Why Native Apps No Longer Add Up

The economics no longer work in the mobile game market. But alternatives are emerging for game discovery and monetization.

Robert Grossberg, CEO, TreSensa

December 23, 2013

5 Min Read

SuperData, a New York-based market research firm, recently published some disturbing data for iOS mobile game developers. Are you ready for this? SuperData estimates that the current cost-per-install (CPI) for mobile games in the Apple App Store now stands at $2.73.

That means that if you're a studio trying to get a user to install your mobile game, and you're not one of the very few that can get featured by Apple or coax installs through viral means, you'll have to pay one of the growing set of app marketing firms (e.g., TapJoy, ChartBoost, etc.) an average of $2.73 per install to get your game on a user's device.

That doesn't mean the user will actually play your game or spend money within your game -- it just means they will download the game to their devices, and in many cases their reasons for doing so may be tied to incentives that have nothing to do with your game.

The study also noted that the average monthly revenue per user generated by gaming apps has topped off at $1.96. I'm no mathematician, but you don't need to be Archimedes to understand that the math does not add up here. Put simply, the odds are that marketing your game in the app store will be a money-losing proposition today. To have a chance at even making your marketing investment back, you must maintain a strong purchase conversion rate among your user base, and you need to hold their interest for between one and two months -- which, in gaming years, is forever.

The economics no longer work for native mobile games. Game over.

Another mobile game trend has emerged over the past few years, one that runs corollary to these rising costs: Games have become less fun. In order to have any chance of recouping their game and marketing investments, studios have been forced to abandon ad-supported models. You would need to serve a gazillion ads to make even a small dent in a $1 million game development/marketing budget -- so most studios don't even bother. Instead, studios have inundated their game designs with prompts to purchase items within the game. Only a few studios, like Supercell and King.com, have mastered the monetization balance in which the user spends significant time and money within the game and is happy to do so. Most studios struggle in this area, and the result is that lots of games that could be awesome blow it by trying to funnel their users to a purchase point every few minutes of game play.

But fret not -- help is on its way.

Just as the web helped break down preexisting content monopolies and became the democratizing force in opening up all sorts of online content, the mobile web is beginning to do the same thing today on mobile devices. And I firmly believe it will be the next great platform for gaming. Why?

First, it removes the friction in playing a game on your phone or tablet. You may say that the act of downloading a game is quick and easy, but it's still friction. Users need to make a commitment to the game to decide if they want it to take up real estate on the phone. No commitment is necessary for a mobile web game -- just click and play. Even more important, though, removing the download requirement opens the game up to seamless social sharing via Facebook, Twitter, or other mobile social platforms. Again, just click the shared game link and you're playing, regardless of device or operating system. The download requirement and siloed operating systems are core reasons why so many online social game studios that killed on Facebook desktop have struggled on mobile.

[Is it time to allow smartphone use during air travel? Read Make The Skies Friendlier For Mobile Devices.]

Second, mobile web games can be distributed and played by millions of users with zero marketing cost. Mobile web games are ultra-portable and can be found and played through browser search and/or within mobile web game sites and portals; on game sections of major mobile media sites; within game marketplaces being introduced by phone carriers and new mobile operating systems like Mozilla and Tizen; and within mobile messaging apps like Kik. And because the games are produced in HTML5 and are supported cross-platform, the cost of producing a mobile web game can be much cheaper than the cost of producing native games. This in turn opens up more possibilities for monetization, including advertising and other ways a standard desktop website or game might monetize.

Naysayers will argue that performance is not there yet for mobile web games and that native will always win -- and they are partly right. For a certain set of games with heavy graphic and/or sound requirements, native may well be a better way to go. However, for a wide variety of popular game genres, mobile browsers are effective. And in the end, on-mobile convenience will rule the day.

What is needed now is for more studios to take the plunge. The key question for mobile game studios today is this: Do you want to spend your time paving the way of the future, or digging yourself out of an ever-expanding app store black hole?

Rob Grossberg brings more than 12 years of digital advertising experience to TreSensa. A corporate lawyer by trade, Rob spent almost eight years at DoubleClick, first as deputy general counsel and then as VP of sales operations. After leaving DoubleClick, he focused on video advertising, becoming general manager of Visible World's television ad customization product.

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About the Author(s)

Robert Grossberg

CEO, TreSensa

Rob Grossberg brings over 12 years of digital advertising experience to TreSensa. A corporate lawyer by trade, Rob spent almost eight years at DoubleClick, first as Deputy General Counsel and then as VP of Sales Operations. After leaving DoubleClick, he focused on video advertising, becoming General Manager of Visible World's agency-facing, dynamic television ad customization product.

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