Episode 37: Evolution of Monetization: Discussing What’s Changed in How Games Make Money
GameRefinery Team
3 November 2022
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Features, Game Design, Monetization, Trends
In this episode of the Mobile GameDev Playbook, we look at how monetization features have evolved from 2020 till now. Joining us from GameRefinery, a Liftoff Company, are Chief Game Analysts Erno Kiiski and Wilhelm Voutilainen.
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We explore innovation in battle passes, IAP mechanics, external web stores, and what monetization may look like in the future for mobile games like Cookie Run: Kingdom, Call of Duty Mobile, and Royal Match.
You can also watch the episode on YouTube:
Topics we will cover in this episode:
IntroductionWhat has happened in the field of monetization in the last two years?Evolution of monetization featuresMeta monetization is coming to casualMany games in the past year have added ad monetization in their monetization mixScaling new games is harder than everUsing in-game events to boost your monetizationLatest trend within Battle PassesGame economics are getting more and more complexMobile game gachasHow bundle offers have evolvedWhich new trends will become more relevant as time goes on
Read Transcript
Introduction
[00:00:00] Jon Jordan: Hello, and welcome to the Mobile GameDev Playbook. Thanks for tuning in for another episode. This is a podcast all about what makes a great mobile game. What is and isn’t working for mobile game designers and the latest trends. I’m your host Jon Jordan and joining me today; we have two very familiar faces. We have Erno Kiiski and Wilhelm Voutilainen. Both are game analysts from GameRefinery by Liftoff. How’s it going, guys?
[00:00:27] Erno Kiiski: Hi, it’s going great, Jon. How are you?
[00:00:29] Wilhelm Voutilainen: I’m great as well. Great to be here once again.
[00:00:30] Jon: Good. Yes, I am looking forward to this one. Good. This is going to be a fascinating sort of look back at the history of mobile game monetization, and I look forward to the future as well because that’s the point. Looking at the big trends, and it’s interesting. This is the stuff we touch in every episode, depending on the game or project we’re talking about. We might talk about certain bits more than others. This is a whole dedicated show just about what’s been going on. I know you guys have been preparing in detail. I’m going to ask the question and let you guys go on. What exciting trends have been happening over the last two years with monetization?
What has happened in the field of monetization in the last two years?
[00:01:13] Erno: Yes, sure. A lot of different things and topics that we can discuss. It’s a broad subject. I was thinking if we start maybe a little bit from a higher picture, bigger things happening in the market that affects the monetization, and then go deeper into individual features and mechanics, and so on.
The first thing we could discuss is the recent trend of this web store monetization becoming more relevant. Naturally, because of the apple-epic lawsuit case results, and so on. Now, it’s starting to pick up and become more visible. It’s not super common yet, but if we look at the market now, what is there now that the games have this type of web store. What is a web store? It’s an online store where you can buy items by currency and connect your account. Then you can make purchases on a website in a web store.
Why? Of course, this is beneficial because it bypasses the platform fees. You have your apple fees. You have your Google fee. For developers, it’s naturally lucrative. As we know, with the changes that happened with the lawsuit, you’re not directly able to advertise and link your web stores inside the apps, but you are now allowed to have them, and you are allowed to market them with your emails and stuff like that as an example.
Where have we been seeing them? At the moment, it’s mainly used for the hardcore/mid-core type of games which is natural because usually, those are the games that have the most engaged users. They are going through online, and it’s easier to create this type of store, then the user finds it, and so on. If you cannot do it in-game, many casual players or casual players play the game, and they’re not engaged that much outside the actual app.
Especially 4X strategy games, we have seen plenty of those using it. Scopely is one good example. They have doubled down; I think almost all games have a web store now. Even YAHTZEE With Buddies is the first casual game we have seen to have a web store available for purchases.
Suppose we talk a little bit about what kind of web stores there are. Those are the genres that we have seen in it the most. Those are the reasons naturally why different companies are going for them. The classic example of these web stores is that you buy bundles. They are like specific web store bundles. It’s like an IFV offer inside a game, but you might also get it for a better price for the consumer. For example, in Supercell’s Clash of Clans, you can buy a bundle of three battle passes at a lower price and then when the new battle pass comes around, you already have one.
One more specific example I want to highlight is this web currency or how one of these games has a particular currency used only for the web store. Game of Thrones: Conquest from Warner Brothers. It’s a 4X strategy game. If you open the app nowadays, if you go inside the game, everything even inside the game, you have the basic premium currency purchase that you can buy whatever diamonds there are inside the game.
Everything in the store is priced with that, but they now have another currency called gems. You are not able to purchase that directly inside the game. If you click it, “What is this currency?” It just says, “This is interesting currency,” whatever, “learn more from our website,” stuff like that. It’s not directly advertising the currency, but it is there to pinpoint that there is something like this that I can purchase, and then maybe I go online and search for it. When you go online, you find the store and start to do some calculations, so it’s, “Oh, actually, this is a better price if I buy it from here.” Then purchase something with the gems as an example.
They are the first ones we have seen that have a specific currency tied to the web store, not just individual bundle purchases that you make by connecting to your account. We expect to see more of this happening, especially from bigger developers. As I said, mid-core/hardcore games are surely moving towards this type of monetization.
It’s one of those more significant things. Suppose we continue to another big thing happening because of the more macro-level things happening in the mobile game market. We have already talked about hybridization in this podcast for ages. I’m not going to spend too much time on it. It’s definitely in terms of monetization, something that we cannot skip if we talk about trends in the past few years.
If you look at the market, hybridization has been happening from both sides. Hybrid-casual games take elements you implement in IAP mechanics. Trying to make the lifecycle of the games longer, but then also from the other side of the spectrum: the hardcore games, 4X strategy games, and so on, get elements from casual games and other mid-core games to appeal to a broader audience. Because naturally, what drives that is the new marketing landscape has harder and harder advertising targeting, as an example.
A big trend that I would say is happening because of these more significant events, IDFA changes, and now affecting the market on both sides. In terms of ad monetization, hyper-casual games are adding IAP monetization. And then on the other side, widening the spectrum.
Evolution of monetization features
[00:09:14] Jon: In general, when any game shows success and best practice in how to, here’s a technique that seems to work, then it doesn’t matter what the genre is. It may be a very specific technique, but everyone will have a go to see “boy, does that work for us?”. With all these techniques we’re looking at, probably, there’s no single game where they’re all going to work. Developers have to see what fits them.
The interesting thing is that over time, more of these initially quite specific monetization things work more generally in games because the audience has been exposed to them differently. Just part of it is everyone’s like, “Oh, why would I pay for that?”. Then over time, it’s sort of, “Of course, I’ll pay for that.” Of course, I get a much better deal if I have a subscription going, or, I think a lot of these things just over time become more relevant and more valuable to game developers in the first few months that they’re not at all.
[00:10:24] Erno: Yes. Somebody always has to be the first to go, and then people follow that and iterate on those same principal ideas that drive these different things.
Meta monetization is coming to casual
[00:10:49] Wilhelm: Yes. Going deep into more specific examples, archery is a fascinating hybrid example of the casual game. Usually, casual games are core game-focused monetization, but archery has the RPG meta, so it’s meta-monetized. On top of that, you’re just purchasing more continues or stuff like that. Then talking about casual games in general, of course, meta elements coming into casual games have been something we have been talking about for a while. While that’s not a massive trend, it’s been going on for a while. But still, in some of these games, it’s a more light way.
Like Lily’s Garden and Homescapes, they have also monetized their meta layers. In these games, you have examples like monetizing energy mechanics with continuous boosters. There’s also direct purchases such as cosmetic pets in Lily’s Garden. We’ll discuss it later, but there’s also progress in-app purchase offers. Then in Lily’s Garden, they also added new battle pass plans. Instead of just getting boosters battle pass plan, you’re also getting stuff for your meta, so you’re getting cosmetic skins for the characters. They added these decorative Halloween-teamed furniture skins in the most recent battle pass. Instead of choosing from the three basic ones, which are usually always free in the meta layer, you can now customize stores with these exclusive Halloween cosmetics. A little bit of meta monetization is coming to casual as well.
Many games in the past year have added ad monetization in their monetization mix
[00:12:42] Erno: Then also it’s quite interesting because we talked about this ad monetize game moving away, or at least hybridizing the monetization model by adding IAPs. Suppose you look at the top-grossing games, where our primary focus is at GameRefinery. In that case, it’s not a massive trend, but many games in the past year have also added ad monetization. Not all of them do it, but many do, some examples are Project Makeover, Toon Blast, Two Dots and Lily’s Garden.
[00:13:34] Wilhelm: Lily’s Garden added the same as Project Makeover has when you can watch an ad to get two extra lives before the levels.
[00:13:42] Erno: Yes. They’ve been experimenting with this hybrid model of trying to monetize the non-payers at least a little bit. It’s risky and involves finding the right balance so you don’t cannibalize your IAP price points. In terms of implementation, there are interesting examples like Two Dots, which I think is unique. In that one, if you lose a level, you can watch an ad of this reward reel, and then there are chances that you get extra moves. Wilhelm, you remember, or you have analyzed the games better, but after watching the ad there are chances you get three extra moves. But, they have added a randomized mechanic on top of that.
[00:14:44] Jon: I guess the fastest way to destroy your retention is to implement ads badly. Generally, we’ve seen that. I think that’s the hardest to balance ads because if you’ve been running games for a while without ads and then put ads in, it breaks the flow. Some games work better, but there are some ways you can think, wow, that’s brave.
[00:15:18] Erno: Especially, I would say in mid-core games. One game that a few weeks ago added ads was Cookie Run Kingdom, which is a team-based RPG where in the genre itself, ads are not standard in any way. But, Cookie Run has a more casual approach to the turn-based RPG that appeals to the wider audience. We have one analyst in the company who is playing it regularly, and he was a bit hesitant about the additional ads, even though they were only rewarded ads. They are not like interstitial ads or anything like that, but it felt weird to him, at least initially. We’ll see if it affects retention in any bigger way.
[00:16:21] Wilhelm: I think some apps have ad monetization coming, and I think more games are trying to add additional monetization streams and elements.
[00:16:44] Jon: You’re seeing a bit more pressure on monetization because people can’t necessarily extend their audience the way they once did by understanding the UA funnels. The UA funnel’s gone pretty skewed, so you’re not sure it’s worth you spending a lot of money because you’re not quite sure what you’ll get in. However, if we’re going to stick some organizations into what we’ve got, maybe that’s the best way to grow at the moment. Maybe that’s playing into it a little bit as well.
Scaling new games is harder than ever
[00:17:13] Erno: It’s interesting. It’s not necessarily a direct monetization, but overall in the casual game genre, scaling new games is harder than ever, and LiveOps is becoming more important. Something that we have noticed in casual games is not necessarily the mechanics of the monetization itself. For example, many level-based casual games are adding so many events, and using them to drive players to the same monetization mechanics that have been used in these type of games for ages.
There are many competitions trending on this type of casual game, it’s not PVP directly, but having various implementations like a leaderboard-based competition. Or there are now 1V1 competition events for Match-3 where it feels a little more personal, like pushing or tapping into the competitive motivation. The loss aversion and win streak stuff is nothing new either, but many events now combine these elements.
For example, Royal Match has a recent event where there’s a race event where you need to complete levels to beat others or beat levels more quickly than the others. Then there’s also a winning streak, like a loss aversion mechanic. If you lose levels, you return to the race’s starting line. There’s the competitive loss aversion push. The event itself is not necessarily monetized. Still, it exposes players to your monetization syncs much more or instant devices to go players to purchase that extra move, for example.
[00:19:37] Jon: As I say, I guess it’s interesting that some people, even in casual games, quite like that competition, but others don’t. I think it’s a way of placing it so people who don’t like it don’t feel like they’re missing out on this super cool thing. But for the competitive people, maybe you wouldn’t normally spend this money playing the game normally. Still, you’re opting for slightly more aggressive monetization in your chosen mode. All these things, I think, will be challenging to balance.
[00:20:15] Erno: Yes, exactly. That’s why we haven’t seen direct PVP modes in Match-3. Still, it’s the delicate balance of you having the competitive events to push the players interested in it. It’s easy to ignore and just play because the progression is made by playing your usual levels, and that’s it. There’s no specific PVP mode that I go and play, but I actually play at my own pace, and then I can care about that, “Okay, I’m now actually at the top spot with the top rewards, and I want to play more, or then I can just totally ignore it.” It’s how you bring the competitive side or element to the users. It’s not as in-your-face as in many other genres.
Using in-game events to boost your monetization
[00:21:12] Wilhelm: I find that in many of these casual games, like Township, Erno, you’re the expert for this game; the trend is that they run all these kinds of events. Of course, we have assumed that you can reserve these specific events with the feature decks coming to the game’s service. For example, that’s cool if you want loss aversion or renovation events. I think, for example, renovation events are an excellent way of indirectly boosting your monetization because of the competition elements there, which advise you to play more. Also, renovation events will be super satisfying for you to complete the limited-time renovation mode before it ends, so it advises you to play more.
On top of that, we had a lot of indirect examples. Some games are also directly monetizing their events. For example, Cooking Diary, one of the top-grossing time management games, has had a couple of these different loss aversion events (which are directly monetized). You play these special event-based levels and have to win five in a row, if you lose one you’ll lose the streak and start all over. Then, if you lose, you’ll purchase extra to continue that streak inside the event. Cooking Diary’s events have their own specific energy mechanic. You have this special monetize energy mechanic, monetizing those event levels. That’s an interesting case as well of directly monetizing your event.
On top of that, to talk about directly monetizing events, I would say this is quite rare, but we’ve seen a little bit in some of the top-grossing games. They offer you the chance to boost your event rewards by making a small purchase. For example, at the start of the event or when you receive the rewards, you get this offer, “Hey, you want to pay this extra few dollars to double your event rewards?” Also, boosters are sometimes offered at the event’s start, saying, “Hey, you want double or triple event progression. You can purchase this booster. It will boost you throughout the event.” Let’s say finish your renovations faster or stuff like that.
[00:24:03] Jon: It’s interesting to see whether it works. Sort of like having a gym membership. The whole point is, “Well, I got a gym membership because that will force me to go to the gym”, and maybe it works for a while. If you paid for that a bit upfront, then you’re like, “Well, I’m going to, at least for the first few days, play that more,” and then because you’ve already paid for a little bit up front and you feel, “I’m getting an extra reward for that.” You can see psychologically how that would work for some people.
Latest trend within Battle Passes
[00:24:29] Erno: Yes. I guess that ties into the next topic. We’ve been talking about battle passes a lot. Still, one of the trends for battle passes seems to be exactly like shorter-term event monetization or shorter-term event track monetization. We have seen more of these games. You have your bigger overarching battle pass for the whole game, but then this shorter one-week event. Then you have that paid reward track, basically a battle pass purchasing, like a boosted reward, purchasing a better reward track for your event, and then monetizing through that. Many examples have started to do this quite recently, all around genres.
Merge Mansion, for example, started to do this. It’s a casual merge game. Rise of Kingdoms, a 4X strategy game, too, has done this. 4X strategy games have been doing this for a long while. Call of Duty: Mobile’s latest game mode is a tournament mode, a weekend mode that you can only play on weekends. You play a free-for-all mode, and every weekend, there’s a reward track, and then you can buy better rewards for the weekend with a tiny price point, but basically, it’s a weekend-long battle pass.
Then Clash Royale has these monthly tournaments, for example as well. You’re competing against others and get a score, but in that one, it’s much shorter and a much smaller part than the overarching battle pass that Clash Royale also has. The event itself is monetized, and you can purchase this extra boost, extra track of rewards for just this one event. That is one implementation we have started to see more and more in terms of battle pass mechanics.
[00:26:55] Wilhelm: I find that extremely clever. Of course, it comes with its own risk, and battle passes are never an easy balance. We have noticed the power of battle pass and all the different benefits. So why not try? If you want to monetize your event, why not add premium rewards on top of the free rewards for players who want to pay? As we mentioned, players who then purchase the premium rewards or the premium pass of the event are even more incentivized to complete the event. The benefits are numerous there.
[00:27:33] Jon: They tended to be because they’ve been too popular. They’ve ended up being so quite long in duration. If you ever look at a month-long battle pass, the problem is that these things gradually diminish over time. The first time is about battle passes everyone piles in, and then the second time. It’s still exciting when you’re on your sixth battle pass. However, even if people are engaging and buying into it, they’re not necessarily driving the same engagement they once did. Breaking it down into smaller bits, it’s just giving people that little reminder, “Well, here’s a sexy reward you can get.”
It is interesting because the more monetized these things get, the more it fragments your audience. If we went back more than two years ago, we had a straightforward thing: free-to-play games and in-app purchases, and that was all there was. You played it by grinding things out. You spent money to get fostered gems. Now you have these incredibly complex economic models, all linking into each other and different cohorts of people who weren’t paying anything, but then there are all these other different layers. I imagine how you would, from an economic point of view, manage all this stuff.
I am very cautious about whether adding a new thing may be great. Still, if that’s going to end up cannibalizing something that you’re not going to realize for a month that you are making much more money, just the moving parts in it are incredibly complex.
Game economics are getting more and more complex
[00:29:03] Erno: Yes, like you said, especially the more hardcore game you go, it is insane the economics that those games nowadays have and how complex they are. Even for those shooter games, when you think about, “You’re just selling cosmetics,” the mechanics inside the game, the cadence, how they’d run those events, and how different things are. How cosmetics are monetized gets complicated quickly.
[00:29:45] Wilhelm: You mentioned can battle passes become boring. These more unique battle pass mechanics are an interesting trend to touch upon. Of course, battle passes themselves are nothing new anymore. The battle pass is in pretty much every mobile game genre. I think, looking at the data, over 60% of the top 20% performing games in terms of revenue in the US have battle passes. It’s not a new thing anymore. But, we have seen on top of this that we mentioned using battle pass mechanics in events. We have seen numerous unique ways to implement battle pass, make battle pass more exciting, and bring additional bonuses.
Some of these interesting things to mention are, for example, having multiple battle passes in your game. Some bigger games, like Mobile Legends: Bang Bang or HearthStone, where you have your normal mode in Mobile Legends: Bang Bang, this mode is MOBA. In Hearthstone, the main mode is a turn-based card game, but both modes also have their fully-flexed auto-chess modes. They’re so comprehensive that many players can play these auto-chess modes without caring about the main mode because there are essentially two games in one game.
Hearthstone recently brought a secondary battle pass plan for its auto-chase mode. Monetizing those auto-chess mode players specifically. Looking at other games like AFK Arena, AFK Arena is a game with many different modes. It’s almost a platform of different game modes nowadays. It has, three different main battle pass plans. Then on top of that, different event battle pass plans and so on. Numerous battle pass plans are going on at the same time.
Then another interesting one, League of Legends: Wild Rift, just added in their latest battle pass plan. There’s a battle pass-specific currency that you get when you’re progressing in the battle pass. You get this currency, and also, when you have completed the battle pass plan, you can continue getting these battle pass levels, and then you get more of this currency. Then this currency is used in the battle pass’s shop to purchase more of these exclusives rewards. It’s also monetized more by purchasing more of that currency; let’s say you want to open and purchase all the exclusive extra stuff in the shop, then you can purchase that currency directly. That’s one way of monetizing the battle pass more and incentivizing players to level the battle pass after completing it.
[00:33:03] Erno: That is like some cosmetic-based games where the battle pass is the center of everything. It’s one way to increase the spend depth for the hardcore players for your battle pass because, usually, the battle pass is that individual transaction you make. If you look at, for example, PUBG Mobile. Some similar small nuances and tweaks incentivise players to skip the tiers or purchase tier skips and then continue to get value out of the battle pass system. It increases the spend depth and the value for the most hardcore players inside your battle pass system.
[00:34:01] Wilhelm: Yes. In Mech Arena, they’ve added a piggy bank system to their battle pass plan. When you purchase or when you progress in the battle pass, then you also fill your piggy bank at the same time. When you purchase the premium pass, on top of gaining the premium rewards of the pass, you also gain the rewards of the piggy bank.
Dragon Mania Legends had a unique one when there were three different battle pass plan difficulties. Let’s say you’re a PVP player. You can select the PVP-focused battle pass plan. If you are a more casual player, you can select the casual-focused one. There’s that, that’s a unique one. Then we’ve seen social mechanics tied to the battle pass plan. I think Royal Match had this. When you purchase the premium pass, you also give this guild gift to your guild mates. That’s nice. Top War had guild-focused progressive battle pass plans and stuff like that. The fascinating ones are the auto-renewing battle pass plan and getting extra benefits from the battle pass plan. I think, Erno, Call of Duty had fascinating ones.
[00:35:15] Erno: I guess this ties a little bit overall into subscriptions. It’s not that common yet, but if we think about Google, all their recurring subscription fees went down to 15% at the start of this year. That’s one of the drivers that make implementing subscriptions in your game more interesting or appealing.
Then we have seen a little bit of how different companies tie a battle pass into an auto-recurrence subscription because the battle pass is already a subscription in itself. You purchase it, and then you have benefits for 30 days. For example, in Call of Duty: Mobile, what they did some months ago is that you can still purchase the individual season as an IAP or subscribe to a monthly subscription. It’s a bit higher price point than purchasing individual seasons, but you get extra benefits and some more unique cosmetics. You get more weapon XP in the game and develop those weapons. There are some small subscription benefits. Now you have an option as a player: do I want to pay and buy this individual battle season, or do I want to then subscribe to this subscription? I will get the battle pass, but I will also get a few other benefits.
It’s a bit more expensive for me, but then on the developer side as well, if they’re getting higher cuts of the whole revenues, it’s an interesting thing that I would assume that more companies would try out, at least to some extent. There are not many examples, yet Call of Duty is one, and then Wild Life has been doing it with their games like Zooba and Tennis Clash.
[00:37:29] Jon: Again, subscription as a model only has come about recently. Though, the general population has become more used to subscriptions for everything. Only ten years ago, subscriptions were seen as quite an odd thing to do for content. Now obviously, Netflix and Spotify are all very common for people to have this. I know what my subscriptions are, so game subscriptions have been big. Again, those things become available as people become more used to them. Again, going back to the complexity of it, when battle passes came in, they were an odd thing and now, as you were describing there, Wilhelm, there are battle passes on top of battle passes. I think the broad monetization thing for game developers is they want as many people as possible to pay for something. They always want to charge as much as possible to those who want to pay as much as possible. That’s always the tactic between them.
The more you chop down the cohorts between that, it’s easier to work out what you were charged at certain levels, but then the hard part becomes for the users to know where they go. Because in free-to-play mobile games, what percentage of people pay anything at all? Not assuming watching adverts; it’s still that 95%-98% of people are not paying anything at all. It’s funny how sophisticated it’s become for that tiny percentage of people.
The other thing about subscriptions is that if I’m subscribing, I will only subscribe to a certain number of games a month. If a developer can get someone locked up in a subscription, you’ll see that they’ll probably be playing your game and not someone else’s. That’s an added competition, where you’re using that as a moat or whatever competitive advantage you get over other people’s games, which is beyond just what’s happening within one game.
Mobile game gachas
[00:39:38] Erno: Yes. It’s also a good point regarding battle passes and subscriptions. There’s an excellent GDC talk by Supercell when they added this battle pass to their Clash of Clans game. This is always case-by-case. With Clash Royale, they had a negative effect when they added a battle pass, and then they figured it out. In that talk, they explained how even though the average revenue per paying user went down, the number of converting users increased significantly, so the revenues were higher. It was a healthier monetization model in the long run. It’s always case by case, of course. Then we’ll talk about battle passes and the cosmetic monetized game. Next, we’ll talk a little bit about gachas, which is still one of the key monetization mechanics, especially in mid-core/hardcore games. The most revenues generated are coming mainly from gachas.
Even those Call of Duty mobiles and so on, have battle passes. Looking at games where unique cosmetics are sold through limited-time gachas and mechanics. These gachas are nothing new but like in battle passes, there are different ways that developers try to twist and turn around with “you have your loot box, this is your reward pool and then just pull from it”. Some more popular emerging mechanics are variations of the PT mechanics. Naturally, in PT mechanics, we mean that if you pull the gacha multiple times, you get some benefits.
One example that has become increasingly popular in the West and the China market is these gacha shops. I was talking about a battle pass currency, but now there are many gacha types, especially for these top cosmetic games li
