay. Often, native ads are woven into the fabric of the game, such as billboards or sponsorships of game elements. App designers should be careful not to interrupt the game action with banner ads, however, as this dramatically impacts the user experience.
- Interstitial ads: Interstitial ads appear at a natural break in gameplay, such as after completing a level or progressing through the app. These are full-screen experience app ads that take over the app screen and command attention.
- Video Ads: Video app ads have become increasingly popular. Videos can play as game loads, in between the gameplay, or as a rewarded video.
- Rewarded Video Ads: With rewarded videos, players opt to watch a video in exchange for an in-game reward, such as virtual currency or virtual items.
- Playable Ads: Playable ads let users try an app before downloading it. They feature mini-versions of the game and encourage interaction. Playable ads attract some of the highest CPM rates for gaming apps and conversion rates, yet they are also the most efficient. Playable ads have the most affordable cost-per-install (CPI) rates compared to other forms of app ads.
Video game subscriptions are becoming more common on consoles and are starting to emerge in the mobile app gaming world as well. The gaming subscription model already generates more than $7.8 billion annually and is forecast to rise to $11 billion by 2025.
For apps, a subscription model generates monthly recurring revenue (MRR), which can help better manage cash flow. Subscriptions commonly include premium gameplay or enhanced items.
Subscriptions are a trend. More than half of the 15 top-grossing mobile game apps offer subscriptions, although this strategy works best for games that deliver a critical mass of regular users or games that fit into a very specific niche of passionate users.
Of course, you can also sell access to your gaming apps in the app store and some app developers have had success. To make it work for you, however, you’ll need to offer a unique or superior game. Nearly 97% of apps in the Google Play store are free to download in mid-2022. That’s a noticeable change from late 2021 when paid apps made up 18% of total apps. In 2022, paid apps represent just 3% of the total apps available.
Other Ways to Monetize Your App
There are other ways to monetize your app, including:
- Merchandising: Some of the more popular gaming apps have had success with merchandising or licensing products based on apps. Angry Birds, for example, sells clothing and apparel, and eventually wound up as a feature movie.
- Branded content: Like product placement in movies or TV shows, you can incorporate branded content into your apps. Ad tech tools allow dynamic content, so app developers can update sponsorships and branded content within apps.
- In-app stores: Besides in-app purchases, you can also feature in-app stores that sell gameplay enhancements, and virtual items, or feature affiliate marketing offers.
- Bundles: Limited-time discounts on consumable and non-consumable (permanent) in-game items
- Monetized wait timers: Forcing players to wait to advance in gameplay and giving them the option to use virtual currency to skip ahead.
What’s the Best Way to Monetize Mobile Games?
The answer to this question is up for debate, partly because so much of the revenue stream depends on traffic and engagement, app popularity, and user retention. High churn rates can be due to poor gameplay or letting monetization negatively impact the user experience. Game design in gaming apps plays a big role in how you can monetize your gaming apps.
Few apps can survive solely on in-app purchases. The biggest revenue generator by far is in-game advertising, valued at $6.7 billion globally. It’s forecast to grow by more than 10% a year, reaching $12.35 billion by 2028.
As such, ad networks that allow for in-app advertising for games have become increasingly popular. Once integrated into an app, ad networks can generate passive income for developers. This lets the game publishers focus on gameplay and marketing rather than selling ads. Ad networks work with ad exchanges and demand-side platforms (DSPs) to connect advertisers with app developers. (Find out more about the best ad exchanges for mobile app monetization!)
Testing Monetization Strategies
It’s crucial for app developers to do regular testing on monetization strategies in much the same way as they test game design, functionality, and playability. For developers, user retention is a significant challenge.
Explain why testing is critical to monetization. Assuming that a single revenue stream will work could lead to decaying revenue and/or no revenue at all. Give examples of how a user can test (i.e., running ads vs. in-app purchases). More than nine out of ten apps that are downloaded are used once and then deleted. So, it’s important to ensure you’re balancing user experience with monetization strategies.
Usability testing, A/B tests, and multivariate testing can help determine the best strategies to optimize revenue without disrupting gameplay to a point where it causes the user base to erode. There can be some trial and error in the methodology to find the right mix.
One of the advantages of working with the expert at Newor Media is that they take a more hands-on approach to help app developers and website publishers to optimize revenue. They combine proprietary algorithms, machine learning, and ad tech with years of experience to help you find the optimal ad placements and ad units to maximize revenue.
With more than 250 million unique monthly visitors and serving more than 1.5 billion monthly ad impressions, Newor Media has a team of professionals that can work with you to make sure you have the best possible ad strategy in place.
Mobile game monetization represents a huge opportunity to generate revenue. Whether you’re using in-app ads, in-app purchases, subscriptions, or paid apps, there are multiple ad formats and ways to monetize your gaming apps.
Testing will be an important part of finding the right mix for your app to ensure you generate the highest revenue possible. The ad tech experts at Newor Media are standing by to assist you with mobile game ad placement, website ad units, and more. Contact our team today today to learn more about optimizing ad revenues.