OP-ED

Developers build and create games out of love and passion. But in order to keep doing what you love, you need a solid monetization strategy.

The goal of any monetization strategy is to maximize opportunities for revenue while minimizing distractions from gameplay. The best way to achieve this is to start mapping out monetization while you're still developing the game.

Puzzle games and other “casual” games, which feature shorter gameplay sessions and more accessible economies, have historically generated most of their revenue from advertising. Action games and other “core” games, which traditionally feature longer and immersive game sessions, have relied more heavily on in-app purchases (IAPs).

But after years of partnering with game developers, we've learned that a hybrid monetization strategy mixing in-game ads with IAPs offers a higher potential for revenue growth across a variety of mobile game genres.

Players see value in ads

Developers of “core” games in particular have often steered away from in-game ads, fearing that they would disrupt gameplay and increase churn.

However, our latest insights report tells a different story. Over three-quarters of action mobile players say in-game ads have a positive or a neutral impact on their gaming experience, and 85% of them report having at least some level of interest in the ads they see. In addition, studies have shown that rewarded ads where players receive virtual goods for engaging with ads can upgrade the app experience, resulting in an increase in IAP revenue, retention, and engagement.

Avoid cannibalizing your IAPs

Retention remains a key metric for hybrid monetization games whose revenue largely comes from IAPs because it’s critical that they keep paying users. Given this, rewarded ads become a highly effective format because users opt-in to engage with these ads. In addition, rewarded ads can give players a taste of premium in-game items, motivating them to purchase those items in the future and ultimately increasing IAPs.

Another key element of a hybrid monetization strategy is segmentation. If you're able to identify which players are less likely to make in-app purchases (for example, they haven't specified a payment method in their profiles), you can show them more rewarded ads without worrying about cannibalizing your IAPs.

AdMob mobile advertising platform makes this easy with the smart segmentation feature which uses machine learning to predict which players are less likely to purchase in-game goods, and allows you to show them relevant ads.

Developing a well-designed game economy is also essential for implementing a successful hybrid monetization strategy without cannibalizing IAPs. One way to do this is to implement a dual-currency mechanism with “soft” and “hard” currency. “Soft” currency is in-game currency that cannot be purchased with real money – it’s available only through rewarded ads and other in-game achievements. “Hard” currency on the other hand can only be obtained through IAPs and can be used to purchase “soft” currency.

Select ad formats that fit your game type

Different ad formats may work well for a hybrid monetization strategy, depending on the type of game you are building.

Rewarded ads are especially successful when there's an existing, well-developed in-game economy with a large store of virtual items. Even in a “hyper-casual” game with a more simplistic game economy, you can drive incremental revenue by rewarding players for watching a video ad to remove ads or to continue playing after exhausting in-game lives.

Interstitial ads are full-screen ads that work best when shown during natural breaks and transitions in your app (e.g., after a level completion). Unlike rewarded ads, interstitials are a push format that can help you monetize all of your users without waiting for them to opt-in. However, it’s important to not inundate your users, especially paying users, with too many ads. This, once again, is where segmentation becomes critical for your monetization strategy.

With AdMob, you can also use new and innovative ad formats. For example, there’s an app open ad format in AdMob that shows players an ad on the loading/splash screen as the app loads. This means that publishers can start monetizing users from the moment they open the app, rather than waiting for additional engagement to trigger ad opportunities. We’ve witnessed many success stories with this new ad format, including CrazyLabs, which managed to achieve a 3-5% increase in ARPU after incorporating app open ads into their games.

Figuring out which ad formats to use, and when to use them, is a key part of your monetization strategy. A lot will depend on the type of players you have, and where they are within the game. For example, if a player is struggling to achieve a certain goal, that would be a good time to display a rewarded ad or an IAP that helps them reach the next level.

How to level-up your user acquisition

Ultimately, you want your game to scale. The more players you have, the greater your chances of generating revenue from a combination of ads and purchases. The more revenue you generate, the more you can invest in making your game even better.

User acquisition thus becomes an important part of your long-term growth strategy. Using Google App campaign's advanced bidding solutions, you can optimize your own ad campaigns for app installs, retention, or purchase. In particular, Target Return on Ad Spend, or tROAS bidding strategy, helps you acquire users who are more likely to engage with in-app purchases or ads. All developers can now use target return on ad spend for ad revenue, or tROAS for ad revenue to acquire players who engage with ads at scale and directly improve revenue earned from ads shown in-app.

Of course, no monetization strategy will ever be perfect right out of the gate. You'll need to consistently run A/B tests to determine the optimal combination of ad formats and IAPs for each player segment. And when you combine these efforts with a winning user acquisition strategy, you’ll be setting up your game for success for years to come.