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Interactive ads: The future of making money on mobile games?

July 8, 2016 | By Richard Moss

July 8, 2016 | By Richard Moss
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More: Smartphone/Tablet, Design, Business/Marketing, Video



Advertising in mobile games is a necessary evil.

With most of the mobile game audience unwilling to spend money either upfront or in in-app purchases, many developers need to run ads to find success. And with the hyper-competitiveness of the App Store ecosystem, they often also need to buy ads to be discovered. 

Unity Technologies director of ads Jarkko Rajamaki says that the game industry has learned a lot in recent years about how to do mobile game ads right, and rewarded video ads seem to be emerging as the frontrunner. But putting banner ads everywhere or throwing up an autoplaying video or full-screen static ad without warning only irritates players.

Some advertisers are experimenting with interrupting gameplay with something more interactive. The idea is that ads that are actually integrated into the experience can have a positive impact. Interactive ads can make players feel like they have some agency, or even give them a small taste of the gameplay in a title they're being invited to download.

View-to-play

Unity's research has found that the most effective advertising approach at present is to offer opt-in rewarded video ads. This usually involves placing a button or menu somewhere in a game where players can watch video ads — usually 30 seconds each — for bonus lives or in-game currency, or perhaps a resource boost.

Rajamaki cites Futureplay as a poster child of this approach. The Finnish studio, which was founded by Rovio and Remedy vets, gets an average of 22 rewarded video ads watched per install on its second game. This is enough to drive an average $0.15 revenue per player per day in the U.S. Futureplay CEO Jami Laes and marketer Napua Solsona explained to Gamasutra via email that they were able to achieve this by designing from the beginning for rewarded ads — to make these tie directly into the game economy and to have them be a natural, opt-in part of play. 

They describe their model as "view-to-play," which differs from the typical freemium model in that watching ads — not making in-app purchases — unlocks special features, content, or power boosts. But rewarded ads can (and often do) function in much the same way alongside free-to-play and premium monetization strategies.

Rajamaki argues this kind of design is good for players as well as developers and advertisers because it gives the player power. "It actually enhances players’ experiences, drives more engagement, retains players for longer periods of time, and ultimately extends the player's lifetime value (LTV) for the developer," he says. Rajamaki further notes that game companies using Unity Ads have reported "time and time again" that this model works.

Playable ads

As quickly and effectively as rewarded video ads are taking over, however, there's already another kind of advertising on the rise that could become dominant: rewarded playable advertising. Playable ads first emerged a few years ago, pioneered by startup companies mNectar and Agawi. (What they offer is different from things like Zynga's "Sponsored Play" program, in which other companies allowed to pay to get a demo version of their game put inside one of Zynga's existing apps.)

Google acquired Agawi late last year, and has since put out a beta for what it calls Trial Run Ads (up to 60 seconds of a game streamed to the device) as well as custom interactive HTML5 interstitials that let you swipe through screenshots or a list of features or something like that. MNectar, meanwhile, has made its streaming Playables work with the same kind of opt-in rewards that are all the rage with video ads.

MNectar founder and CEO Wally Nguyen explains that the idea behind playable ads is to remove the barrier from app discovery. He notes that around 90 percent of downloaded apps wind up getting deleted within two or three months, which is a massive waste of money for advertisers because mobile ad rates are often based on cost per install. Playable ads are supposed to reduce that wastage because they allow people to try before they install.

Nguyen has found that the most effective playable ads are akin to the 30 or 90-second song previews that were offered on the iTunes Store before Apple introduced its music subscription service. They show people the actual game, as it will be once installed, but only for a short time — 30 seconds or a minute (though Nguyen hopes to eventually try longer five or 10-minute Playables). The quick-fix nature of this playable ad experience unsurprisingly suits smaller, more casual games with pick-up-and-play mechanics much better than traditional console-style titles with complex mechanics and tutorials that last an order of magnitude longer than the ad duration.

But playable ads do exist for these hardcore mobile games, too. Nguyen says that for games with a steeper learning curve they tend to switch out the streaming setup for an HTML5 recreation of a "killer app moment." This is a more labor-intensive undertaking — it requires a team of engineers, whereas mNectar's streaming playable ad service is automated through their custom-built infrastructure and virtualization platform (which is similar to Sony's cloud gaming service PlayStation Now). "Theoretically we could virtualize and stream all two million apps in the App Store in about a year and a half," says Nguyen. "No people involved." But interactive HTML5 game ads take "anywhere between two days and two weeks to make."

Nguyen says that both playable ad types are doing well on retention and engagement. Their in-house research suggests that the conversion rate — the proportion of ad viewers who install the advertised game — is seven times that of video. Curiously, he notes that they've not seen any great difference in conversion for good games versus bad games. The word coming back from surveyed users is that this is because "we just trust the experience." Their logic goes that a video ad can more easily mislead you as to the nature of a game, whereas after playing a playable ad you know what to expect. You know what you're getting — or at least part of it.

Deeper metrics

The real shake-up in the mobile advertising space is not in format but rather in metrics. "Facebook has the best ad network out there," says Nguyen. "They have a lot of user data, a lot of volume, and they've made a huge business out of app install advertising." Cost per install, or CPI, rates have climbed to $10-12 as a result. "And so that just deflates everything," Nguyen continues. "It's kind of blocking out any indie developer or non-Top 100 developer to break into the market." (Except, he notes, for savvier "indie shops" like East Side Games, which has taken a "smarter, scrappier" route to high rankings by focusing more on app search optimization than CPI advertising.)

That high cost just to get in the door has advertisers big and small looking at deeper measures of effectiveness — things like the lifetime value of each player (i.e., how much you earn from them playing your game) and return on ad spend, and not just after a week or a month but after a year.

Nguyen thinks this shift to longer-term, deeper metrics could be a boon for indies looking to advertise. "[Game of War dev] Machine Zone are buying TV ads. They're buying eyeballs every impression in the world because they can afford to," he says. "They have the highest revenue-generating game out there right now. But ROI [return on investment] is a great equalizer. You can have a game that's a fraction of the size of one of the big boys and if you're managing ROI correctly, LTV [lifetime value] correctly, you can be more profitable than the big guys," Nguyen says.

Advertising keeps changing

Nguyen concedes that "it's almost like if you're an advertiser now, you just buy video," but he argues the future is interactive advertising. While video ads are generally accepted and even favored by mobile gamers over static ads like banners and interstitials, they suck up a lot of data and they're often ignored. "If there's a video ad," says Nguyen, "you can just put the phone down. I literally saw my brother-in-law do this on a family trip a year ago in Tahoe."

"Video on mobile is now being treated like TV commercials. Like here's my two-minute break; I'm going to make popcorn or go to the restroom or something."

Nguyen is seeing companies that specialize in making video ads shifting their clientele from game companies to brands "because brands are less sensitive to things like actual engagement. They just want eyeballs."

That's not to say that video ads for games and in games won't continue to be profitable, or that they'll be replaced by playable ads. "At their best, playable ads are great," notes Rajamaki. "But the reality is they're often not executed well, and sometimes it is hard to showcase a game properly in a snack-sized version." 

Rajamaki believes that rewarded video ads will continue to grow. Unity's own research indicates that 80 percent of players are "open to engaging" with them. "Our clients have heard first-hand that players want to see more ads," he says. Whether rewarded ads will continue to work for advertisers is unclear, but clearly they're profitable for game devs and accepted by many players as a part of the mobile game experience.

Rajamaki thinks we'll see new forms of advertising emerge as well as a further evolution of the existing ones. Mobile VR especially seems rife with potential for new ideas. "Imagine the possibilities with VR, for example, where someone could see an 'ad' for a pair of shoes and explore in all dimensions," says Rajamaki, "and even 'try' them on. It's certainly exciting."

The only constant is that mobile advertising changes. "Ten years ago people said you can't make money with mobile games," says Laes. "Five years ago people said you can't make money with free mobile games, and a few years ago people said you can't make money with ads on mobile games. But the world keeps on changing and new models arise and evolve."

The bottom line, though, is that mobile game advertising — in whatever form it takes now or in the future — needs to be implemented with care as to how it impacts on the experience. "If they try to force it to work because that's what the industry says to do, then it may annoy players and do more harm than good," says Rajamaki.



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