As a game developer, you must have been debating this a thousand times with your colleagues: should we serve ads? What formats? Should we focus on in-app purchases only? In this short article, we debunk a few monetization myths and look at what actually works.
First of all, game advertising can sometimes be overlooked because it is not the main source of income for most developers. For 65% of game developers, it represents 40% of overall revenue or less, the rest being mostly in-app purchases. This could lead you to focus entirely on your in-game economy.
The problem is that it leaves you completely dependant on whales (or big spenders). Gamesindustry.biz reports that only 2.2% of players spent any money at all, and close to 50% of revenue comes from the Top 10% of those spenders. While this may generate a great profit, you are neglecting the non-spenders – 98% of your users – who could generate incremental revenue. According to e-marketer, 30% of game developers believe that ads + in-app purchases are the best combo.
But picking an ad monetization strategy isn’t easy. Developers know the direct correlation between the number of ads and user retention, are worried about the impact on the game and bad reviews. Over the past few years, ad formats have evolved to tackle these problems, with various levels of success.
Banners at the bottom of the screen were one of the first formats available to game developers. They’re very intrusive and distract the users from the main experience, which can lead to increased churn, but are still widely used because of the popularity of this legacy format with advertisers, therefore high fill rate. But sophisticated game developers know that is a short term tactic that does not work for games that expect long players loops like mid-core and hardcore titles.
- Level of intrusion: mid-level, but annoying as always in view. Why impact the experience you spent so long building?
- Expected revenue: banners are formats with the lowest CPM, so you better have volume
- Advice: Also, seriously – banners? It’s 2020 guys. Avoid.
In an effort to minimize the impact on the gameplay, the industry moved to interstitials ads – such as videos appearing before/after the game, or in between levels for example. At the end of the video, users are generally invited to download an app, in an effort to monetize them twice. The interstitial can also feature a mini-game demo that the user can play, called playable ads, which drive very high CPMs.
Regardless of videos or playable, interstitials interrupt the user experience. Because of this, there are only limited opportunities to place these ads. Add more interstitials and your long term retention – and overall reputation – will suffer. For this reason, interstitials do not seem to be part of the right advertising trend – as users are becoming more and more sensitive to disruption.
- Level of intrusion: hard to disrupt users more than by taking over their screen in the middle of their games.
- Expected revenue: video ad CPM is about 5x higher than banners
- Advice: use carefully. Max 1 pre-roll video per session.
Rewarded ads are basically interstitials with a reward handed to users who watch a video in its entirety, or complete some kind of action for the advertiser. While the intrusion is unchanged, the reward incentivizes the user to interact with the ad to win extra coins, lives or whatever the in-game currency is, and somewhat ‘soften the blow’ of the interruption. It has established itself as the dominant format in games, with 75% of players naming it as their favorite format, which is not surprising as it is the only format that gives them value in exchange for their attention.
It enables game developers to scatter rewarded ads at various moments of the gameplay, but many are careful as it does affect the user experience. So even the most popular format today is ‘capped’ at a few ads per session to minimize negative impact on the users.
- Level of intrusion: same as interstitial, but players more likely to engage because of the reward
- Expected revenue: high, as a consequence of high engagement with an ad
- Advice: use carefully. Max 3 rewarded ads per session.
Overall, the industry has seen some evolution from static banners to rewarded ads, to benefit the publishers (increase in overall revenue) and the advertisers (more engagement and brand value). It’s the third party of this marketplace who is consistently been ignored by the advertising industry: the end-users.
Therefore, ad monetization is still subject to the same limitation: more ads equates to more churn, lower life-time value of remaining users, worse user experience, and worse reviews on the app stores. These challenges have not been addressed at scale. What the game ad industry needs is a revolution, not an evolution.
It comes down to finding an advertising model that puts the user first. Happy users mean less churn, higher LTV, and better reviews.
So what makes users unhappy and causes them to churn? Interestingly, what users hate most is disruption – something preventing them to keep reaching their goal, in this case enjoying the gameplay. That feeling of constantly being taken out of the game causes fatigue and prevents users to be fully immersed in the game, meaning they lose interest quickly and eventually churn. Solving this would open a new era of monetization.
Turns out, a new emerging ad format is solving precisely this issue: native in-game ads (disclaimer: my company Admix is at the forefront of this innovation).
In-game ads are ads that are integrated within the game as product placements. They can be banners on billboards, video screens, or even 3D products that users can interact with. Being part of the story, the ads never force users to interrupt their progress in-app, instead, they complement it. Being fully programmatic, ads can be targeted to be contextually relevant to the game they’re placed in. The ads’ position and style are also controlled by the game developer, who can customize shaders to make the ads even more native.
This combination of non-intrusiveness and relevance is the key to a positive ad experience, that has no negative impact on user retention or bad reviews. As a result, game developers are able to place considerably more ads in the scene to increase overall revenue – from 3x up to 30x the amount per scene! And the revenue follows accordingly 💰
- Level of intrusion: none. By definition, in-game ads do not interrupt the gameplay.
- Expected revenue: very high, due to longer time in-view, and larger volume of ads.
- Advice: I’m biased, but recommended to use in all relevant areas of your games!
Lastly, in-game ads are not competing against your traditional ads, as they target different real estate in the game. The best results come from combining different models. HGames, an indie-studio with 50M downloads traditionally using interstitial ads from large networks like Admob or Unity Ads, reported 30% incremental ad revenue with in-game ads, less than 3 months after adopting it!
While some types of ads are proven to work better than others, the intrusiveness of the traditional ad model left game developers unable to truly scale their advertising efforts. In-game ads are the revolution that the advertising industry needed, enabling them to take control of the advertising experience and reducing the unwanted impact on user retention. As a developer, you are free to decide how much advertising to add to your scene, based on your strategy and financial goals. The best part? Your users will thank you for it.
See how Rabbit Mountain is monetizing their 1M+ users here