Programmatic ad buying has restricted the ability of game developers to effectively monetize. The mobile game sector has really been through the wringer. Can you imagine describing the gaming economy to a potential investor? You start off by telling them about the fantastic new idea you’ve got for a game. They say, “How much is it going to cost?” “$millions” you reply. “Jeez! So how are you going to make your return?”. “Well, we’re going to give it away for free and use in-app purchases”. “Cool, so how many of the players will pay, using in-app purchases?” “About 1%” you tell them hopefully.
Add user acquisition costs into the mix and it soon becomes clear why advertising revenue is so vital. Well, you’d think that wouldn’t you? But reluctance by developers to serve ads, alongside a crisis of confidence as to what ad strategy is best for their game, has left many within the industry in turmoil.
The problem is this: Game developers are at the heart of games companies, they are the founders and CEOs of these companies, and the reason they got into game development was lastly and leastly to show ads. They got into game design because they thought they could make cooler and more amazing gaming experiences and not once did the idea of advertising figure.
However, our hard-bitten investor will want to know how you plan to monetize the remaining 99% of players who aren’t going to spend in the game? “We’ll serve ’em some ads” you say. “Not too many as they might leave and not too soon in the game as they might become payers and we don’t want to frighten them off, as retention is vital.”
But this isn’t the reality. According to Unity’s latest research, players are getting comfortable with ads, particularly rewarded ads, where players receive an in-game award for watching, yet the developers are still often taking a very light touch because of fear of tumbling retention figures and negative reviews.
In fact, fans of the Angry Birds franchise have become so accepting of reward ads that when Rovio removed ads from Angry Birds Transformers for any player who had spent money on the game, the move was met with outcry from fans who paid for progress, but had come to rely on those video ad rewards as an important supplement, rather than an annoyance.
When you look at some of the most popular free-to-play games, some of these are taking very aggressive strategies with games, showing ads right from the first session and serving high volumes of interstitials, games like Tiny Troopers and Trial Xtreme 4; and yet their iOS store ratings are not adversely affected, with 4.5 and 4 stars respectively.
The question is; are the ad strategies that are being set in games, the symptom or the cause of the results being achieved? Surely if developers are seeing substantial amounts of cash rolling-in from advertising, they’d realise they can increase revenue and retain their players?
Until recently, the power has squarely been with the ad networks, hindering the ability to understand the impact of advertising on player behavior. We’re seeing ad data kept in silos, away from player data so the reconciliation of monetization and retention can’t happen. We’re seeing promotional eCPM rates that quickly diminish because of buyer programmatics and the difficulty the Developer has in manually maintaining effective ad network cascades in individual games; but the tide is slowly turning, and it’s being driven by the mid-sized games companies. The big guys have used the power of numbers they bring to negotiate good deals with the networks or directly with advertisers, but it is the mid-sized game developers who don’t have that influence, who are adopting programmatic mediation to put them in control, so they are dynamically showing ads from only the best performing ad networks, and managing ad frequency based on understanding the effects on player data. The programmatic buying available to ad networks and buyers will now go head-to-head with programmatic mediation.
How will it all end? Armageddon or equality? I expect equality, more consistency in eCPM rates and an increase in supply as game developers more confidently increase the frequency of ads in free to play (F2P).