[Gamesbriefers] How do you decide whether you should put ads in your games

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Question:

King has announced that it was taking all ads out of its products, presumably because its IAP strategy is working so well.

Last year, I recommended that video game devs focused on IAPs, not ads, but was roundly rebutted by Kiloo.

So what is your advice? Should developers focus on honing their IAP strategy or stick ads in the game? How should they decide?

Answers:

Eric Seufert Mentor at Gamefounders

Ads are not wholly at odds with F2P strategy, but their inclusion should be informed by highly-analytical scrutiny. The amount of daily revenue delivered by ads is irrelevant; what’s important to consider is foregone monetization from IAPs, which has the potential to deliver far more revenue. If you have eyeballs in your games, you can monetize those eyeballs from ads — but that monetization will scale linearly with engagement, whereas IAP revenue can move geometrically with engagement. King has an incredibly strong data science team; the decision they’ve made about ads has almost assuredly been modeled exhaustively by domain experts and is being pursued because it poses a net-positive benefit to their revenue streams.

Richard Firminger  Managing Director, Europe at Flurry

Makes sense, but not for most. And I’d question whether this is a sound decision long term.

Buoyed on the success of CC it might provide a over-optimistic environment where they believe they can do without ads.

Let’s be clear advertising revenue in freemium games is critical to most. Wall Street Journal estimated the market for VG and Ads is predicted to be worth $25bn in 2013 and one third of that is Ads. And only the few have CC or Cash of Clans in their portfolio.

Well targeted and well placed they ought not to be intrusive or annoying – but journalists have perennially loved to jump on the “advertising is the work of the devil” bandwagon. You can for example choose to only show ads to those that dont pay or spend. You can also place ads in obvious breaks in play and at departure. This is resonant with other free media such as radio and TV.

It feels too gung ho to me but certainly interesting. I wonder if they will live to reget this once CC falls from the skies, which it will.

Oscar Clark Evangelist at Applifier

To me its always about how do we make the game better.

Virtual goods are amazing when they deliver delight that players are willing to pay for and ideally have a social capital association. But they aren’t the only way to make money as Kiloo have attested to.

In my previous roles I’ve seen around 75% of revenue coming from virtual goods and the rest coming from ads. Interestingly we saw that these revenue elements didn’t cannibalise; a virtual good only game would only get 75% of the equivalent ARPU and an Ad only game got only 25%. We should be careful with that data however as it was a relatively small sample size.

We should also consider that these ads break down first into Incentivised, Paid or Cross-Promotion and secondly into Banners, Interstitials and Opt-in. Each have different format has a different impact on the flow of the player through our game and this can be further enhanced or diminished by the placement of the advert in that flow.

There is nothing wrong with ads inherently, its just how we use them and how we make players feel about them. They can be a great way to generate revenue from Freeloader players, but we don’t want to take this too far as this might stop them from later converting to payers and even if they don’t we benefit from their regular play.

Opt in adverts, like Impact from Applifier, also help provide a method for non-payers to voluntarily give back to the game in order to gain some free currency (for example). Viewing the ad (with Impact these are videos) of another game is, hopefully, enjoyable and gives them something that they benefit from in terms of consumable items in the original game they were playing. This helps keep Freeloader players playing and also allows them to try out the value proposition in your consumable goods without having to risk their own money. That can only benefit the overall game and the virtual good sales themselves.

All that being said for King perhaps they see the use of ads negatively impacting the longevity of users, removing them might seem a sensible choice in their case; but then every game is different.

Charles Chapman Director and Owner of First Touch Games Ltd.

I’m really interested to hear other people’s views on this. Mine are personal to our experiences obviously.

A couple ago I would have been pretty much anti ads in our games, considering them intrusive and damaging the overall experience, whilst not really generating much revenue. A couple of years on and whilst I still think they can be intrusive, they’ve been hugely beneficial for us.

In particular incentivised video has generated good revenue, but it’s also increased retention. Non-paying players can play forever, at a level not too far off someone who is spending small amounts of money, by watching a few videos.

Around 15% of our users will watch videos on a weekly basis, with each user watching around 6 clips. That’s obviously a significantly higher number than people who are spending.

Banner ads & interstitials are obviously more intrusive and, for us, are only shown to players who’ve never spent, but they’re still good revenue generators from the ninety-something percent who’ll never spend any money.

One final point – when we made Score! properly free to play back in April this year, our IAP revenue increased as you’d expect, but our ad revenue went from zero to match the IAP revenue, and continues to match or exceed it. Arguably monetisation for IAP across our games is weak, and you get a lot for free, but as an overall package of keeping players playing whilst generating revenue from non-payers it seems to work.

King’s move is obviously interesting, but they’re an outlier, and we probably shouldn’t read too much into their move and how it might apply to the rest of us.

Stuart Dredge Journalist at The Guardian

I wonder if for the really big F2P games, it might be interesting to explore fewer, bigger partnerships with brands rather than pure display / install ads.

For example, if I was in charge of the marketing campaign for Lady Gaga’s new album, might I be interested in getting some branded levels into Candy Crush Saga? If I was a big fashion house, likewise.

Zynga did some stuff with CityVille around this kind of thing, but I think there’s more scope in mobile: brands seeking an audience, and F2P games with that audience in spades. Especially when there’s a two-way effect where the brand/star can promote the game to their fans/customers.

Ben Cousins Head of European Game Studios at DeNA

Back in 2007 when we announced Battlefield Heroes we talked about ads as equally important as ‘microtransactions’. That was the prevailing wisdom back then, before anyone in the west really knew how this business would work.

Since then, a lot of the teams I’ve worked with have started out with an ads + IAP strategy, only to abandon the former when the latter’s revenues trounce it. I’m talking core games only here, but I’ve never seen it meaningfully contribute to the bottom line of a game.

In my experience, that space is much more valuable being used for cross promotion between multiple titles from the same developer or publisher or for the promotion of events or IAP for the game itself.

Teut Weidemann Online Specialist at Ubisoft

Advertising can even hurt your revenue. Most consumers think that advertising makes millions of dollars as they are observing ads all day long. With this in mind a lot of users who see your ads in your game simply think you already earn enough money – and there are spenders out there who buy simply because they want to do you good for your nice game – not necessarily for the items.

So in some cases Ads hurt conversion.

Basically you can say that ads only work in games where your IAP model failed.

Anthony Pecorella Producer for virtual goods games at Kongregate

While I don’t have data to back it up (and would welcome support or correction from someone who does), I’ve seen ads tied more explicitly to IAP conversion in some games.  Charles noted that they never show ads to paying users, and very smartly so, but I don’t know how clear he is being to players about it.  Getting a player to make a first purchase is tough and one of the reasons that we advocate some sort of first time buyer package.  But along those same lines you can tell users that making any purchase in the game will also remove ads forever.  Some games try to split out ad removal into a separate purchase (or entirely separate SKU, though that’s more as an attempt to chart on the paying apps list) from all other IAP but I think that’s unwise.  If you’re going to use ads to monetize your free users you should also use them as a direct incentive to convert to a paying user.  Even a $0.99 purchase should be worth more than the player will generate in lifetime ads on average and the chances of them making a second purchase in the future goes up tremendously.

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