Video Games in the Age of Cell Phones
Last year global revenue from mobile games was about $25 billion, up a sharp 42% over 2013.
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Mobile games send a lot of information back to the people who make them.
It’s all anonymous and aggregated, but make no mistake, the gamemakers
know how long we play, how long a level takes us, where we get stuck,
when we give up.
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But far and away the most successful model right now is called freemium, or sometimes free-to-play. That’s where you give the game away for free, but then offer players the option of buying extra lives, or extra turns, or power-ups, as the need arises. Candy Crush Saga is a good example of a freemium game, which is sometimes derisively called a pay-to-win game. It costs nothing to download, but if you find yourself stuck and needing to remove an inconvenient candy, you can buy a Lollipop Hammer and smash it for $1.99.
But far and away the most successful model right now is called freemium, or sometimes free-to-play. That’s where you give the game away for free, but then offer players the option of buying extra lives, or extra turns, or power-ups, as the need arises. Candy Crush Saga is a good example of a freemium game, which is sometimes derisively called a pay-to-win game. It costs nothing to download, but if you find yourself stuck and needing to remove an inconvenient candy, you can buy a Lollipop Hammer and smash it for $1.99.
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“There are two parts to the equation, making
money and getting users,” Murphy says. “And people don’t really talk
about the getting-users piece. But it’s no different from Hollywood:
it’s a direct-marketing business.”
Generally speaking, that marketing takes the
form of advertising on Twitter and Facebook and in other games that run
in-game ads. The process is often referred to with the rather
industrial-sounding phrase user acquisition, and it boils down to a
simple question: How much is each new user, on average, costing you in
marketing money? If that number is greater than the average user is
paying you in revenue, then you may have a problem.
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This equation is getting harder to balance because as more and more
developers get into the market, drawn by those fat revenue numbers, they
compete for a finite pool of advertising, driving up prices, with the
result that user-acquisition costs are going up faster than revenues
are. According to one estimate, by the mobile-marketing-technology firm
Fiksu, the cost to acquire a loyal user was $2.74 in April, up 80% from
the previous year. To jack up revenue numbers, publishers have to resort
to more and more aggressive business models. In other words: freemium.
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