Industry Forecasts

App Monetization, Industry Forecasts

Latest report from App Annie supports the claim that the market is choosing View to Play as the business model of the future for the mobile ecosystem

Last November, while most of us were already preparing for the holidays, AppAnnie released a very interesting report that might have gone unnoticed by some of you. One of the Key Learnings is that Free-to-Play is giving way to View-to-Play. In other words, the fastest growing business model in the next 5 years in mobile apps will be in-app advertising and not in-app purchases.

In app advertising is growing at 24% CAGR and expected to surpass $110B by 2020 while Freemium is trailing behind

About App Annie and the report

The App Market data company needs no introduction from us and has become the source of data for most of the industry with regards to app store data. The company has over 600 employees in over 13, many of which are focused on researching data. From time to time, App Annie generates industry reports and forecasts and shares those through it’s blog and other content channels.
Company website – https://www.appannie.com/
Report Download Page – http://go.appannie.com/report-app-annie-app-monetization-2016-dg

What is View to Play?

If you haven’t heard the term View to Play, it’s probably because it’s new. When the app store just emerged, apps were sold and not given away for free. With the introduction of In-App Purchases, developer quickly started offering free apps to attract more users and find different ways to monetize them. This led to a new breed of game companies that specializes in conversion optimization, analytics, segmentation and performance marketing – the term Games as a Services was coined to reflect these new practices as well as Free to Play gaming. View to Play is similar in approach but instead of pushing users towards in-app purchases, the optimizations are focused around ad based monetization models – hence, “View to Play”. Users who want to advance in the game are often offered rewards and incentives for watching ads and a new breed of companies emerges with a toolset that includes special analytics capabilities around ad revenue measurement.

What is Driving the Change

In a recent article we covered how CPI is increasing and companies needs to adapt quickly. Well, some have already started and the App Annie report hints that more companies will be adopting the view to play model in the future.

These companies are realizing something that others have not. The CPI increase is highly correlated with the expected increase in ads LTV. They are both been driven by the same forces – the total mobile advertising spend is increasing twice as fast as the user growth. IAP revenues are actually increasing slower than the user growth and are becoming more and more concentrated in top grossing apps.

The cost per install is increasing over time as well as the average ad based revenue per user while In-App Purchase models are declining

This means that companies who transition quickly to view to play will be far better prepared for the future increase in CPIs. That is, as long as they can also adapt their measurement and optimization practices with a platform such as SOOMLA Traceback.

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Industry Forecasts, Marketing

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If you have been marketing your app long enough you must have noticed a CPI increase. Getting users to install your app used to cost a lot less than it costs today. This change can be noticed globally and across different platforms.

The reason behind CPI increase

One of the drivers of the CPI increase we are seeing is the brand budgets starting to pour into mobile. when the internet just emerged, users adopted it first and a few years later bigger budgets started to follow. Facebook story also shows a lot of resemblece – the social network first had 1 billion users and 3 years later it was making $25B in advertising. Mobile advertising also follows the trend of the money following the eyeballs. Recent report from eMarketer projects mobile advertising to reach $195B by 2019 with most of the increase coming from brand budgets.

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Ad spend per user is growing

Here is another way to think about it – if you devide the projected ad spend growth by the projected user growth you can see that the average ad spend per user has been increasing but will continue increasing even more.

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So apps who want to get users face 2 options:

  • Try to relay on organic discovery
  • Increase their LTV in order to afford higher CPIs

Relaying on organic discovery however has proven more and more difficult due to the app stores being overly crowded. Apps today have to invest in marketing to gain momentum. So that leaves us with only one option – increasing LTV.

Adapting to change in CPI prices

In order to increase LTVs app companies must adapt to the change quickly and make the brand budgets work to their advantage. In other words, your company needs to make sure some of this new money finds it’s way over to you. The most effective way to increase LTVs is to introduce a view-to-play model in your app and targeting the 98% of the users that don’t pay. This puts your app in a position to enjoy the projected increase in ad-spend per user and not suffer from it. From a unit economics perspective, monetizing a larger portion of your user base allows you to increase ARPDAU and LTV. Combined with an adequate ad revenue measurement tool, you would be able to increase CPI bids with confidence, remain compatitive in the market and keep growing your app.

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Industry Forecasts, Research

Zynga_s_Financial_ReportsOne of the things I learned a while ago but was recently reminded of by one of our advisors is that you can learn a lot from the financial reports of public companies. Lectures in industry events, blog posts and news articles are great sources of data but you never know the exact context and how accurate the data is. Financial reports are much more reliable.

Zynga’s ad revenue is growing

The motivation to check Zynga’s ad revenues came because in the past 3 months I’m suspecting that there is a growing trend in mobile games to rely more heavily on advertising revenues. Most of the data points I had, however, were based on unreliable sources so I wanted to check with a source I can trust as well – financial reports.

So here are the results. Zynga ad revenue grew from $74M in 2011 to $173M in 2015. 2.3x in 4 years while their in-game revenues went down 40%.

Screen Shot 2016-04-20 at 5.51.47 PM

Moreover, the ratio of the ad revenue from the overall revenue is also growing dramatically from 7% to 23% in just 4 years. In their last reports Zynga released information that their Q4 and Q1 ad revenues accounted for 30% and 26% of their total revenues. Their Q1/16 ad revenue grew 41% compared to the Q1 revenues in 2015.

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What’s driving the trend towards advertising based monetization

There are many drivers for this trend. Here are a few that I’ve spotted:

  • Brand budgets are starting to go mobile.
  • Video ads bring high eCPMs from brand campaigns as well as app trailers.
  • App publishers are learning to integrate more ads in non-intrusive ways and are feeling more comfortable with increased ad exposure

The first driver is the most important one that will lead future growth in the next years. There are forecasts by eMarketer showing that mobile advertising will grow 3x in the next 4 years.

 

If your company also makes significant ad revenues it’s important to know the Advertising revenue per user. Check out SOOMLA Traceback – Ad LTV as a Service.

Learn More

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Industry Forecasts, Marketing

what's the average spend per app on cost per install campaignsAbout 2 weeks ago a friend asked me how much do app companies spend on getting app installs – what’s the average cost per install campaign size. He was pretty happy with the answer I gave him and the research I referred him to so I thought I would share the answer.

Concentration in cost per install campaignscost per install campaigns account for growing part of the total mobile ad spend and forecasted to reach $6.8B in 2019

First, you have to realize that the average spend is really irrelevant here due to strong concentration in the market. According to eMarketer there were $4.6 billions spent on App Install campaigns in the US during 2015. You can assume that the numbers are 2x if you look at the global market so $9.2B. The reality is that the top companies are doing a big chunk of that. You can look at the public companies to get a sense of that:

  • Zynga spent $169M on Marketing in 2015
  • King spent $344M in 2015
  • Glu’s marketing spend was $45M in 2014

The rumor is that Machine Zone and Supercell are spending close to $500M each on cost per install campaigns. The real answer is that the distribution is estimated as:

  • Top 3 companies: $1.2B ($400M each)
  • #4 – #10: $1.2B ($150M each)
  • #11-#50: $4B ($100M each)
  • #51-#100: $2B ($50M each)
  • #101-#200: $0.75B ($15M each)

The average spend per app is around $4,600

If you still want to figure out the average spend you would need to divide the total campaign spend by the number of apps. Surely enough Apple and Google can provide this data. The latest numbers that were released were 1.5M apps for Apple and 1.4M on Google Play –  http://techcrunch.com/2015/06/08/itunes-app-store-passes-1-5m-apps-100b-downloads-30b-paid-to-developers/. Obviously there is a lot of overlap so we can assume 2M apps in total and an average spend of $4,600 per app.

 

 

 

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Industry Forecasts, Industry News

My Learnings from China Joy

Last week I attended a huge conference in Shanghai called China Joy. It was fascinating and awesome and like everything in China it was really, really big, but I’m not here to talk to you about that.Your Ad Here Icon

One of the things that took me by surprise was that games in China don’t have ads in them. I mean, that’s almost embarrassing to admit. How did I not know such a thing about an industry I live and breath? And…if I missed something like this, what else did I miss about China?

Where are the Mobile Ads?

You might think that Chinese users are less receptive to ads, so game designers choose not to include them in favor of superior user experience. However, the reality is a bit different. It is not the game publishers choice not to include ads, but actually the App Stores in China that object to ads. There are roughly 300 App Stores in China, so users can install apps from multiple stores. This creates quite a competitive atmosphere between the various App Stores, so they do everything in their power to prevent users from downloading games from other stores. They want to own the user exclusively and that can’t be done with the way ads are managed today.

Mobile game advertising in China could be a huge thing. Mobile game advertising is already worth about $5B in thChinese Appstorese US. Think about how big it could be in China. Maybe it would be smaller, but we are looking at a billion dollar opportunity at the very least. In addition, unlike in other parts of the world, the biggest advertising company, Facebook, doesn’t exist. While this could potentially be a huge opportunity for ad networks, there are some pretty big challenges to get there.

What the Future Will Hold

My estimation is that by the end of 2016, there will be ads in mobile games in China. The more innovative ad networks, will find a way to work with the App Stores to offer ads inside games while respecting the needs of such App Stores. One way this could happen is via white labeling. Basically, the stores will take the part of the ad network by leveraging advertising technology from ad-networks outside of China. For the App Stores it seems like the best move. They will make additional revenue while keeping their game publishers happy. However, there is one problem, ad networks tend to be better when they are bigger. There are advantages to scale for both sides of the network. For advertisers, bigger networks means they have to deal with less interfaces and get more reach for their ads. For publishers, scale means better fill rates and more ad diversity.

Therefore, I’m anticipating that soon after, the App Stores will grow their own networks. Therefore, three types of services will evolve:

  • DSPs focusing on aggregating all the App Stores into a single interface for advertisers.
  • Network-to-network marketplace between the App Stores.
  • Publisher side dashboards allowing publishers to monitor and manage their ad monetization across different App Stores while still respecting the boundaries.

These are, of course, my opinions and estimations. I’ll be monitoring this market closely to see if I was right. If you have other thoughts about how this market will evolve, feel free to share.

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Industry Forecasts, Research

User retention, user behavior, ad networks, the list goes on and on. Developers want solid user retention and acquisition. For that, you will need to search endlessly for useful data reports about what keeps users engaged, what buttons they are clicking, what time of day they are playing, and so on. Lucky for you, we compiled a list of the top ten mobile game data reports and a what they can do for you.

Check out our 2015 Q4 Mobile Gaming Data Report. It shows a unique synopsis of F2P games.

Download Now

The Apps Flyer Game Performance Index – May 2015

In May 2015, AppsFlyer found a few key insights on user retention.  Video networks produce a 130% higher user retention rate in mobile games compared to other ad platforms.

The full report answers questions such as:

  • Which platform has the highest user retention?
  • What is the best media partner for user retention?
  • Which advertising platform is best?

“Know your players and you will create successful and fun games”

Full Data Report

10 Killer Insights: deltaDNA GDC Session Slides – March 2015

Lack of Appointment Setting is the main reason players are leaving games. Appointment Setting is defined by DeltaDNA as creating “appointments” for users to come back. Good examples are special events, theme changes, tournaments, double points days, and Trivia Tuesday. Push notifications and emails are a great way to remind users of these events.

  • What percent of users are leaving my game due to lack of appointment setting?
  • What are other important reasons users are leaving games?
  • How should developers drive engagement?

“The Cost Per Loyal User has a 39 percent rise year over year”

Fiksu Indexes for May 2015

Fiksu defines loyal users as users that open an app three or more times. In May 2015, Fiksu published indexes about the cost of maintaining loyal users, cost of acquiring game installs through advertising, and the cost of app launches.  The cost of acquiring a loyal user is increasing overall year to year in iOS apps.

  • What is the cost of acquiring a loyal user?
  • How do developers ensure that their games are making profit?
  • How does the cost per install compare between iOS and Android?
  • How does the cost per launch compare?
  • Is it worth it to spend more on one platform over the other?

 

Full Data Report

“In 2015 for the first time ever, over half of the US population will be mobile phone gamers.”

For Advertisers it’s Mobile Game Time – July 2015

In July 2015, eMarketer highlighted the importance of mobile games for advertisers. The mobile gaming audience consists of over 150 million different people in the US –  this broad, diverse audience is comparable to the audience of television viewers.

  • What does the large ever-growing mobile gaming audience mean for developers and advertisers?
  • How many mobile app users will pay for apps?
  • How many tablet users will pay for apps?
  • Is it worth it to develop games for tablets?

“The very first players of your game are your best. Invest resources in retaining and keeping them happy, the rest will follow as a result.”

The GameAnalytics After Analyzing 400+ Games – March 2015

Players that enter a game in the beginning have a greater chance of converting than if a player enters later. Players that downloaded a game in the first week and converted were likely to spend more in a game.

  • What methodology was used to acquire this information?
  • What is the Golden Cohort?
  • What do these numbers say about where developer resources should go? 

Included in the Full Report:

  • Key findings from TapStream, AppAnnie, Tune, Swrve, and InMobi.
  • Information that will help you improve your games.
  • Facts to consider to make profit.
  • Much More!

Full Data Report

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Industry Forecasts

With fiverr users offering to make a personalized game for $5 you must be asking has this gone too far? Do we have enough apps already?I recently came across an interesting item on Fiverr: “I will create a Flappy Bird clone for you with your theme for $5”. Apparently, there is someone will to make flappy bird games on demand for a very low fee. How is that possible?

Game templates enable game clones

Digging in a bit further, it appears that many games these days are available as templates and anyone can make their version of it with $99 and a free afternoon according to a post by Wired Magazine. It appears that flappy bird is not alone. Here is a short list of templates I found in a quick Google search:

  • Bejeweled
  • Whack a mole
  • Fruit Ninja
  • Super Mario
  • Bubble Shooter
  • Doodle Jump
  • Jetpack Joyride
I’m sure there are more but the point is clear – making game has become easier than ever.

Are there too many apps?

One question I have been asking myself recently is “are there too many apps”. I recently came across studios that published over 100 apps that look almost identical in game play and the only different between them was the theme and the words that describe them in the App Store. This is not a coincidence but a carefully planned strategy that has it’s roots in the days of search engine optimization. This method is based on a few simple principals:
  • People discover apps by searching in the app stores
  • Specific results rank higher so making series of games gets more traffic: bear jumping game, koala jumping game, …
  • Users often search with typos
You can look at it as a cynical response to the App Store algorithms or as a new level of personalized experience but there is no doubt that apps have became very easy to make these days.

Will there be less apps in the future?

With the current trends and with the thresholds of app making getting lower it’s hard to imagine what will stop the app flood. The only thing is maybe Apple’s recent moves to increase the bar of getting into their store. However, many times, it’s actually Apple’s actions and algorithms that entice developers to make versions of their apps. For reference, the internet has close to 1 billion domain names and about 180 million active sites according to Netcraft so if anything you can expect the number of apps to go up and not down. If Apple will try to fight it they are likely to lose.

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Game Design, Industry Forecasts

I recently gave a session at Casual Connect Singapore about game publishing. If you missed it, you can see it here.

Game publishing used to be about putting CDs on shelves

In the first part of my session I’m describing the history of game publishers and why they were such an important component in past times. When consumers used to buy games in retail stores the importance of being able to put a CD on the shelf was very high. The shelf space was limited and whoever got in there was immediately successful. Game publishers were essential.

The role of publisher changed to an aggregate of tools and knowledge

When we come to look at game publishing in the digital age, we can see that the game publisher’s ability to put mobile games on the shelves of the app stores is very limited and in fact the top free charts are dominated by self-published and indie studios. The role of digital publishers is still important but it changed to be something else:
  • Provide game development and game management tools
  • Aggregate know-how and best practices
  • Benchmark games and make better decision based on historic performance
  • Learn audiences and target game distribution

Are publishers really bigger than indies?

Most of the value that publishers can bring to the table is derived from their size. Developing great tools require a lot of engineering efforts and most indie studios don’t have enough engineers to invest in this. Publishers can aggregate know-how and benchmark games since they have visibility to many games and finally analyzing audiences works only at scale. If we compare publishers to studios, they are usually much bigger. They have thousands of engineers compared to 1-10 people in indie studios and they see more games and more users. However, if we count indie game developers in aggregate, there are:
  • Over 1 million engineers
  • hundreds of thousands of game apps
  • Visibility to over 1 billion users

Shared publishing is shared economy applied to game publishing

There is a global trend of shared economy. The concept is simple, when individuals share resources and join together they can achieve great things and free themselves from dependency in centralized corporations. AirBnb did this by realizing there are more rooms people are willing to share in their houses than there are in hotels. Kickstarter proved that crowds can be a valid source of funding and open source showed us what great tools can be built when engineering efforts are shared.
Shared publishing means that game publishing can also be shared. I believe that it’s time for indie developers to join forces and create better games. It’s time for studios to create a standard for sharing data and it’s time to drive insights from a data pool that includes all of their data together. It’s time for shared publishing.
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Fun Stuff, Industry Forecasts

Happy New Year from the Soomla botStartup life doesn’t leave a lot of time for reflections, you need to keep moving forward at full speed. However, the little time I spent looking back on 2013 yielded some interesting thoughts that I wanted to share with you.

The year when IAP exploded

When we started SOOMLA in the middle of 2012, the In App Purchase model was just starting. Apple announced it earlier and Google just added it. The capability was there, the promise was clear but developers were still hesitating. 2013 Changed all that. If you need to narrow it down to one thing, it will be Candy Crush Saga but that’s not even half the story. Free 2 Play requires leaner and more agile ways of game development, it requires more sophisticated funding models and highly measurable user acquisition channels. Most importantly, it requires conversion optimization tools – the ability to measure, analyze and adapt aspects of the game in real time. In 2012 only a few top publishers had these tools. In 2013 they become available through 3rd parties especially for Tier 2 publishers. In 2014 we will see more tools focused on the mid tail and long tail market.

The year when iPhone started following Android

In many ways, 2013 was the year when Android took over the market. It’s true that more Android devices existed before and the number of app installs also surpassed Apple’s in 2012. However, it wasn’t an apples to apples comparison (couldn’t resist this one). Android is really an aggregation of many providers, some of the devices sold internationally are crappy Android 2.3 phones and App Store revenues were still on Apples side. In 2013 we saw a lot of that changing:

  • Android accounted for 81% of shipped devices compared to 13% by Apple
  • App installs generated from Android were 75% of the market vs. Apple’s 18%
  • Apple is still leading in App Store revenues but Android had better growth rates and the gap is shrinking
  • In 2013 Apple released the iPad Mini and iOS 7 – both are following Android devices in form and functionality

SOOMLA Breaks Through with an Open Source Project

For SOOMLA, 2013 was the year where SOOMLA turned from an open source project into a company. The In-App Purchase Store space to which SOOMLA moved first received validation from the industry and has become anecessary building block in mobile games. Our small open source project which had 25 downloads in the first month is now being used by thousands of developers all over the world and more than 10M devices has SOOMLA inside.

In short, 2013 was really great and we are expecting 2014 will be even better.

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Industry Forecasts

Let’s start with the elephant in the room – predicting the future is a funky business.

Don’t trust anyone that tells you he knows what the future looks like. With that said, you can treat the rest of this post as it is meant to be – a fun attempt to guess some of the trends and maybe spike some interesting ideas and discussions.
seven predictions about changes in mobile games and ways to monetize them within the Soomla platform for game developers.

Video Ads Will Remain Strong

Betting on an existing trend seems like a an easy one but history does show the Gaming Industry can be rocky one so there is really no guarantee for any trend to continue. That said, there are quite a few reasons, why video is a very good format for mobile games:
  • Easy access to creative materials – they’re called video games for a reason
  • Highly effective format that delivers an immersive experience
  • Native fit inside other games and other types of affordable inventory

Lower Banners Will Go Away

It is just a bad format all over. Low quality clicks for advertisers, annoying for users and low revenue for publishers.

The ‘Click’ action Will Change from Tap to Swipe

This one is more of a wishful thinking than an actual prediction. There are just too many parties involved to make such a change that obviously impacts CTR, CPCs and CPMs. However, here are some reasons why this change makes sense:
  • Small screen sizes combined with big fingers makes the tapping less accurate than a mouse click on a PC
  • High ratio of accidental clicks drives click quality down
  • The context switching between apps takes longer so the accidental clicks are more annoying for the users
  • Swiping is a fun experience
  • A user that swipes an ad is much more likely to convert later on
  • As the mobile ad industry matures there is more room for specific formats that are purpose built as opposed to ones that originated from PC/Web

User Selection and More In-Ad Interaction

About 2-3 years ago there was an attempt to innovate online video advertising by giving the user a choice between a few video ads. This makes a lot of sense as the user who actually made a conscious choice to watch an ad is more likely to take action later on. In online video, this didn’t catch on but it seems that this approach can be a better fit for mobile game ads.
  • Gaming content is interactive while watching an online video is a passive experience.
  • It’s easy to create a fun selection experience in mobile touch screen
  • Video is today one of the most effective formats for mobile game advertising

Twitter will Become a Big Source for User Acquisition

Many game publishers consider Facebook as the best source of new users. The combination of the in-feed ads, the high ratio of mobile usage, the targeting capabilities and the volumes makes Facebook campaigns the #1 or #2 choice today. Twitter shares very similar advantages but reaches different audiences than FB. Once twitter launches such a platform it will be a big hit.

More Native In-Game Advertising Experiences

While the top grossing titles are actually moving away from advertising as a source of monetization, there is a new breed of publishers who specializes in bringing masses of users and monetize them based on ads. Many of those publishers relay on sequels or a more templated approach to design, development and can invest more in creating better in-game ad experiences that makes the ads feels less intrusive. I’m not talking about product placements, these are very hard to justify. I’m talking about nicer ways to put an interstitial, a video ad or an offer wall and actually making it look like it belongs. Some of the offer wall providers are already offering their offers in a form of a feed that can be integrated creatively.

Offer Walls / Incentivized Ads are Here to Stay

There have been voices against the practice of offering users incentives to watch ads or take different offers. The ‘Scamville’ fiasco comes to mind as well as Apple’s repeated attempts to fight incentivized downloads. At the end of the day, most users likes having this as an option and it is by far the least intrusive form of advertising. After some trial and error it is also clear that while not all advertisers get ROI there are certainly many advertisers that do.
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SOOMLA - An In-app Purchase Store and Virtual Goods Economy Solution for Mobile Game Developers of Free to Play Games