How to impact in lifetime value in F2P game monetization design?

In order to create economically successful game your lifetime value (LTV) needs to be greater than Cost per acquisition (CPA). What factors affect to this success formula (LTV > CPA)? What is the relationship between LTV and players’ lifecycle?

Pete Koistila, Blogger

April 15, 2014

6 Min Read

In order to create economically successful game your lifetime value (LTV) needs to be greater than Cost per acquisition (CPA). How we could achieve this situation? What factors affect to this success formula (LTV > CPA)? In order to answer these we need to understand which factors affect to LTV and how could you maximize those factors in game monetization design? What is the relationship between LTV and players’ lifecycle? [1]

Lifetime value and players’ lifecycle

LTV can be maximized by understanding your audience behavior at every phase in your players’ lifecycle. The better you engage, the better your LTV grows.

Analytics and metrics provide the key tools to measure and understand your audience behavior at every phase in your players’ lifecycle. Below the image illustrates phases of your players’ lifecycle and how those phases correlate with your LTV. [2]

LTV Lifetime value curve

Image: Phases of players’ lifecycle and lifetime value (LTV) [2]

Key phases of players’ lifecycle and LTV in monetization design are: Retention, Focus on In-App Purchases (IAP’s), Re-engagement, Cross-Promotion and Monetize with Ads. In order to maximize your LTV it is important to understand each of these phases and their role.

Retention

If your player does not play your game you can not monetize. You need to make sure at least the following retention mechanics work properly:

Fun experience: Most of all your game needs to be entertaining and fun. Gaming experience needs to be enjoyable, so that your players want to play it again, again and again.
Core loop design: Pay attention to simple and effective core loop design. Your game should pass the Starbucks test.
The 1^st game session is very important: Guarantee your player will continue later. This can be done with a fresh theme of the game, short & captivating tutorial sequence and ending with a cliff hanger.
Enjoy, learn and progress: A meta layer binding together early stage achievements helps to keep up the interest and never-ending game play. Progression should contain visual progress and progress in game economy.
Social aspect: As number of users is a key to success it is a must to design well-functioning social mechanics to generate more traffic. Your revenues are directly correlated with daily active users (Revenues = Daily Active Users * Conversion rate * ARPPU). [1]

For developing retention rates measure and improve stickiness of your game: 1, 7 and 30 day active users metrics (DAU, WAU, MAU) are important tools and describe how well your game attracts the audience.

Focus on In-App Purchases (IAP’s)

Once the proper stickiness level and retention has been reached starts the very important part of monetization: player will focus on IAP’s. Elegant rolling of IAP methods have been introduced step by step at the retention phase. Do not try to push IAP methods! At least the following IAP methods will help in game monetization:

Dual currency: use soft and hard currencies. Player keep on spending soft & hard currencies until one runs out of hard currency. In order to progress faster hard currency could be purchased with a real money.
Itemization: Items are essential part of your game economy design. Items could be purchased from item shop. Well-designed item shop is natural part of the game. Items can be tied to levelling (e.g. item unlocks at certain level), customization (e.g. looking different) and attracting different player types (e.g. Items to beat another players).
Provide elegant In-App offers: In-App offers could be considered as service (e.g. compare Hay Day newspaper ads/offers).
Do not forget whales: you should be able to provide all the time something to purchase for all types of purchasers. If a whale wants to spend, let them spend by providing meaningful items to be purchased.

Re-engagement

Once your metrics show, your player has not focused on IAP’s for a reason or another, it is time to focus on re-engagement. With re-engagement we target to convert your players into paying players and if this does not success we start to prepare for the cross-promotion phase. The following re-engagement methods support your work at this phase:

Push notifications: Once players have ended their game session, push notifications could be used for inviting them back (e.g. use timers for measuring the progression of your items or provide rewards and announcements: “Your mining tools are ready for use now. Try those.”).

Acquire newsletter subscriptions and Facebook likes: Newsletter subscription is a low-cost tool for player acquisition and Facebook provides another low-cost re-engagement channel (e.g. Hill Climb Racing provides soft currency in return for your Facebook like and they have managed to reach over 100 million downloads). [6]

Cross-promotion

Remember: even 98% of your players might not spend any money to your game, but your player could have important role in maximizing your LTV still. If re-engagement does not convert player into paying player or bring in desired revenues it is time to move on the next phase in LTV curve: Cross-promotion offers a good tool to lower your CPA. In order not spend so much money into user acquisition (CPA) you could focus on the following:

Cross-promote your other games and hope player will install your other games. Maybe player will convert into paying user within your other games?
Ranking and ratings matter in App Store. The more and better ratings you have the better your ranking will be. You may ask your users to rate your app, but do it in an elegant way! Do not violate App Store Review Guidelines. [3, 5]

Monetize with Ads

At the last phase you could start monetizing with external 3^rd party ads. This will drive your player to other apps or games, but you could generate revenues still:

Provide ads elegantly: Goal is not to drive your player to quit totally, so do not push ads, but design a natural and elegant way of providing ads. Ads could be even considered as a natural part of the game (e.g. Hay Day newspaper ads).
Use 3^rd party attribution SDK’s: Lower your engineering costs and avoid of paying for several ad networks of same installs. You do not want to integrate to every single ad network SDK separately, but instead use 3^rd party integrator SDK’s, which provide several ad networks with a single SDK (e.g Mobileapptracking/MAT, Ad-X, Kochava). [4]