In Analytics insights, Game monetization, Smartads

In Free-to-Play (F2P), publishers have always poured the majority of their revenue straight into User Acquisition (UA). Acquiring users costs money, users generate revenue. Spend money to make money. When the next install could be a whale worth $10,000, every last dollar becomes a precious investment. There is, however, a difference in 2018: for every whale, there’s an ad whale.

This is what led to the mass adoption of in-game advertising across the industry. Even poorly implemented ads can increase each daily user’s revenue contributions by a few cents. Totaling the value of those incremental boosts across 10,000+ users reveals a tidy pot of cash to be invested back into UA.

The uptake and impact of in-game advertising have escalated quickly. Intelligent game design and the use of behavioral analytics have seen the placement and optimization of in-game ads improve dramatically. It is now possible for top games to derive the majority of their revenues from in-game advertising alone, with daily ad revenues reaching well into the $100,000s.

Numbers like those above are achievable with three ingredients: ad-optimized game design, ad inventory optimization, and an ad-aware UA strategy. Below, we will explain the secrets to each.

 

Ad-optimized game design

There are two main types of in-game ads – interstitial and rewarded. The efficacy of each depends hugely on their timing and placement. Used poorly, interstitials can drive rapid churn. Likewise, less than 30% of players will interact with rewarded ads if their placement and value are wrong.

Interstitials are best placed during moments of transition when the player is unlikely to have their ‘flow’ unnaturally interrupted. A perfect such opportunity occurs when the player is navigating between a mission-completed screen and the main game lobby. Our research has shown that ads seldom have a negative impact on retention but that does not mean that they are incapable of doing so. Showing an interstitial ad at a moment of crisis – when the player is already experiencing negative sentiment (e.g. losing a level) – may increase the immediate risk of churn and so should be avoided.

When it comes to rewarded ads, there are many options and combinations available in terms of placement and rewards offered. Unlike interstitials, some of the most common and effective placements of rewarded ads occur at negative touch points. They offer redemption in the form of an extra life upon level failure, or free energy when the stamina bar runs out. As well as bringing in additional revenues, they serve to reduce churn and increase retention. Other placement options include pre-level boosts, mission-reward multipliers, extra daily gifts or even incentives to connect social channels. All of these work to improve player sentiment while simultaneously boosting that all-important Average Revenue Per Daily Active User (ARPDAU).

‘Free Life’ offer in Bee Brilliant

Ad inventory optimization

The difficult truth of in-game advertising is as follows: the ads shown in your game are designed to drag players away from your game and into another. Even worse, your closest competitors will inevitably be those willing to pay top dollar for access to your players and it is their ads that invariably perform best. ‘Safer’ options in other genres and non-game ads generate either low-value impressions, a low volume of impressions or both.

Striking the correct balance is tricky. Completely avoiding competitor ads is certainly possible but it severely caps the potential of your ad revenue. Branded ads are not yet readily available via standard ad networks and so, direct deals aside, showing non-game ads exclusively is not an option.  Furthermore, showing completely irrelevant ads to your players will not only generate paltry revenue but also annoy them immensely – possibly to the point of churn.

Serving ads for other genres that have a similar demographic to your own can pay dividends. Match-3 and Puzzle games are well-matched, as are Collectable Card Games (CCG) and Builders. Experimentation and working with the ad mediators to identify well-matched traffic are crucial to identifying the right ad sources.

Finally, matching your player types to different ad sources is vital. Direct competitor ads are too valuable to ignore, but you almost certainly don’t want to show them to your spenders. Using multiple ad placements, you can match player types to different ads. For instance, new players and spenders might get access exclusively to rewarded ads from non-competitors, while entrenched non-spenders (i.e. those that have not made any purchases after 1 week) might get competitor interstitials and rewarded ads.

Toy Blast ad as shown within Wordscapes

Ad-aware UA

Having an optimized supply of ads and a game to host them is just the beginning. With regard to In-App Purchases (IAP), the science of UA has evolved rapidly. Successful publishers will have access to accurate Lifetime Value (LTV) predictions as early as a few days after a UA spend. This facilitates the rapid iteration needed to consistently source high-value players.

The advent of ad monetization has given rise to a new class of valuable players – ad whales. These players do not engage with IAPs but generate large revenues via interactions with ads and offer walls. Ad whales can be acquired much more cheaply than their big-spending opposites and require a UA strategy that is radically different to the low volume/high value one for IAP.

This approach is only possible if the data is available to back it up. In stark contrast to IAP LTV, understanding the ad value of players requires matching data from a large number of sources – acquisition stats from attribution partners, behavioral data from analytics partners and eCPMs from ad partners. Combining this data is a huge undertaking, but the rewards for those that do so can be staggering.

Space Ape Games’ Fastlane: Road to Revenge launched to underwhelming metrics in May 2017 and suffered further misfortune during the 6 months that followed. Against all the odds, however, Space Ape Games turned things around to make Fastlane into their most profitable game yet.

How? Ads.

The growth team at Space Ape worked out that they could afford to increase their UA spend because the users brought in by advertising in other games would, by their very nature, be more likely to generate vast ad revenues in Fastlane. As discussed, It is a long-held belief in F2P that advertising so-called competitor games within your own will be disastrous for retention as players are tempted away. Space Ape, however, found that players were returning to Fastlane even after downloading other games. Moreover, because players were being shown ads for games that they were likely to enjoy, engagement rates were extremely high and the value of each impression increased with every successful install.

Currency reward offer in Fastlane: Road to Revenge

Summary

Like many of the choices facing F2P games publishers, using in-game advertising can be a daunting proposition. At best, a poorly conceived ad strategy will annoy your players. At worst, it will drive them irretrievably into the clutches of your eager and grateful competitors. It’s not all doom and gloom, though. Informed by sufficient data at a user level and executed well, a brave ad strategy can generate more revenue than would ever have been possible through IAPs.

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