Mobile Game Development: When to Think of Monetization?

Game development is fun.

Among the mobile game developers I know and work with, though they enjoy the game development process, they’re looking for a profitable game at the end of their efforts, maybe even the next Angry Birds.

Unfortunately, too many developers wait too long to start thinking of monetization.

So when should you start thinking of monetization? The answer, in my opinion, is at the very beginning, in the game planning process and sometimes even before a single line of code is written.

Let me start by dispelling a game industry myth – monetization is not a dirty word.  Everyone has to earn a living and to provide for themselves, their employees, and their families. Therefore, a game developer who offers players the opportunity to buy in-game virtual goods, upgrades, or power-ups isn’t deceiving their players.  They are simply offering a way to improve the gaming experience while generating revenue which enables the developer to continue developing a better, richer, more exciting, and sustainable game.  Anyone who thinks that virtual goods are ripping off players should first take shots at the florist industry which generates billions of dollars, pounds and euros by selling a product that dies within five to ten days.

When you’re outlining your mobile game on a napkin (OR a notepad or iPad) – this is the time to incorporate monetization into your game design.  So before a single word of the story is written, and before compiling your gameplay mechanics, start thinking about the role monetization will have in your game.

At this early stage, these are the kinds of questions that you should be asking:

Can in-app purchases make the game playing experience better?  If so, what kind of virtual goods will you offer for sale?  What virtual goods lend them to the playing environment? How can I incorporate advertising into the game?

Though monetization will never define the story arc OR game mechanics, it’s important to start thinking of how to integrate monetization in these early stages.

In “Monetization-based Game Design: ARPDAU Contribution,” Joseph Kim, co-founder of mobile game development studio Playviews, Inc., presents tools / charts which enable game developers to insert variables in the design phase in order to show that their game can generate a positive return on capital investments / resources.  Kim claims that he’s seen too many mobile game designers who have no clue what they’re doing and therefore make poor decisions regarding how to monetize their games.

Kim also says that retention rates among the various genres / types are very similar; therefore developers can assume that their game in a set genre will experience similar retention patterns as other games in that genre, which makes revenue projections that much easier to calculate.

It’s important to understand how much revenue a game can be expected to generate before allocating a marketing budget (or even developing the game).  That’s why forecasting future revenue streams is so important.  The game you’re excited about might appear financially unfeasible once your project revenue streams, forcing developers to either add new revenue opportunities which will enable achieving profitability OR abandoning the project entirely.

With mobile game development, localization is critical to the development of your game. Local can mean both the country/region you’re targeting as well as the device/operating system you’re developing for.

Much has been made about the differences between iPhone and Android users.  Though there are more Android smartphones than iPhones (according to comScore), iPhone users generally have higher incomes (41% of iPhone owners have a household income of $100K vs. 24% of Android owners).  iPhone owners are also more likely to engage in mobile commerce than Android owners by a gap of 23% vs. 17%.  When thinking about monetization via in-app purchases, these are important statistics to keep in mind when planning your mobile game.  The differences continue as one migrates from phones to tablets, with m-commerce significantly higher on tablets than on phones.

Not only are there differences between platforms and devices, but geography also has an impact. For example, according to research from NewZoo, 87% of players in Asia play mobile games vs. only 52% in the US, and 47% of the players in Asia pay for games and in-game goods vs. only 36% who pay for mobile games and in-game goods in the US.

But it’s not enough just to run a marketing campaign in the countries/regions you’re targeting – game developers must create games that are in the language of the market they’re targeting and that also address the game playing genres and trends in the market.

Though App purchases, power-ups and virtual goods are the leading sources of revenue for most mobile game publishers, in-game advertising shouldn’t be an afterthought.  Many mobile game developers are generating a lot of revenue from mobile advertising.

The planning of mobile advertising should also be done early to ensure that marketing opportunities can be integrated into the game.  If you think that mobile advertising is only about running banner ads in your game, think again. Today, there are several different types of mobile game ad vehicles a developer should consider when creating their monetization plan.  The natural breaks at the end of a game, when a user needs to power up or when a player makes an in-game purchase all provide effective advertising opportunities which can generate significant revenue.

One format of in-game advertising which is gaining traction is the interstitial, a rich media ad served at natural transition points in the game.  Interstitials provide a richer marketing canvass than banners do, and therefore generate better engagement and conversion metrics than banners.

Another marketing vehicle which should be considered before game development is product placement.  Though most game developers can only dream of the revenue Rovio generates from licensing Angry Birds toys and merchandise, game developers should never rule out product placement.

Having met and worked with many game developers, I know that most aren’t marketers at heart.  But early marketing integration into a mobile game can be the difference between breaking even and reaching profitability.