Have you ever wondered how those “free” mobile games, infamous for their pervasive, weird, and often misleading ads, make so much money? It’s a multi-billion dollar industry, with some titles raking in over a billion dollars each year. Games like Candy Crush Saga, Monopoly Go!, Honor of Kings, and Last War: Survival show how lucrative the mobile gaming market can be.
But how do mobile games make money, exactly? While these games are free to download and play, they employ a variety of strategies to generate revenue. This article will explore them – explaining how and why they work, as well as provide an overview of off-game revenue streams.
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How do mobile games make money: understanding the F2P model
The free-to-play (F2P) model has become the dominant monetization strategy in the mobile gaming world, and for good reason. But what is it? Quite simply, it means that the game itself is free to download and play. In other words, there’s no upfront cost, which removes a major barrier to entry for potential players.
But if the game is free, how do mobile games make money? Well, F2P games rely on various in-game and external revenue streams. This can include things like in-app purchases, advertisements, sponsorships, licensing agreements, merchandise sales, and more, as well as any combination of those.
The beauty of the F2P model is that it allows developers to reach a much wider audience than they could with a traditional premium (paid) game. People are more likely to download a game if it’s free, even if they end up spending money later on.
However, the F2P model also has its drawbacks. The biggest challenge is balancing monetization with the player experience. If a game is too aggressive with its monetization, it can alienate players and drive them away.
This is why finding the right balance is so important. Done well, the F2P model can be incredibly lucrative for developers and enjoyable for players.
With this explanation out of the way, we can start going deeper into the main monetization systems.
In-app purchases (IAPs)
In-app purchases (IAPs) are one of the defining features of F2P games, and they come in many different forms.
One common type is consumable items. These are things like boosts, extra lives, or in-game currency that players can purchase to help them progress through the game. Once used, these items are gone, prompting players to purchase more if they want to continue using them.
Then, there are non-consumable items. These are permanent upgrades, cosmetic items, or other enhancements that players can purchase to improve their gameplay experience or customize their characters. Unlike consumable items, these purchases are permanent and provide ongoing value.
A relatively recent and very popular type of IAP is subscription services. These offer players ongoing benefits, such as VIP access, daily rewards, or exclusive content, in exchange for a recurring monthly or annual fee.
Another successful yet controversial kind of IAP are loot boxes: for a small price, you’ll get to open a crate with random but potentially expensive, exclusive, or rare rewards. Lately, they’ve been facing scrutiny from many regulatory organizations, especially in the EU. On the other hand, Blizzard has recently announced loot boxes will be coming back in Overwatch 2’s upcoming season.
The psychology behind IAPs is quite fascinating. They often tap into players’ desires for progression, customization, or social status. The feeling of unlocking something new or gaining an advantage over other players can be highly rewarding.
Successful and ethical IAP implementations focus on providing value to players without feeling exploitative. Cosmetic items, for instance, allow players to express their individuality without affecting gameplay balance. The trick is to make IAPs feel like a choice, not a requirement.
In-game advertising
Another key way that F2P mobile games generate revenue is through advertising. There are several different types of ads commonly used in mobile games, each with its own advantages and disadvantages. We’ll look at the three most popular ways to implement ad-based revenue.
- Banner ads are the simplest form of mobile advertising. These are small, rectangular ads that typically appear at the top or bottom of the screen. They’re relatively unobtrusive, but they also generate less revenue than other ad formats.
- Interstitial ads are full-screen ads that appear at natural transition points in the game, such as between levels or after completing a task. They’re more disruptive than banner ads, but they also tend to generate higher revenue.
- Rewarded video ads are a popular and relatively player-friendly option. These ads allow players to watch a short video in exchange for an in-game reward, such as extra currency or a temporary boost.
Water is wet, and forced, intrusive ads aren’t good for user experience. Some will end up either not playing the game or giving it a miserable rating, though others will pay to get rid of them. This is why it’s important to find a balance between generating revenue and providing a positive player experience.
How do mobile games make money: premium games
In contrast to the F2P model, premium games operate on a more traditional business model. You pay a one-time upfront price to download and play the game, and that’s it. Usually speaking, there are no ads, and non-cosmetic IAPs are much less prevalent. In fact, ads in premium games are a huge no-no, it’s just something players will NOT expect or tolerate.
One of the biggest advantages of premium games is that they typically offer a more streamlined and focused gameplay experience. Developers can concentrate on creating a high-quality game without having to worry about balancing monetization with the player experience. This can often lead to more polished and engaging games.
Furthermore, premium games often offer a more complete and satisfying experience, similar to highly anticipated AAA games. Without the need to constantly incentivize players to spend money, developers can focus on creating a game that’s fun and rewarding from start to finish. Generally, the result is an experience that is rewarding and satisfying for players.
Alternate ways mobile games make money
Besides those methods, there are a few other ways that mobile games can generate revenue, although they’re less common than IAPs or advertising.
Sponsorships are a great way for mobile game developers to partner with other companies and brands. They can incorporate branded content into their games, or even create entirely new games around a particular brand or product.
Merchandise sales are another way for mobile game developers to generate revenue. They can sell physical products like t-shirts, posters, or figurines based on their games.
Some mobile games can generate revenue through esports and streaming. Games with a competitive scene can organize tournaments and offer prize pools, while popular streamers can earn money through sponsorships, donations, or ad revenue.
These methods can add some revenue, even if it’s not guaranteed!
So – how do mobile games make money?
By several means! Throughout this article, we covered many different monetization strategies commonly employed in mobile games. Whether it’s through IAPs, ads, or premium sales, the key is to find a monetization model that works for your game and your target audience.
There’s no magic formula, but you’ll need a good command of these revenue streams if you’re aiming for commercial success while shipping a delightful, frustration-free experience.
Thinking about getting into game development with an incredible idea? Or maybe you’ve got a project already in the works and you’re looking for some expert help? At Main Leaf, we’re passionate about creating amazing gaming experiences, mobile or otherwise.
Our talented team can help you understand the finicky world of monetization, design engaging gameplay, and bring your vision to life. So, why not reach out and see what we can do for you? No pressure, just a friendly chat about your project. Let’s talk!
