Gaming apps are experiencing their biggest year yet, fueled by record levels of app downloads and consumer spending.
Mobile app usage across all categories grew 40% year-over-year with Gaming apps leading the way, according to data from app store intelligence provider App Annie for the second quarter of 2020. April saw an all-time high of over 200 billion hours. Meanwhile, consumer spending in apps spiked to $27 billion. Games and esports analytics firm Newzoo reckons roughly one-third of the planet’s population—that’s 2.6 billion people—will play mobile games this year. Many are die-hard gaming fans, and many more are part of a new and captive audience forced by global events to practice social distancing and use their downtime to seek digital distractions.
The lockdown also opens opportunities for models and approaches that monetize audience attention, as well as optimizing spend. This is critical at a time when the gaming industry is set to experience both a windfall of profits and the headwinds of a potential global recession. Right now, the “increase in playing time will naturally lead to revenue growth in mobile gaming,” Tianyi Gu, Newzoo Market Lead – Mobile, told me in an interview.
Once COVID-19 restrictions ease and players shift attention to other pastimes, though, momentum is bound to slow. And lighter wallets will likely depress in-app spending: Full or partial work closures impact “more than 80% of a global workforce of 3.3 billion currently.” Newzoo is cautious. “We expect engagement growth to be much higher than revenues, as it is notoriously difficult to convert players into payers on mobile,” Gu says.
It’s why Fouad Saeidi, Founder & CEO of App Growth Network, a full-service app product marketing agency focused on optimization throughout the funnel from acquisition to retention, is bracing for “a boom” in approaches that incentivize and monetize audience attention. The global pandemic may have increased appetite for gaming apps. “But it’s also diminishing the purchasing power of users across a number of key regions and growth markets such as Brazil,” He tells me in an interview. To make up for the decline in revenues, he observes companies are doubling down on efforts to “drive organic efforts and growth and construct viral loops to acquire and keep users in the app.”
Rewarded advertising gets a refresh
Rewarded video, an ad-supported scheme that offers players perks and prizes in exchange for watching or interacting with an ad, has become the standard ad unit to engage and monetize gaming audiences at scale. The ad unit cashes in on an established behavior: watching commercials. The reality is that most game enthusiasts understand and accept that advertising has become an integral part of the games they play.
For publishers looking to reduce their dependence on in-app purchases, rewarded video offers more than an effective monetization tool. It allows publishers to pursue a more balanced business model, diversify revenue sources and dial down the practice of targeting the high spending users (roughly 2% of players, also known as whales) who account for the lion’s share of in-app purchases. Rather than hunt for whales, publishers can double-down on models like rewarded advertising that offer greater value to a wider pool of players. For players, the payoff is the opportunity to gain additional benefits in the game without having to wait or pay.
Data from Playtika, a digital entertainment company that specializes in the development and publication of social games, shows rewarded ads provide better user engagement and increased retention. “Our metrics show that some of our most engaged users in our games are the ones coming in from rewarded ads,” Mark Avidan, Playtika Media Department Lead, told me in an interview. Avidan is convinced that “integrating the ad inside the game gives a better user experience to the player, and thus leads to better engagement.”
Avidan is particularly bullish about an ad unit called Playtime that rewards players for the time they spend actually playing games, rather than just watching videos. It’s a “win-win” that fuels a positive growth loop, Avidan says.
Creating a virtuous circle for advertisers and publishers
It’s a scenario that pays off for all stakeholders. The longer users play, the more engaged and valuable they become to publishers and advertisers. Imagine a typical rewarded video scenario where Emma, an avid gamer, is shown an ad by Publisher A for a game from Publisher B. Emma interacts with the ad and Publisher A benefits because it has monetized effectively. But showing Emma (and millions like her) an ad for a competitor game can also backfire. Emma can be encouraged to try out a new game. But she can just as easily be convinced to switch to the game from Publisher B and abandon the game from Publisher A altogether.
But publishers that deploy the Playtime ad unit don’t encourage Emma to pick a favorite. Instead, she is incentivized to be loyal to both.
In this scenario, Publisher A shows Emma an ad for a game from Publisher B. But playing the advertised game (from Publisher B) is a pastime that earns Emma virtual currency to redeem in the game from Publisher A. More importantly, the advertised game from Publisher B stays top of mind with Emma thanks to gentle nudges and contextual notifications that remind her to continue playing and earning rewards. “Here we have a model that adds engagement value to the original game and the destination game, boosting retention and monetization for both,” App Growth Network’s Saeidi explains. “Companies that used to compete for the wealth now share it. And, in the hard times ahead, that’s a real game-changer.”
Playtime is the brainchild of Hamburg-based adjoe, a company with a new twist on a proven model. By allowing users to earn virtual currency for their favorite game through playing third-party games, “adjoe is able to generate highly loyal users for advertisers while increasing the engagement for publishers that use Playtime for ad monetization,” Jonas Thiemann, adjoe managing director, told me in an interview. “The longer they play the advertiser’s game, the more currency they earn to spend in the publisher’s game,” he explains. In addition to “high three-digit eCPMs,” the ad unit results in “upwards of 10 additional sessions per user for the publisher in the first week after engaging with Playtime for the first time.”
New pathways for mobile app monetization
The mix of high revenues and impressive retention rates—particularly early in the customer lifecycle when staying top of mind with players is crucial to driving longer-term loyalty—has paved the way for the company’s success to date. Thiemann says AppLike Group (which adjoe is part of) has “more than doubled revenues for the past four consecutive years.” It’s a track record that has also allowed the company to grow its customer base to include major games studios, including JamCity, Playrix, and Zynga.
Beyond growing its customer base, adjoe is laying the groundwork to “become one of the top players in ad monetization and user acquisition,” Thiemann explains. While the plan may appear ambitious, it’s a goal well within reach for a company with deep roots in ad tech, and investors with deep pockets. And adjoe has both.
On the tech side of the equation, adjoe is part of the Applike Group, a mobile app marketing platform provider with a top 10 position in the AppsFlyer Performance Index for the past three years. On the cash side of the equation, adjoe benefits from being under the umbrella of Gruner+Jahr (G+J). The media company is owned by Bertelsmann, the global conglomerate headquartered in Germany, that reported solid earrings on $19.4 billion (€18 billion) in revenues in 2019.
In April, G+J announced an “8 digit investment” in AppLike, a cash injection that benefits its subsidiaries, including adjoe. Thiemann says he will use the funding to “improve the company’s ad monetization technology and double the team from currently 100 to 200 for further expansion.” The next moves are critical and closely watched by G+J, which is counting on AppLike to help it establish a dominant position in the market.
While G+J was quick to move its roster of 100+ premium magazine and newspaper titles to online destinations, the path to monetize mobile media assets has been a rocky one. “As a publishing house, we know how hard it can be to make the shift to digital,” Julia Jäkel, CEO of Gruner + Jahr and member of the Bertelsmann Group Management Committee, said in an email. It’s the main reason why G+J is so eager to “build on the strong momentum” of the AppLike Group, which, Jäkel says, has “become one of the highest-earning digital businesses within G+J.” Jäkel herself joined the management board of AppLike this year.
Driving connection and removing friction
While adjoe started out with a sharp focus on more traditional games of skill and chance, it’s receiving increased interest from gaming categories where virtual currency powers virtual in-game marketplaces. A prime example is IMVU, a pioneer in the gaming genre that offers its players a 3D avatar-based social networking universe. “Members [in IMVU]generate value when they spend money to purchase our virtual currency and redeem it to meet people, play games and have fun,” Lomit Patel, Vice President of Growth at IMVU, told me in an interview. But cash alone isn’t the prize. “Members who take part in chat rooms, just being present and being a friend in the community, generate another kind of value–one that benefits the entire ecosystem.”
It’s this “engagement value” that IMVU, home to more than 200 million registered users and 7 million monthly active users, wants to incentivize and monetize, Darren Markovitz, IMVU Head of Monetization, told me in an interview. Markovitz, responsible for “finding ways to monetize our traffic that go beyond driving direct in-app purchases,” was searching for a “differentiated product” and one that complements the other ways IMVU monetize audience attention, like rewarded videos, offerwalls and user surveys.
Today adjoe, which operates only on Android, is a “fully integrated partner,” Markovitz adds. “In terms of performance, they are a significant partner for us now.” The technology was the draw, and adjoe’s parentage is a plus. “The company also has the financial backing of a much larger company [Bertelsmann], which from our standpoint reduced the risk of a partnership of this kind,” he says.
Members appreciate the virtual currency they receive for spending time in games they try during their gameplay in the IMVU metaverse. The bigger bonus, though, could be quality user experience and the lack of friction, Patel says. “It rewards how members interact with the app anyway as opposed to requiring them to stop the fun and fill out a survey or watch a video.” He adds that rewarding members for time spent also gives IMVU more options to shape longer-term player habits and behavior. “It’s about getting people to really love the product, and we know the more time they spend in the product, the more they’re going to end up using it.”
And it’s an outcome all companies, not just gaming companies, should aim for, according to App Growth Network’s Saeidi. He touts the importance of “revisiting and reapplying” the learnings of Gabe Zichermann, the industry’s foremost expert on gamification, to app marketing. Zichermann’s SAPS framework, based on four powerful motivators—Status, Access, Power and Stuff—helps marketers make the match between the right perk to offer based on the behavior they want to drive. “It’s all about shifting the focus from transactions to interactions and rewarding users for their actions in the app,” Saeidi explains. “It’s an approach that occupies the top tiers of Zichermann’s pyramid, and it should be top of mind in our evolving next normal.”
In the search to build stable revenue streams in these turbulent times, new approaches that reward consumers for time spent while compensating advertisers and publishers are pioneering models that power a virtuous loop and unlock growth.
This article first appeared in knowledge.wharton.upenn.edu
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