MoComment: Ad Supported Mobile Games: Don’t Believe the Hype
Ed: We are restarting our “MoComment” section, which has guest essays and commentary from industry players. If you’re interested in writing about an issue related to mobile content industry, send us an e-mail us at rali AT moconews.net. Previous essays are here.
Matthew Bellows is the GM at Floodgate Entertainment, a leading mobile games developer. Previously, he was the founder of Wireless Gaming Review and the Director of Business Development at Engage, an Internet advertising network.
Ad Supported Mobile Games have recently been called everything from “inevitable” to “the best hope for innovation in the medium” but the truth is far from that. In fact, the middlemen who are trying to aggregate ad inventory in mobile games face two sets of problems: the ones that the Internet ad industry has already struggled through, and the ones that the broader mobile games industry is finally coming to terms with.
The problem is not getting mobile games to show ads in. Both Greystripe and Hovr already have scores of games from dozens of developers. There are enough independent developers to keep mobile game content flowing for a long time.
If their self-reported numbers are to be believed, the mobile game ad networks have also had no trouble attracting customers and teaching them to download. Greystripe claimed 1.4 million game downloads in their first four months. Hovr claimed 200,000 downloads in its first weeks. GetJar.com, which sells ads during the download process as opposed to within the game, claims 1.4 million downloads last week alone!
Now that these companies have a large and growing pool of ad inventory, their problems start. At last week’s GDC Mobile conference, members of the mobile games ad panel claimed they were selling $30 CPMs. A brief look back at the Internet advertising industry from 1998 to 2002 will clearly show that price, or anything near it, is indefensible. For the CPM model to work at any price point, even in the short term, these networks need a critical mass of advertisers willing to spend branding dollars (not direct marketing dollars) on a new, untested medium that will appear in a wide range of content. That’s going to be hard to find.
Assuming for a moment that the networks can find enough of these advertisers, that will increase the attraction for publishers and developers to run ads in their games, thus adding more inventory and further depressing prices.
But it’s much more likely that the entire mobile CPM model will collapse, as it did on the web. Interactive agencies were already burned once by ad networks and $30 CPMs. That’s why the vast majority of web ad buys now are CPC (cost per click) or CPA (cost per acquisition). Both of these models put more responsibility on the content provider, and insulate the advertiser from risk until the viewer takes an action.
In fact, there are CPA campaigns running in games from Greystripe — a $5-off coupon from Speede Oil Change for example. Although the statistics on that campaign are not publicly available, it’s impossible to assume that the effective CPM on that campaign approaches $30.
The long term success of CPC and CPA models rely on direct marketing metrics, a huge volume of impressions, an ad selling system more scalable than that required for CPM campaigns, and a mobile commerce infrastructure (technically and psychologically) to monetize the consumer action. All of these are a long way off for mobile game advertising.
Plus, the ad sales teams for these companies are competing with all the other mobile ad offerings being launched, from carrier efforts, to mobile search companies to WAP advertisers. Even Nokia is announcing a mobile ad initiative. If you are a forward thinking ad buyer with some money to experiment with, who are you going to try your campaigns with — Virgin Mobile or Hovr?
The people who run the new mobile game ad networks are claiming that they will bring in a new user base for mobile games
In his typically smart fashion, Mattthew eloquently and directly addresses yet another hot balloon of hype starting to float up with the hopes of some in the industry. I strongly suspect that Matthew is, once again, right.
Matthew is spot on with this essay. Maybe there is room for mobile games advertising in small Flash Lite games but the expense of developing and porting a new mobile game is beyond what ad revenue can provide. People are willing to pay for top quality games as proven by the $10 – $12 games on VCAST.
What does willingness to pay prove? People prove they're willing to pay for TV shows too, but the free, local channels still seem to do well for themselves with an ad-supported model. I'm not saying I disagree with you (or Matt), but I do think it's a little shortsighted to be discussing specifics of what ad revenue can/can't support.
I'm an indie(very indie, just me) mobile game developer, partnered with greystripe. My games are starting to do fairly well now, and can actually pay my bills. I've only been doing this for 6 months, and already it's paying well enough for me to keep doing it.
My case may be an exception though, since I don't pay a team for development costs, and don't share any of the profits. Also, my games do better than most, so I imagine a lot of the other developers arn't seeing their ad revenue as a replacement for sales like I do.
I hope we don't see a fall in the CPM any time soon, as this is what keeps me fed.
Now time for a shamesless plug:
Play "3D Attack Chopper", "3D Attack Chopper 2", and "Attack Breaker Pro" . Should work on just about any mobile device out there.
http://gamejump.com
Matthew is addressing an important aspect of the equiation — game quality. But it's hardly the only one. It would be easy to point to numerous games that are offered for sale that in fact are not worth the price, and are not worth playing for free, either :)
Given the ubiquitedness of the device, the mobile content consumer is much more akin to the casual player of browser based games than to the committed gamer. Ad sponsorship has worked quite well in this space on the PC, and it will work for mobile.
I've gotten a bunch of emails on this essay, and thought I'd post some numbers I threw together to illustrate a point I didn't have space to bring up in the original piece — the lack of developer revenue that will trickle down from even a large $30 CPM campaign.
CPM: $30
impressions bought: 1 million
ad network revenue: $30,000
developer share: 40%*
[80/20 assumption]
top 20% games rev.: $9,600
avg. top game rec.: $480
bottom 80% games rev.: $2,400
avg. bottom game rev.: $120
* from a panelist at the GDCM session
So from a fairly large buy, the individual developer stands to make almost $500 with a top game. I don't see how this revenue opportunity can really support innovation in the mobile games world.
Matthew
It depends on how fast the 1million impressions are used up doesn't it?
Sure the top games may get around $480.00 from your figures, but what time period is that spanning? Days, weeks, months? You're leaving out an important factor there.
Speaking from my own experience, on a monthly basis, the top games may do considerably better than $480.00 on a monthly basis. Many of these games don't take large teams of people multiple years to make, so it brings the dedicated small developers into the field.
Also, you have to factor in that many developers have multiple titles out and generating revenue in the same time period that a big dev house may make 1. So lets say in a 6 month time period, a small dev house(1/2 people?) can make 3 resonably popular mobile games, and possibly be bringing in thousands of impressions per day. After a year or two double/tripple/quadrupple the impression rate because the mobile advertising games are spreading quickly these days, plus they'll have more games.
I can say for a fact that without a large publishing deal, you can't make any money on sales of mobile games, however with the advertising systems you can pay the bills or better, which as far as I'm concerned is quite the improvement.
Great topic and feedback here. Two questions:
1- Can anyone speak to standard CPM or CTR's on standard WAP applications? For example, if a social network was to go mobile, what are some good numbers to use for the initial business plan? It seems $30 is a high number from the essay.
2- What about opt-in or permission based marketing for WAP… for example, if you were to be able to select x number of special vendors you'd like to recieve product information/advertising on…in exchange for free WAP access to the site, what numbers can we expect in this model?
3- On question #2, how does the logistics of such opt-in campaigns work and/or what providers are best positioned to provide these options?
Thanks!