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May 16, 2024
1. Subscription models enter mobile gaming
2. New monetization change is blowing in with Direct-to-consumer (DTC) web shops
Pulling the loyalty lever in mobile game monetization strategies
In the dynamic landscape of mobile gaming, monetization teams are facing more pressure than ever to perform and innovate. This is especially true as acquisition becomes more challenging, and every player counts to achieve return-on-ad-spend (ROAS) targets, drive lifetime value (LTV), and unlock sustainable growth.
According to Liftoff’s 2024 App Marketer Survey, 2024’s KPIs are more aggressive across the board, with 38% of gaming app marketers saying that the state of the industry is now worse than it was 12 months ago. Pair that with our finding from the 2024 Mobile Gaming Spender Report that 32% of mobile game in-app purchase (IAP) spenders plan to decrease their spending in 2024, and the challenge is clear. Evaluating new monetization avenues is on every publisher’s mind.
But it’s not all doom and gloom – and if the mobile gaming industry is anything, it’s innovative. New and exciting opportunities for publishers to monetize their titles and hit their 2024 targets are on the horizon.
In this article, we explore two monetization trends on the rise in mobile gaming as publishers vie for share of wallet to future-proof their profits.
👀 Related reading: Mobile gaming trends of 2024: Top 7 developments set to define the year
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One of the burgeoning trends that has gained significant traction in recent years is the introduction of subscription models within mobile games. This monetization approach offers a win-win scenario for both publishers and players, providing a sustainable revenue stream while offering enhanced gaming experiences – and it’s not a new topic in mobile gaming either.
Subscription models have been discussed as an option in mobile gaming for years, but it’s only in the last couple that we’ve really seen growth with this type of monetization model being put to use.
While the subscription-based monetization model has been a popular choice in app categories outside of gaming, mobile games that use a subscription model have almost tripled from 2022 to 2023.
“Despite the economic downturn, app marketers should feel assured by our latest findings – which show a rise in consumer spend and revenue growth per user, especially where subscriptions are concerned.” – Scott Reyburn, Senior Content Marketing Manager at Liftoff (1)
👀 Related reading: From player to patron: An overview of subscription-based mobile game monetization
One of the major benefits of subscription-based monetization is its flexibility. Today, consumers are familiar with all kinds of subscription-based models in the apps they enjoy, with some apps only being available through a subscription (like Netflix), while others offer a free version – with their more premium content and experiences gated, so that they’re only available with a subscription (like Spotify). This kind of flexibility lends itself well to experimentation within mobile gaming, as the majority of games follow this freemium model with monetization either coming from locked benefits behind IAP walls or ads integrated as part of the gameplay experience.
For IAP-based games, bundling a variety of IAP offers such as exclusive items/content, monthly in-game currency allotments, or access to particular events and challenges could be an easy expansion of the IAP monetization model.
On the other hand, for games that monetize through in-app advertising (IAA), a subscription model could be introduced to offer players an ad-free gaming experience, splitting revenue from one stream (ads) to another (VIP subscriptions).
The ad-free subscription is already quite promising, as shown by our 2024 Mobile Gaming Spender Report: A full 29% of mobile game IAP spenders would pay to enjoy an ad-free experience in their mobile games.
“Paying for an ad-free experience was my most worthwhile purchase. It was worth not having to watch ads to progress. The more ads a game has, the more likely I am to quit playing before making a purchase.” – Anonymous Mid-value spender (2)
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Drawing inspiration from the realm of Social Casino titles, where subscription models have flourished, mobile game developers can glean valuable insights on implementing tiered subscription plans akin to tiered loyalty programs.
As our article on cross-industry loyalty programs highlights, applying multiple tiers to your loyalty program provides benefits that scale as players interact with your game, make purchases, and complete tasks. The same can be said for a tiered subscription plan, which could unlock higher levels of rewards, access to priority support, or even meta-layer benefits like premium profile pictures or badges.
As Cheryl Robinson details in her Forbes article,
“By offering different service levels at different price points, you can cater to a broader range of customers... the key to a thriving subscription business is its ability to adapt, create continuous value, and foster a strong sense of community.” (3)
While subscription models might not be the go-to monetization stream for most mobile games just yet, it’s clear that this avenue provides ample opportunity for experimentation within the industry, and we should expect to see more concrete examples of this strategy come to fruition in the years ahead.
👀 Related reading: Charting ROAS success: The flywheel growth model’s team-centric approach for mobile publishers
In a strategic pivot away from traditional app store platforms like Google Play and the App Store – known for taking up to 30% commission cuts – mobile game publishers are embracing direct-to-consumer (DTC) web shops as a pathway to greater profitability and independence.
While app store domination has long dictated the mobile gaming ecosystem, the emergence of DTC as a viable path to profitability has opened new avenues for publishers to foster a more direct relationship with their player base.
By circumventing the traditional revenue-sharing structure, publishers can retain a more substantial share of their earnings, enabling them to reinvest in game development and both improve and expand the gameplay experience without compromising revenue.The vendor marketplace is supporting this pivot, with companies like Xsolla unveiling Cross-Play and Cross-Pay to help publishers open their own web shops and retain more of the IAP revenue their titles drive. Already, the company has helped 40 of the top 100 highest-grossing mobile games launch web shops through their unique platform, with that number only expected to increase this year.
“Cross-Play Cross-Pay is our strategic innovation to meet the continuously evolving demands of the ever-changing mobile game industry. By delivering a multi-platform solution for mobile game developers, we can help them reach more players and grow their business.” – David Stelzer, President of Xsolla (4)
Transitioning player spend to DTC web shops has historically been difficult to navigate for publishers. Consider Apple’s previous restrictions that limited advertising out-of-app web shops in apps available on the App Store as a way to prevent publishers from leaving their platform. However, with the EU leveling their $2B fine against Apple for this very practice, and the US looking to follow suit, the transition to move players to the DTC platform is becoming easier.
Note: As of today, Apple’s new App Store Guidelines discourage developers from using external payments and marketplaces, but there are some loopholes publishers can capitalize on to avoid unnecessary commissions paid to Apple.In an article by Liquid & Grit, the guidance to avoid extra fees is as follows:
In this era of app store monopolies, publishers aren’t alone, and new businesses are emerging to support developers in creating web-based DTC platforms. Beyond Xsolla, Twitch cofounder Justin Kan launched a new webshop firm, Stash, to be the “Shopify for games” and grow game revenue beyond the app stores.
“The biggest market in gaming is in-app purchases, but it’s gotten harder and harder for mobile game companies… the margins are super competitive and then after IDFA [identifier for advertisers], you no longer own your customer relationship.”– Justin Kan, Cofounder of Stash (5)
Out-of-app monetization isn’t a new topic in Asian markets. According to Niko Partners’ 2023 model, it’s estimated that this monetization model accounts for 21% of all mobile game revenue in Southeast Asia. In China specifically, the Google Play Store is blocked as Google is absent from the market, and alternative channels such as third-party web stores account for 53% of all app monetization.
Part of the success of DTC web shops in these markets is due to the fact that gamers in this region have less access to and lower usage of credit cards. As data from Statista shows, China only had 38% credit card penetration as of 2021, well below Canada’s 83%, the United States’ 67%, and the UK’s 62%. Countries such as the Philippines and Malaysia have even less access, with credit card penetration below 10%. Instead, Asian gamers often make their purchases through alternative payment methods, such as e-wallets, or through their phone carriers with calling card top-ups.
In an article with PocketGamer.biz, Lisa Hanson, President and CEO of Niko Partners, expands on this need for publishers to adapt and diversify their payment options to suit regional needs:
“We need to recognize that purchasing power varies market by market, and that consumers like to have a choice about how they access desired content. Out-of-app monetization helps to unlock revenue in markets where gamers have different options compared to Western markets, from alternative payment methods to tighter budgets for game spending.” – Lisa Hanson, President and CEO of Niko Partners (5)
Mobile game publishers are now taking learnings from these markets and following in their footsteps to provide alternative payment methods to all of their players.
👀 Related reading: The spending habits of Korean mobile gamers: IAP trends shaping 2024
As player spend is projected to decline in 2024, transitioning IAP spend to first-party or third-party web shops will help publishers keep a larger share of the revenue than what’s possible through Google Play or Apple App Store purchases alone.
Playtika, who launched their own DTC platform in 2020, has already seen massive growth with this monetization strategy. Last year, they reported that their 2022 DTC revenue made up nearly a quarter of their total revenue. And while part of that is owing to the success of the DTC approach, it’s partly attributed to a decline in their non-DTC revenue.
“DTC platform revenue increased 14.7% from 2021–2022, ending the year at $607M. Total revenue only increased 1.3% in the same period, ending the year at $2.6B.” – Liquid & Grit (6)
Similarly, Huuuge Games launched their own DTC channel in 2022, generating $16.6M in Q4 of 2023, which is triple from the previous year despite a decrease in daily players.
As the mobile gaming industry navigates changing player behaviors and revenue trends, diversifying monetization strategies beyond traditional avenues emerges as a critical step toward sustained success and growth.
In a shifting landscape where the tech ecosystem supporting publishers is evolving and player spending habits are changing, mobile game publishers are tasked with exploring alternative monetization avenues to preserve (and grow) LTV. Subscription models and DTC shops stand out as two promising strategies that have gained traction in recent years, showing strong indications of increased adoption and popularity for the foreseeable future.
However, beyond revenue diversification, building player loyalty is another crucial element in capturing a share of the player's wallet and forging a path to sustainable growth. This focus on player loyalty not only leads to increased retention rates, but also paves the way for deeper player engagement and increased lifetime value. By prioritizing player-centric approaches, personalized experiences, and community-building initiatives, publishers can effectively pull the loyalty lever, creating a foundation for lasting success in the competitive mobile gaming industry.
Check out Mistplay’s 2023 Mobile Gaming Loyalty Report, where we look at quantifying loyalty and uncover key learnings for a loyalty-first approach to driving LTV – and reach out to us directly to see how we can help you unlock the power of your player loyalty.
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