Introduction
Jon Jordan: Hey and welcome to the Cellular Video games Playbook. Thanks for tuning in for an additional episode. It is a podcast about making a fantastic cellular recreation enterprise, and that’s one of many issues we’re going to be taking a look at in right now’s episode: monetization!
I’m your host, Jon Jordan, and I’ve two consultants within the topic who’re going to be serving to us form of drill down into what’s been happening and the traits in monetization.
First up, we’ve got Andrew Seow, who’s the Director of Monetization at Triple Dot Studios. How’s it going, Andrew?
Andrew Seow: It’s going nice. Thanks for having me.
Jon Jordan: I’m glad you might come alongside and share your experience. Ravid Sela, the Advert Monetization Lead at Play Studios, additionally joins us.
A lot to cowl once we come to the topic of monetization in cellular video games, which is the center and soul of cellular video games. I believe we’re going to drill down into some explicit areas, however to kick us off, Andrew, can you are taking us by way of a number of the headline traits that you simply’ve been seeing within the sector over the previous 6 to 12 months?
Key monetization traits in 2024
Andrew Seow: In cellular gaming, and notably in adverts monetization, which is Triple Dot’s bread and butter, the standout monetization development for 2024 has been this transfer to header bidding. In 2024, that’s been headlined by Google Adverts making that transition.
We’ve seen a number of different networks making that transition as properly. The corollary is that you simply’re seeing extra companions beginning to develop their very own merchandise. Beloco is an instance the place they’re beginning to come out as an SDK, slightly than purchase by way of exchanges, as a result of that’s maybe extra environment friendly, that provides them extra management, that provides them extra publicity to the stock.
So header bidding has actually been, no less than within the adverts world, the standout development. On an extended timeframe, when IDFA deprecation occurred about three years in the past, and a number of cellular stock shifted in direction of Android, we’re beginning to see a shift again in direction of iOS. A few of that has to do with the header bidding mannequin, nevertheless it’s additionally the truth that extra advertisers are beginning to familiarize yourself with learn how to work throughout the parameters of IDFA and concentrating on stock on that foundation.
And so what can be attention-grabbing, I assume, shifting ahead from that’s whether or not that stability continues to exist, whether or not it shifts extra in favour of iOS as the entire companions transfer to header bidding, guided by the likes of AppLovin and Unity as the principle mediation gamers.
Understanding header bidding vs. waterfall mannequin
Jon Jordan: I’m certain all our listeners know what header bidding is, and it’s simply me who doesn’t, however for the uninitiated in advert monetization, are you able to give us an thought of what it’s?
Andrew Seow: I’m joyful to try this, after which Ravid also needs to give her view on this. The way in which I take into consideration it is vitally very like an public sale home however virtually like a single-slot public sale, so that you don’t get to bid on prime of one another.
Every companion that participates on this public sale receives the identical bundle of knowledge or set of alerts about that individual advert or that individual alternative to indicate an advert to a person.
That is in distinction to what within the adverts monetization world we’d name a waterfall, a group of costs set by us, the publishers, to inform the companions what costs we wish them to bid at.
So header bidding has actually elucidated a shift in that form of pricing dynamic from publisher-led to companion/network-led as a result of now the algorithms and the best way that costs are being decided are altering.
Execs and cons of header bidding
Jon Jordan: That was a very good rationalization. Ravid, what’s your view on this?
Ravid Sela: To be trustworthy, once I’m taking a look at this yr’s traits, I fully agree with Andrew concerning the shift to header bidding or extra structured auctions.
Whereas we see it as a helpful transition for publishers and networks because it cuts out a number of work, and optimization is critical, we see the drawback as giving everything of the ability to the mediator.
Once we have a look at the entire public sale course of, it’s based mostly on a really hid algorithm that solely has very basic pointers or explanations for the tactic itself.
So we’re mainly specializing in bidders solely, and the writer loses a number of the intelligence they might as soon as get from seeing which charges are successful and which aren’t.
Extra particularly, seeing which charges are shedding—as a writer, we are able to solely see the successful impression charges. We don’t have that energy anymore. That results in higher workflow every day, however we’re shedding a number of info within the course of.
One other distinguished facet of the mediation is that we’re not in a position to see the eCPMs of the shedding bids in addition to the successful impressions all through a person’s journey or lifetime.
So we solely see averages. The writer is shedding their intelligence on what’s happening in that course of. The mediation is getting again all the ability. As a writer, that’s an obstacle. I want to get a greater view of the public sale processes.
Business-wide adoption and its implications
Jon Jordan: It looks as if some adjustments within the trade occur as a result of they’re extra environment friendly. There’s an effectivity issue right here, but in addition some downsides.
Has this alteration occurred as a result of, typically, everybody agrees it is a extra environment friendly approach to do it?
Or do mediators have the flexibility to do that? So that they’re utilizing that energy to introduce a brand new system that can enhance their enterprise effectivity.
Is that the precise method of taking a look at it? What triggered this alteration? If it’s extra environment friendly, you should be proud of the change on a top-line foundation. In any other case, presumably, you wouldn’t be adopting it.
Ravid Sela: The primary ones that deprecated their handbook CPM traces had been Meta, so far as I do know, and it was all a part of pure development. Tech-wise, now issues have turn out to be extra in direction of bidding as a really environment friendly methodology of working, each side have seen some great benefits of it, however not all sides figured the disadvantages of it.
So now, so far as I’m involved, there’s a bit imbalance, however it is going to finally be balanced once more. Andrew, what do you assume?
Andrew Seow: I believe, Jon, once you had been saying, does everybody agree?
I believe the query is, who’s everybody?
What we have to bear in mind is that on the opposite facet of the chain are particular person advertisers who wish to purchase stock on our apps, i.e., the chance to indicate their adverts to our customers and gamers.
They will solely do this if they’ve the technical skill to learn the alerts they’re sending, interpret them, and worth them.
The bidding change has streamlined a number of the infrastructure, nevertheless it doesn’t essentially make it accessible to all advertisers.
Some companies, for instance, work with bespoke model purchasers, and the campaigns that they run are very customized and really tailor-made, however which may not profit from an extremely streamlined large-scale system.
And I assume that’s the form of basic declare in opposition to most technological progress.
However I suppose within the particular case of fascinated with monetization traits and the way it impacts our income efficiency, it does have an effect on the competitiveness of that public sale.
Income traits and challenges in 2024
Jon Jordan: I assume you’re coming again to the highest line for your online business. You might have opinions on how the system’s altering, but when your income’s going up to your adverts, that’s high quality. You turn out to be a bit extra not sure for those who go, “Properly, not fairly certain if our income might not be going up,” then you definately really feel such as you don’t like the method and actually don’t like the end result. In order that’s the stability.
Andrew Seow: I believe we’d all settle for throughout the monetization trade that this yr maybe has not been as nice as previous years. The dearth of management is maybe the obvious factor as a result of it lets us decide what costs—given the interior info we’ve got about our customers—we expect these customers are valued.
Now that, as Ravid was saying, is taken away from us as a result of it has all moved to the networks or to the mediation ecosystems.
So, I’d make the final declare that it hasn’t been as robust throughout the trade for revenues. Coupled with that, I additionally assume we’re speaking about monetization, however person acquisition is the opposite facet of the identical coin for us.
And I believe we’re typically additionally seeing a development the place the price of buying customers goes up, which typically doesn’t make for a wholesome mannequin—of accelerating prices and rancid or not-increasing-as-quickly monetization and income progress.
So, there’s a little bit of transition friction that I believe the trade goes by way of proper now. And I believe that’s the context through which we’re taking a look at many of those traits, even trying ahead to subsequent yr.
What does that decide about our technique? Do we alter something, or will we attempt to work throughout the parameters of the system that’s now designed in some ways for us?
The rise of hybrid monetization fashions
Jon Jordan: Yeah, it’s all the time humorous on the cellular advert facet. A lot of corporations use adverts to drive income, however each cellular recreation writer is utilizing adverts to draw customers.
Some have it greater than others when it comes to how they run advert income, however you’re all utilizing it to draw customers as properly.
So there’s this attention-grabbing double state of affairs.
You appear to recommend that these mediation layers are gaining extra info, and the income mannequin you’re suggesting appears to be making extra money as properly.
Possibly for this reason AppLovin is doing so properly. It’s been a extremely good enterprise mannequin for them.
I assume we want a little bit of shaking out over time from this new enterprise mannequin for you guys to work out some analytics to higher worth what you’re promoting.
You don’t need the development to proceed any additional.
You each centered on the advert facet of monetization, however with these types of adjustments, do you’re feeling meaning the form of extra direct monetization of customers—does that come extra to the fore?
Does that imply that, as a result of adverts are form of in flux in the intervening time, corporations begin to assume, “Can we enhance our in-app purchases?”
Would that be a strategic change or possibly a extra tactical change that you might make? Or does it not likely imply that?
You may’t simply swap these issues out and in.
Ravid Sela: Hybrid monetization has simply actually taken off and turn out to be highly regarded this yr.
Customers who can’t afford to pay or received’t take that leap are extra susceptible to in search of rewarded movies. In return, customers can retain and play, and publishers get a broader viewers.
One other attention-grabbing level is that if we have a look at it from a person acquisition perspective, person acquisition strategies trace that these adverts would pay extra for paying customers.
They might bid larger to draw these customers to their apps.
In that sense, having paying customers inside your app will draw larger eCPMs and better revenues from adverts. The hybrid mannequin feeds off itself and contributes to the upper eCPMs of the DAU.
The connection between adverts and in-app purchases
Andrew Seow: I’d solely add one, possibly two issues. The primary is that the kind of recreation or play mode that helps or encourages in-app purchases—the motion of individuals opening their wallets—is sort of completely different from one that’s supported primarily by adverts.
When you consider adverts, you consider learn how to make them as seamless throughout the person expertise as doable so that folks won’t ever like adverts, however they is perhaps extra tolerant of adverts showing.
In relation to in-app purchases, I believe you are attempting to encourage them to see the inducement and see the upside in shopping for no matter it’s that you’re buying.
So, , to Ravid’s level, I believe there may be the sense that we’re attempting to make it extra necessary, however there are particular underlying fundamentals that want to vary.
It’s essential have an financial system that gives power-ups and different types of rewards to attempt to justify folks subscribing or making a purchase order.
And I believe that’s the toughest a part of a transition.
One factor you would possibly do as a recreation studio is you would possibly say, “Possibly we have to do an acquisition, possibly we have to produce new video games which are beginning out from being in-app purchases.”
However that can also be a special ability set.
So I believe the transition—a number of studios are contemplating it or attempting to do it—however there may be a number of friction in there that goes beneath the conceptual factor of, “Sure, we wish to make that transition to an IAP or hybrid mannequin.”
On the advert facet, we’re seeing some rising codecs which may encourage folks to open their wallets or no less than be comfy with the idea of opening their wallets.
So, if you consider what Amazon is investing in, it’s shoppable adverts or attempting to make that transition to the store as seamless as doable.
Making an attempt to encourage the behavior of getting folks to spend within the context of a cellular app is rising as a format and will change the best way gamers behave when utilizing their units.
However purely on the IAP and hybrid facet, there may be maybe a slower take-up or a extra frictionful transition to that hybrid mannequin.
Consumer spending habits in cellular video games
Jon Jordan: It’s a very good level. The form of idea somebody like me—who doesn’t make video games—might need is, “Oh, you’ve received a recreation that has adverts in it, simply stick a few in-app purchases in there, and hey, you’re making a great deal of cash.”
You in all probability might have accomplished that 10 years in the past. The cellular area is now so specialised within the sorts of experiences and customers that you simply construct your online business round.
It’s a really engaged and considerate strategy of the way you broaden that.
As you say, typically the simplest factor is to do M&A and usher in different individuals who have that experience slightly than spend years attempting to construct it your self.
I do marvel—and I assume over time folks have gotten extra comfy with in-app purchases in video games or apps or shopping for issues on cellular—the cellular video games trade is enhancing its skill to monetize its gamers.
Some video games are extremely good, and a few genres, comparable to 4X and RPGs, may be superb at monetizing their viewers.
However I don’t get the impression there’s a rising tide making it simpler for folks to spend cash.
It nonetheless appears to be a really small proportion of the viewers.
I can’t bear in mind the info, however tens of 1000’s of persons are producing virtually billions of {dollars} of income.
I don’t get the impression that’s altering rapidly.
Do you assume persons are getting extra open to the final idea of spending a greenback on a recreation or having a bank card hooked up to Google Pay or Apple Pay?
Ravid Sela: From my expertise, video games that are typically extra hybrid-build don’t depend on friction to get customers to pay however on larger worth for customers.
So seasonal passes, for example, are a really stylish merchandise proper now, they usually range in worth.
I really feel like that is one thing that can assist convert a person right into a paying person, and in return, the person will get extra worth.
The person will get higher enjoyment from the sport, and this doesn’t depend on friction. The frustration is sort of not there.
It’s serving to customers of their development throughout the recreation in a way that’s not precisely a pay-to-win format, however it’s enhancing the enjoyable.
So, I believe that each side are extra susceptible to utilizing that methodology as a changing methodology.
We will see that throughout many video games. It’s highly regarded proper now—having seasonal passes that go from weekly to biweekly or month-to-month.
If we’re taking a look at methods to monetize customers and convert them, the trade is attempting to sort out it by going with enhancement slightly than friction.
Andrew Seow: I believe the fact is all the time going to be that it’s going to stay an absolute minority and even an absolute tremendous minority that’s making in-app purchases.
Possibly except for video games like Genshin Influence or Honkai: Star Rail, the place there may be a complete meta constructed across the in-app buy and the worth of the in-app buy.
In relation to in-app purchases, we should ask what precisely we’re shopping for from or promoting to the person.
As Ravid stated, it’s not a lot the truth that you won’t get friction—besides possibly for those who don’t should see adverts as a result of that’s a part of the bundle.
It’s actually about how that ties into the enjoyment of the sport.
For lots of people, their relationship with cellular video games within the COVID period was to alleviate boredom and to be entertaining.
It’s a really informal relationship in a number of methods, which implies that you’re not inclined to spend this cash on the margins versus shopping for a sizzling canine, proper?
So, if you wish to enhance conversions, it’s important to ask your self if there are extra micro methods of promoting bundles or packages to try to make them extra attractive.
However I do assume that many publishers who give attention to IAP or for whom IAP is the principle income mannequin settle for that will probably be an excellent minority that’s making many of the cash.
They’re attempting to extend the amount of cash they get from that tremendous minority after which, on the margins, attempt to convert the payers.
However I wouldn’t assume that it’s attempting to extend the person base from one or two % to hitting 40% of payers.
I don’t know if that’s cheap, however intuitively, it doesn’t actually appear cheap to me versus attempting to maintain your most engaged gamers and your highest-paying customers.
The way forward for direct-to-consumer monetization
Jon Jordan: In the long run, it’d be attention-grabbing to see tremendous video games like Fortnite and Roblox as a platform for spending cash.
My youngsters are eager to spend cash there, however fortunately don’t have debit playing cards.
As that technology grows up, you would possibly see it go from one or two % to a few or 4 % as a result of digital items are one thing they’ve grown up with.
However I believe you’re proper. For the time being, it makes extra sense to give attention to the folks are spending.
Are you able to get the one who spends $100 to spend $150?
That makes way more sense than getting somebody who’s by no means purchased something to spend $50.
We’re form of coming to the tip, however there are a number of different issues.
I don’t know for those who guys have any feedback on this, however clearly, one of many attention-grabbing issues we’ve seen within the final couple of years is direct-to-consumer shops.
These shops promote in-app purchases to customers exterior of the app.
We’ve seen huge gamers doing it, and I believe that’s turning into extra related since you can provide a a lot better deal to people who find themselves spending.
So it’s not essentially attention-grabbing to get your views on whether or not that may enhance.
Do you assume that’s going to be a extra impactful method of straight getting cash from folks?
Andrew Seow: It’s undoubtedly rising and fairly nascent.
Maybe in some elements of the world—Asia springs to thoughts—it is perhaps a bit extra established in non-gaming verticals.
It could possibly be extra established than gaming, however we’re seeing it being adopted by a number of the bigger gaming publishers.
So, what I’d say concerning the direct-to-consumer form of avenue is 2 issues.
One is that there’s all the time this subject of funds, proper?
Something that’s going to be round the way you get the funds, if there are commissions, and so forth.
And that, I believe, possibly it’s not a monetization development as a lot as it’s simply the most important drama of 2024—fights over funds and shops and fee charges and that form of factor.
If you happen to’re attempting to take it exterior of the system, there may be that infrastructural query.
The remainder of it is vitally much like the best way you’d do financial system optimization or in-app buy optimization, which suggests you have got all this flexibility.
Possibly you possibly can provide even higher offers due to the decrease fee charges.
Then the query turns into, how are you selecting to phase your gamers?
Do you phase them any in a different way than you’d for those who had the fee charges to keep in mind or much less flexibility since you’re working throughout the system of Apple or Google?
You attempt to push the person to open their wallets.
A few of the extra artistic startups that we see on the market are additionally attempting to push content material.
So that you’re actually constructing a form of neighborhood, and I do know that many publishers are fascinated with neighborhood as an idea.
However I don’t actually know what direct-to-consumer shop-driven communities would appear like or how that may be radically completely different.
I believe that’s what we must wait and see, however it might be attention-grabbing to see if that adjustments something concerning the dynamics of getting folks to pay, getting folks to pay extra, or getting folks to typically be extra engaged.
Wanting forward: Innovation in monetization
Ravid Sela: To be trustworthy, conducting the auctions utilizing bidding actually frees up a number of time for the advert monetization groups.
So, in that sense, there may be a lot extra time for creativity and seeing the place that may take us.
That is what I’m anticipating from 2025—it’s going to be a number of innovation, a number of new ideas, a number of trial and error.
It will permit us as groups to dig deeper and possibly be extra product-oriented or tech-oriented.
Solely time will inform, however simply because we’ve got a lot extra time on our palms for innovation, I’m curious to see what we’re going to supply.
The position of AI in monetization methods
Jon Jordan: And ultimate query, how do you assume the impression of generative AI is—Is that going to be vital when it comes to your workflow? Or is that also form of arduous to inform?
Ravid Sela: It’s not a podcast if we don’t point out AI, proper?
Jon Jordan: Precisely.
Ravid Sela: For me, it nonetheless must be confirmed that we are able to depend on it.
Proper now, we’re utilizing it extra for ideation and all of these areas of creativity slightly than leaning on it technically or analytically.
That’s it for me in that sense.
Andrew Seow: Not a lot so as to add when it comes to generative AI, and I believe it undoubtedly impacts extra of person acquisition when it comes to, , creatives and attempting to check out new concepts.
However, like Ravid was saying, whether or not we use it for information science or analytical work—I don’t know if we wish to share our information.
Most publishers don’t wish to do this.
So till there’s a safer method—by which I imply a form of data-safe, privacy-safe, and confidentiality-safe method—for us to try this, I don’t see it affecting most of the operations we run every day.
Closing ideas and takeaways
Jon Jordan: Pretty! Properly, we lined an terrible lot of floor there, so thanks a lot to your experience and for explaining in all probability very fundamental ideas for you guys, however possibly for a number of the viewers.
Thanks very a lot to Andrew and Ravid for his or her dialog.
Andrew Seow: Thanks.
Ravid Sela: Thanks for having me.
Jon Jordan: Thanks for watching or listening to the podcast—nevertheless you’re consuming it.
Keep in mind, in each episode, we dive into what’s happening in cellular video games, which continues to be as dynamic as any artistic enterprise may be.
There are many technical adjustments occurring on a regular basis in how folks pay for and play these video games.
I hope you’re subscribed. Don’t miss out on the episodes, and we’ll see you subsequent time.
Bye!