How Do Mobile Games Generate Revenue?
Mobile games are generally set up in one of two ways - free-to-play with ads or free-to-play with in-app purchases.
Free-to-play with ads means the gamer can download and play the game for free but they will be required to either watch ads at different stages of the game or see ads throughout the game. Often ads can be removed by purchasing an upgrade.
Games that are free-to-play with in-app purchases allow the gamer to buy extras during the game to have a better gaming experience. These are also known as ‘freemium’ games.
In-app purchases make up a huge revenue channel in mobile gaming, in fact five free-to-play mobile games generated over $1bn in revenues each during 2021. These games were:
• PUBG Mobile $2.8bn • Honor of Kings $2.8bn • Genshin Impact $1.8bn • Roblox $1.3bn • Coin Master $1.3bn
A good example of a game with in-app purchases is Pokemon Go by Nintendo. In 2016 hordes of people took to their smartphones to wander the streets in search of Pokemon. It became a cultural phenomenon, allowing gamers to play the game in real life in an augmented reality. The principle of the game is to catch Pokemon with Pokeballs, if the player ran out of Pokeballs they could purchase additional ones with real money with an in-app purchase adding to the 2020 revenue of $1.92bn.
The Mobile Gaming Monetization Model
The mobile gaming monetization model includes two types of participants: payment service providers - the companies that collect the money, and ad networks - the online services that link game publishers to advertisers that host in-game ads.
Payment Service Providers
Payment service providers enable gaming companies to take payments from gamers. These providers include financial services companies with online payment and credit card services and alternative payment services like digital wallets and telcos.
Game publishers typically work with local payment service providers in every country to offer recognizable and trusted payment solutions and to make sure they adhere to local banking regulations, making payment service providers the backbone of success for gaming companies.
Ad Networks
As mentioned earlier, some games make revenue by pushing ads to the player - this is where ad networks come in. Ad networks are the middlemen between the advertisers and the game developers. They facilitate the bidding and display of ads within the dedicated advertising space in the games.
Alphabet (Google AdMob), Facebook (Facebook Ads), Unity Technologies (Unity Ads), Apple (Apple Search Ads), Blackstone Group (Vungle), IronSource, AppLovin, AppBrain, Appnext, Mistplay, Tencent (Tencent Ads), LG Uplus (LG U+AD), and InMobi are some of the key providers of ad networks helping connect advertisers with gaming platforms.
These platforms allow advertisers to ‘bid’ to promote their ad within the game, the highest bid wins the advertising space, and all this happens in just milliseconds!
The Key Role of Payment Providers in Mobile Gaming
It’s clear that the mobile gaming industry is moving away from the traditional purchase-once-to-play model we saw when smartphone gaming initially launched and is focusing more on in-app purchases- and why wouldn’t they when in-app spending accounts for 95% of all user spend according to TechCrunch.
The challenge here for the gaming industry is to remove as many barriers as possible that might stop the gamer from making an additional purchase while playing the game. This is where the payments industry plays a key role in the success of mobile gaming.
Barriers that may interrupt a payment include:
• Unknown payment options that may appear untrustworthy • Complicated payment processing I.e. requiring too much information • UX experience- not mobile friendly, not biometric compatible, slow • Incorrect fraud profiles – declining a legitimate transaction
Alternative payment methods such as mobile wallets limit the friction of in-app purchases allowing for a better, almost uninterrupted gaming experience meaning a higher conversion rate of in-app sales for the gaming company. Alternative payment methods offer localised payment options, pre-authenticated payment information, fraud protection and are mobile friendly, so working with a reputable payment provider like payabl. can greatly reduce the barriers for conversion.
Mobile Gaming in the Future
Mobile gaming is only expected to grow exponentially over the coming years, and this is a huge revenue opportunity for all players involved including payment services providers. To find out more about how payabl. can help your business grow, set up an obligation-free chat with one of our experts!
Resources: GlobalData, Thematic Research: Mobile Gaming 2021