Mobile games generated $110 billion in revenue in 2022, with downloads increasing by 6.7 billion. In other words, mobile games are big business.
To claim your piece of this enormous pie, you need to create a game that people want to play, implement an effective monetization strategy, and invest in top-level marketing to get the word out.
Let’s talk about the second element in that process: monetization. More specifically, how in-app purchases and in-app ads revenue can complement each other to generate more revenue for your business.
Sounds like a plan? Great, let’s dive right in!
Understanding in-app purchases
So what exactly are in-app purchases anyway?
An in-app purchase (or IAP) is something users buy within a pre-existing mobile app, such as extra content or access to additional features. In mobile games, in-app purchases can include extra lives, special weapons, new costumes, access to additional levels, and more.
Ultimately, in-app purchases enable users to pay real money for additional benefits inside the apps and/or games they know and love.
The 4 types of in-app purchases you need to know about
Not every in-app purchase is the same. There are four that you need to know about to effectively monetize your game:
- Consumables: These often take the form of in-game currency, bonus lives, and power-ups. Users buy them, use them, and then have to buy more if they want to use them again.
- Non-consumables: The opposite of consumables. In mobile games, they often take the form of extra levels and new characters. Users buy them once and are able to continue using them for as long as they play the game.
- Auto-renewable subscriptions: These require a subscription fee. Users pay game developers on a weekly, monthly, or yearly basis to access premium content. The subscription automatically renews at the end of the predetermined period.
- Non-renewing subscriptions: These also require a subscription fee, but they don’t automatically renew at the end of a predetermined period. Users have to manually renew their subscriptions to continue receiving premium content.
The benefits of in-app purchases
Why use in-app purchases? They can be incredibly beneficial for monetizing your mobile game. Here are three reasons why:
- The most obvious benefit comes from revenue. In-app purchases allow you to have a free-to-play version of your game alongside a “premium” paid version in which you can monetize a portion of your audience with access to new levels, new characters to unlock, and more.
- In-app purchases inspire loyalty by giving players control over the perks and upgrades they want to pay for.
- Get valuable insights into user behavior by monitoring which in-app purchases are most popular, then use this information to improve the gaming experience.
Tips for implementing in-app purchases
While in-app purchases sound pretty great, how do you successfully implement this monetization strategy? Here are nine tips to get it right:
Choose what to sell
- Make it valuable: It may sound obvious, but your in-app purchases should include things players actually want. Study your users, learn what they like, then sell it to them.
- Avoid pay-to-win: Your in-app purchases shouldn’t be essential. If players feel like they have to buy perks to excel in your game, you’ll have a high churn rate.
- Analyze performance: Keep an eye on your in-app purchases. Do players like them? Is revenue up? Are they impacting your install rate? These are important to know.
Select the right price
- Research your market: This will help you determine what other games charge for similar in-app purchases and use that as a starting point for your pricing.
- Offer multiple price points: Mobile gamers want options. Don’t just offer 200 coins for $2, for example. Offer 200 coins for $2, 500 coins for $4, and 1,000 coins for $5 — or something similar. Avoid charging less than $2 for an in-app purchase. Research shows that pricing in-app purchases below $2 can sometimes negatively impact ARPDAU.
- A/B test your pricing: If your game is still in the development stage, charge different users different prices for each of your in-app purchases. Analyze the data to discover which price points work best. A/B testing pricing can be hugely beneficial.
Create a seamless buying experience
- Study the competition: Once again, look to the competition to learn when and how they offer in-app purchases. You’ll see that certain kinds of games gravitate toward specific mechanics — RPGs use loot boxes, puzzle games use piggy banks, etc.
- Integrate into gameplay: Try to offer an in-app purchase when it makes sense to do so. If a player’s character dies, for example, offer them three bonus lives for a small fee. Your game will likely provide numerous opportunities to monetize in convenient ways.
- Offer something awesome: Make your in-app purchases awesome. Like, truly amazing. If players really want your offer, they’ll buy it — even if it’s made available at awkward times. Just don’t make your in-app purchases essential to your game. As mentioned above, this could cause frustration and lead to player churn.
- Develop a direct-to-consumer store: Mobile game studios have begun bypassing Google and Apple Store fees (a cut of 15% or 30% of all transactions) by selling certain in-app purchases through their own external web stores. However, if you choose this route, consider offering your players incentives to visit your web store, such as discounts over buying in-app.
Complementing in-app purchases with in-app advertising
Let’s talk about the in-app advertising revenue model.
In-app advertising (or IAA) is a standard and popular app monetization strategy in which developers are paid to show ads to their users.
Why is everybody in mobile gaming doing it? Because most users don’t make in-app purchases. In-app advertising offers game developers a reliable stream of income they can use to grow their businesses.
The most popular kinds of in-app ads
There are many different ads you can display to your users. The most popular types include:
- Interstitial ads: They take over the entire screen during natural breaks in gameplay, such as between levels.
- Banner ads: These ads are quite popular and are placed at the top or bottom of the screen during regular gameplay.
- Rewarded video ads: Users can opt-in to watch these ads in exchange for a reward, such as extra in-game currency.
- Native ads: These ads blend seamlessly into the app’s design and appear at appropriate moments during gameplay.
- Playable ads: These are miniature games which users can play for a short time while waiting for the main game to load.
By choosing the right ad formats and implementing them effectively, you can strike a balance between in-app purchases and advertising revenue, enhancing the user experience and growing your business.
How to incorporate in-app advertising successfully
In-app advertising revenue is key to success in mobile gaming. You just have to make sure you incorporate your ads in a way that preserves the stellar user experience you’ve built.
Prioritize your users above all else
It’s important to remember that while generating revenue is essential, user satisfaction should always be your top priority. Bombarding players with ads or placing them at inconvenient moments only drives them away. Always consider the user experience first and ask yourself, “Will my users appreciate this?” If the answer is no, it’s time to try a different approach. You can drive in-game ads revenue in other ways that won’t alienate your users.
Choose high-performing ad units
Certain ad formats work better than others, especially in the world of mobile gaming. Stay up-to-date on industry trends and research to help choose high-performing ad units. By selecting the right ads, you can increase revenue per ad without making players feel like they’re stuck in a never-ending commercial. After all, nobody wants to play a game that feels like an advertisement.
Test your in-app advertising strategies
As with any aspect of your mobile gaming business, it’s important to test and analyze your in-app advertising strategies. Which ad formats generate the best results? Which pricing models yield the highest profits? How many ads can you show before users feel overwhelmed? Which demand partners in your waterfall and in-app bidding are having the greatest impact? Experimenting with different approaches can help you find the most effective way to monetize your game(s) while maintaining a positive user experience.
Incorporate user segmentation
You can also use purchase behavior to understand your users better. When you identify players that aren’t making in-app purchases, monetize them with in-app advertising instead. This way, you are monetizing 100% of your users, not just the 2% that end up making an in-app purchase.
Use a mediation solution
A mediation solution is a tool that allows you to connect with multiple ad networks, increasing your chances of finding the best ads to show in your game. It helps you to optimize your ad fill rate and maximize your revenue. Not all mediation solutions, however, are created equal. Many operate as a black box, obscuring how auctions are handled and the logic used, which demand sources participate in each auction, and whether the playing field is tilted by commercial deals between mediation platforms and demand sources.
This is where Chartboost Mediation can help. Our developer-first platform provides complete transparency and control over which ad networks are serving ads in your game. You can have premier demand sources receive your auction requests for unbiased real-time bidding in which the highest-paying qualifying bid wins. The result: real competition that leads to maximum CPM and fill rate with no compromise to player experience.
Best practices for monetizing a mobile game
Monetizing your mobile game is crucial to its success, but it’s important to strike the right balance between in-app purchases and in-app advertising revenue. Here are a few tips to help you create a winning monetization strategy:
- Experiment and learn: Don’t overload your users with in-app ads as it can lead to a quick loss of users and revenue. Test and learn which ad formats and placements work best for your audience.
- Find the right balance: Determine how many ads your users can tolerate and which ones they prefer to interact with. Also, try different in-app purchase offers to supplement your advertising income. A good balance between in-app purchases and ads can keep your users engaged, build your game’s reputation, and generate a consistent stream of revenue.
Know your high-value customers
Identifying your high-value customers is crucial to maximizing your revenue potential. These users are willing to spend significant amounts on in-app purchases and can make up a large portion of your revenue.
To keep them engaged, offer them more personalized and exclusive offers that are tailored to their preferences. Create special in-app events or limited-time offers that appeal to their interests.
Additionally, be mindful of their user experience with ads. The last thing you want is to turn off your biggest spenders with intrusive or irrelevant ads. Keep track of the ads they interact with and avoid serving them irrelevant or low-quality ads. By prioritizing your high-value customers, you can drive significant revenue while keeping your most valuable users happy and engaged.
Run in-app purchase campaigns
The more in-app purchases you sell, the more money your gaming company makes and the less reliant you’ll be on in-app advertising, which can harm the user experience.
So, you need to figure out how to boost in-app purchases. Don’t worry, it’s pretty straightforward. Just run an in-app purchase campaign. Here are a few common ones:
- Triggered campaigns: These campaigns “follow” users as they play your game. The goal is to make relevant in-app purchase offers at the most convenient times. You could offer an in-app purchase every time a user completes a level, for example.
- In-app promotional messages: Looking for a more direct approach? These campaigns send users in-app messages at opportune moments. You could offer a one-time discount on game resources (lives, currency, weapons, etc.) right after users visit your in-app store. The catch is, they have to buy right now to cash in on the deal.
- Promotional push notifications: Push notification campaigns are similar to in-app messages, except push notifications target users who aren’t playing your game at that moment. As such, they can help re-engage lapsed users. Offer freemium users the chance to improve their in-game experience via push notifications. You could try to sell them new levels, characters, etc. for a discounted price. Push notifications have click-through rates of 23%, so they’re worth looking into.
Be willing to adjust your approach when necessary
Always think about analyzing your data on a consistent basis. This is the only way to know if your monetization strategy is working, and how to adjust it to drive more revenue.
If your game is less financially successful than you’d like, experiment with alternate approaches. Offer more in-app purchases. Run more ads. Advertise to a new audience. You need to try different things to get different results. Don’t let fear stand in your way.
Remember, the mobile gaming industry is constantly evolving. What works today may not work tomorrow. Stay informed about changes in the market and be prepared to pivot your strategy if necessary. By remaining adaptable and open to change, you can stay ahead of the competition and drive more revenue. Push forward!
The mobile games market is undeniably massive, and with the right monetization strategy, your company has the potential to earn a significant amount of revenue.
Utilizing both in-app purchases and ads is essential to achieve long-term success, but finding the right balance is key. Fortunately, the tips above will help you achieve this balance and maximize your profits.
When it comes to in-app advertising, Chartboost can help. We offer innovative ad formats, easy waterfall management, and transparent mediation to help you make informed decisions about your game.
Sign up today to create a free Chartboost account and gain access to a top-level platform that can help take your mobile game to the next level by maximizing your monetization potential.