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From Candy To Casino: How Mobile Games Make Money - Part 1 - Strategy

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We’re spending an extraordinary – and ever-increasing – amount of time playing mobile games. Our smartphones and tablets, packed with addictive apps, entice us to spend on average 3 hours a day playing games - a figure which rocketed 57% from 2012 to 2014.

Once there was just snake. Now there’s Candy Crush Saga, Pokemon Go, Clash of Clans… You can race cars, wage wars, play cards, battle monsters... There are, in fact, now over 300,000 iOS / Android games to choose from!

Kids, of course, account for a lion’s share of the ‘binge-playing’ time, “but it’s the adult gamers who are spending more than kids and teens” shares industry analyst Liam Callahan.

Mobile Gaming: A $50 Billion (And Rising!) Market

Kids love mobile gaming, but grown-up players are where the money’s really at. A new generation of gamers are paying big money for their digital pastime. How much? Well, today’s most profitable mobile game, Game Of War – Fire Age, grosses around $1.5 million / day, whilst Mobile Strike and Clash Royale both exceed the $1 million / day mark.

In all, the global app market (of which gaming accounts for around 80%) is worth a staggering $50 billion / year. Mobile analysts App Annie predict that figure will double to $100 billion by 2020.

There’s a whole new world of mobile gaming out there that’s making big money for the developers, marketers and strategists who are tapping into this emerging mobile gaming trend. As digital recruitment specialists since 2001, we've enjoyed front-row seats to the rise of this fascinating industry.

In this article, we’ll explore how mobile gaming business works:

  1. Monetisation Models – The 4 key strategies mobile games employ to bring in cash.
  2. Jackpot or Joy – Gambling vs gaming, and why it’s really all about the playability.
  3. Winning Strategies – How the world’s most successful mobile games make millions.

(Then, in Part 2: People we’ll profile the key roles required for any mobile game to succeed.)

1) Monetisation Models: The 4 Ways Mobile Games Make Money

How does an app like Clash of Clans earn over $12million in just 1 month? Reaching the top of the download charts is one thing but ultimately 'how to make money' is the million dollar question. ($12 million dollar, even!)

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Mobile games make money using a variety of models:

  1. Free, with in-app purchases (IAPs) – Most common, and lucrative, model. Distributing a free, entirely open-access game attracts players to download. Once hooked, IAPs (‘Gold’, ‘Power-Ups’ or ‘Continue Playing’ passes) offer tantalising chances to skip ahead or enhance the playing experience.
  2. Freemium – Subtly different to the above, Freemium apps involve some form of ‘upgrade’, perhaps to unlock exclusive levels. Non-game apps, particularly media providers, often use this model in the form of a ‘paywall’ protecting premium content.
  3. Free, with advertising/sponsorship – Completely free to play. The 1 billion hours a month we spend playing mobile games is of huge interest to advertisers, who’ll pay big money for exposure. Some brands have started going even further, sponsoring whole games to get the reach the eyeballs they require.
  4. Paid/Premium – Pay your money, get your game. The old fashioned way. Parents, many of whom have decried IAPs as honey-traps, rejoice at this model. Minecraft, for example, is a global children’s smash hit, and can be purchased once and played almost infinitely.

Game developers are continually pushing the boundaries of these basic models. Various models can be combined together or modified to suit the game, its players and the markets they operate in.

But essentially, regardless of the playing experience, these are the ways that games make money.

2) Jackpot or Joy – The Gambling / Gaming Distinction

There’s a rather counter-intuitive trend in mobile gaming. Players are spending big money on Vegas-style games of chance, with absolutely no chance of a pay-out.

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Take a look at the top 50 highest grossing mobile games. You’ll find a significant number of games offering slots, poker, casino, dice games and more. In fact, in May 2015, 4 out of the top 10 grossing iOS apps were classed as ‘casino’. These figures from industry analyst App Annie show it’s a growing trend:

All these, you’d presume, must be making their money from “gambling”, right?

Well, technically, no, they aren’t. Despite offering in-app-purchases (IAPs) to fund turns, many of these apps offer no jackpot or pay-out. They are, instead, purely appealing to players’ desire for fun.

Take Double Down Casino, currently ranking as the highest grossing slots app in iOS. In Double Down, you can play hit slots, video poker, blackjack, roulette, bingo and poker – everything you’d find on a Vegas floor.

And yet, as Double Down’s website clearly states, the app “does not offer ‘real money gambling" or an opportunity to win real money or prizes. All winnings are paid out in virtual currency which cannot be converted to real money or “cashed out.”

People really are playing for playing’s sake – and paying money in the form of IAPs for the privilege. It's all about the experience, particularly in the many games which allow collaboration with, or competition against, friends and matched players. Known as ‘social gaming’, these add a real-life interactivity element to the core game.

As counter-intuitive as it may seem, though if it looks like a casino game and plays like gambling, it really isn’t necessarily gambling.

Where's the money at? Jackpots do exist!

Of course, real-money gambling is becoming widely available on mobile too. This is where legal regulation tends to kick in. Some countries (like the UK and Ireland) tend to allow online gambling - with compliance restrictions of course - whilst others (most notably the USA) are much stricter on mobile gaming.

Jackpots, though, really aren’t what attracts most players to spend big on mobile gaming.

Mobile gaming is all about the playability – it’s the game itself, not the payout, that attracts players and earns their payment.

3) Winning Strategies: What Makes A Game Millions?

First launched in June 2009 as an app within Facebook, Farmville was, for a time, the undisputed king of social gaming. Players planted and harvested crops, decorated their farms, and interacted with fellow farmers.

Created by game developer Zynga, Farmville offered virtual items that could be purchased to speed up, or skip, parts of the game which took time. “Clearly, even people who play Farmville want to avoid playing Farmville,” commented Business Insider.

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Farmville quickly attracted more than 74 million daily users. And whilst we’re now used to the idea of exchanging real-money to get game-money, investors were awed by the revenue potential of selling what they perceived as ‘practically nothing’, and finance poured in.

Yet, despite trailblazing, Farmville’s creators Zynga has since been overtaken by hordes of competitors. The company is now, in fact, worth less than its own office building. Zynga, though, spawned a whole new, energised industry of game producers. Armed with the insight Farmville provided, its spiritual successors have since led the charge with smash hits like Pokemon Go and Mobile Strike.

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So what separates a successful app from the 90% that fail to make it? Farmville’s strategy (the ‘Zynga model’) is becoming more science than art.

Zynga’s principles of gaming include…

  • Establish The Illusion Of Free – Absolutely critical to attracting players is the “feeling” of freeness. Of course, this includes a free initial download, but the game also needs to feel playable from the start, and payment-trap-free. Players are increasingly wise to producers who use cynical tactics to lure them towards payment. Establishing an environment of proper ‘free-ness’ is critical.
  • Allow Unlimited IAP PaymentsHalf of In-App-Purchase (IAP) revenue is generated from 0.15% of players. That’s such a huge stat that it’s worth repeating… a tiny fraction (just 0.15%) of players account for a colossal 50% of IAP purchases! The industry refers to these super-players as ‘whales’, some of whom invest $10,000’s into a single game. When any game offers you IAPs of $100+ (as many do) they’ve got these ‘whales’ in mind.
  • Optimise Trigger Activities & Focus On Micro Data Detail – What prompts a player to purchase an IAP? Trigger activities – think ‘getting stuck on a level’, or ‘having to wait 30 minutes for some seeds’ – drive IAPs. Understanding how these trigger activities work, and analysing individual or macro-level data is critical for showing the right paid products to the right players at the right time.
  • Constantly Source New Players – Growth always requires new downloads. Social gaming increasingly uses online and offline social networks to grow player bases. You’ll be asked to “share your results on Facebook”, or “invite your friends to join in exchange for game tokens”. The ability to attract new players, consistently, is the mark of a truly successful game producer.

Nail all that – as big winners like King.com, Supercell, Big Fish and others (including many more of our clients!) have – and you’re on to an awesomely-profitable winner that could bring in revenue for years to come.

At Pentasia, our role is matching the people who make games succeed with the digital jobs that give them that opportunity. In Part 2: People we’ll profile the key roles involved in any mobile gaming enterprise. (Perhaps you’ll discover a whole new mobile world in which to apply your talent…!)

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