Mobile gaming is a very hot industry with more than a billion users worldwide and seems to be easy to make tons of money. But does it in reality? Dean Takahashi, a lead writer for GamesBeat at VentureBeat, says the biggest problems for the vast majority of mobile app developers are how to get discovered and how to monetize free-to-play games. With free-to-play, most of users don't pay at all, but those who do can generate so much revenue that they easily make up for all freeloaders.
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Even though development companies have no such bottlenecks they used to have in the old games distribution systems, they do find it difficult to monetize their products. Companies may have more than hundred million downloads and over a billion online play sessions, may be able to offer sophisticated mobile game solutions and a viral spread, but they all are struggling with monetization right now, according to the former CEO of mobile game publisher Digital Chocolate. Only a handful out of hundreds of thousands of titles are now well monetized. Their developers can afford to invest into acquiring more users via smart marketing campaigns and differentiation. Thoroughly developed marketing strategies tailored specifically for your mobile game can drive a title to the top of any app store rating and keep it there for months. In order to extend significantly a regular churn cycle for players, companies build real social communities around their games enticing players to fight and network with each other. That is one of the ways to make players feel compelled to spend money to keep up playing or distinguish themselves within a given community.
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Topping the mobile rankings and staying there for a while oftentimes result in doubled or tripled revenues. For instance, Rovio, the maker of Angry Birds, reported their revenue to be up 101 percent and operating profits to be up 50 percent in 2012 from 2011. This performance has been assessed as very impressive and able to set a strong fundament for Rovio to pull off their IPO in 2014 at a $4.2 billion valuation. So, what's the secret behind this business success of Rovio? A totally different business model chosen, experts say. All profits from Angry Birds came from merchandizing and licensing consumer products such as action figures, toys, books and TV cartoons, etc. That said, online games developers should consider using diverse offline ways to benefit from an increasingly competitive online gaming environment and sustain their audience that has a natural tendency of losing interest after a few weeks.
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Another source of free-to-play monetization is to create mobile messaging networks globally like Asia's LINE or Kakao. Currently, these networks host games that generate $1 million daily in Korea and Japan and dominate the ranks on the Google Play store. But such networks are still minor and fragmented both in Europe and the United States.
Some experts joke that the best strategy a successful game developer can pursue is to shut down after one hit game and not to try to make another one. Because once you are off the list of top-grossing games, the results can be really tough. Right now it looks like a lottery whether the company will be able to find ways to monetize their games or not. And the winner is usually the one thinking outside the app.