MOBILE GAME MONETIZATION


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Nico Foxell

M
ION








JYVSKYLN YLIOPISTO

TIETOJENKSITTELYTIE
TEIDEN LAITOS

2015

2


ABSTRACT

Foxell, Nico Kristian


Jyvskyl: University of
Jyvskyl, 2015
, 30

p.

Information Systems,
Bachelor’s Thesis

Supervisor
:
Holtkamp
,
Philipp

on models used by games on the Apple App Store?

And w
hat

has

to
be
consider
ed

egy?

The aim of

bachelor’s

thesis
is to analyze
what mobile games are and what Apple
App Store is

and

then
to
present different mon
es
on Apple App Store.
Different types of games are also discussed. Lastly things to


ferent quality expectations.

Keywords:
mobile g
ame
,
m
,
App Store, business m
odel, f
reemium,
in
-
app advertisement, in
-
app purchases, paywall
, paid apps
, downloadable con-
tent, lite apps, free to play, premium apps, non
-
premium apps




3

TIIVISTELM

Foxell, Nico Kristian


Jyvskyl:
Jyvskyln yliopisto
, 2015, 30

s
.


Ohjaaja
: Holtkamp, Philipp

piin?

Tss kandidaatintu
tkielmassa perehdytn siihen mit mobiilipelit ovat,

mik
on Apple App Store,
millaisa eri pelityypepj on, mitk ovat eri rahallistamisme-

t

mobiilipeleille

ja lopuksi
huomioitavia asioita ksitelln luvun

verran
.

Tukimustuloksena esitelln muutam
a potenttiaalinen rahallistamis
.
tamis

Avainsanat
:
mobiilipeli
,
rahallistaminen
, App Store,
, free-
mium,
pelinsisinen mainostus
,
mikromaksu
,

maksumuuri
,
maksullinen sovel-
lus
, ladattava sislt, l
ite applikaatiot
,
ilmainen peli
, pre
mium applikaatiot, non
-
premium applikaatiot



4


FIGURES


Figure 1. Reinvesting revenue generates more customers (Fields, 2014)

..............

8

Figure 2. Mobile game types (Salo & Karjaluoto, 2007)

................................
.........

11

Figure 3. Conceptual Model of an App Store (Jansen and Bloemendal, 2013)

...

12

Figure 4.
Mobile

App

Store

Downloads,

Worldwide,

2010
-
2016

(M
illions

of

Downloads)

(Kuusisto, 2014)

................................
................................
.....................

15

Figure 5. Long Tail Strategy (Baker, Dane, McCann & Dyson, 2011)

..................

22






5

TABLE OF CONTENTS

ABSTRACT

................................
................................
................................
.....................

2

TIIVISTELM

................................
................................
................................
................

3

FIGURES

................................
................................
................................
.........................

4

TA
BLE OF CONTENTS

................................
................................
................................

5

1

INTRODUCTION

................................
................................
................................

6

2

WHAT ARE MOBILE GAME
S?

................................
................................
.......

10

3

APPLE APP STORE

................................
................................
...........................

12

4


................................
................................
.........

14

4.1

In
-
game advertising
................................
................................
..................

15

4.2

Freemium

................................
................................
................................
...

16

4.3

In
-
app purchases and mictrotransactions

................................
.............

16

4.4

Paid games

................................
................................
................................
.

17

4.5

Paywalls and subscriptions

................................
................................
.....

18

4.6


................................
................................
...........................

18

5

DEVELOPMENT RECOMMEN
DATIONS

................................
....................

19

5.1

Recommendations for mobile games

................................
.....................

19

5.2

Recommendations for free to play games

................................
.............

19

5.3

Recommendations for paid games

................................
.........................

22

6

RECOMMENDATIONS FOR

FOR
DIFFERENT GAME TYPES

................................
................................
..............

25

7

SUMMARY

................................
................................
................................
.........

27

8

REFERENCES

................................
................................
................................
.....

29

6


1

INTRODUCTION


As m
obile devices gaining popularity amo
ng business users and co
nsumers
(Chen & Nath, 2004) so
are

m
obile games. This trend has

been going on for a
while. With more and more mobile games downloaded and played every day,
industry tends to move towards games which are free to download and play.
Previously

gam
. Today most of the mo-
bile games are free to download but come with numerous different mechanics
which
generate revenue for the

developers. These mechanics are different busi-
ness models which transform seemingly
free games to revenue
-
producing appli-
cations. This is called to monetize a game, therefore
in this thesis
such practices
will be referred to
as
s
.
Fields (2014) describes
ation

as ways
the developers

u
s
er
s to pay them
.

In
-
app advertisement, free-
mium, in
-
app purchases, paid apps and paywalls
/subscriptions

are examples of

(Baker, Dane,
McCann & Tyson, 2011).

p
lay and paid games.
Alha, Koskinen, Paavilainen, Hamari and Kinnunen (2014)

and Kuusisto (2014)

games.






The focus of this thesis will be on games that are available on the Apple App
Store, whi
ch is a Mobile App Store.
Jansen and Bloemendal (2013)
define an app
store as


“An online curated marketplace that allows developers to sell and distribute their prod-
ucts to actors within one or more
multi
-
sided software ecosystems

.


Other notable app s
tores are Google Play
i
, which is the main app store for the
Android mobile operating system and Windows Phone Store
ii

which is the app
store for the Windows Phone mobile operating system.


As the popularity for mobile games are rising so are the profits. H
igh profits
naturally attract more people trying to get their share of it. Munir (2014) wrote in

7

her blog post that 2% of all the app developers claim about 54% of all revenues.
Which means 98% of the developers share the remaining 46% of app revenues.
One

explanation to this is that, when it comes to in
-
app purchases, 97% of all
customers do not use any money on in
-
app purchases (Kuningaskuluttaja,
1.10.2015).
Remaining

3% of the player base are therefore responsible for 100% of
the revenue. Kauppalehti (2
015, 22.10.2015) reported recently that it is rumored
that one man has spent around one million dollars on the game Clash of Clans
iii

by Supercell
iv
. Clash of Clans is a free to play mobile game which contains in
-
app
purchases. According to Talouselm (2013,

17.5.2013)

Supercell 1,8 million eu-
ros in revenue everyday with in
-
app purchases, in their games Clash of Clans,
Hay Day
v

and Boom Beach
vi
.
Furthermore, according to Kuningaskuluttaja
(1.10.2015) 1000 impressions equals 5
-
15$ in revenue from in
-
game advert
ising.
mobile game/app developers. Best Fiends
vii
, is a mobile puzzle game developed
by Seriously
viii
. According to Kuningaskuluttaja (1.10.2015) this game has
2

000

000 impressions per
day which equals 20

000$ per day in revenue.
Both
Supercell and Seriously are Finnish companies and therefore their tax infor-
mation is publicly available. Supercells taxable income in 2014 was 871

163

837€

according to the information published by the Finn
ish Verohallinto (Taloussano-
mat, 1.11.2015). As
Seriously Digital Entertainment Ltd

is a rather new company
As may be clear from the numbers the
potential profits from mobile games are s
ignificant. Especially when
t
ake
n

into
consideration that mobile game companies are rather small in comparison to tra-
ditional companies with as high revenues.

Returning to Munirs claim that 2% of
all the app developers claim about 54% of all revenues.
According to Pierce (2012)
in Feb
ruary 2012 there were over 15 billion downloads from the App Store and
the developers had been paid over 2,5 billion USD.

While the profits are notable, successful games require a very big player base.
The visibility of each game dictates how many people w
ill find the game. A
game staying on the top list of a given app store, are often good games which
customers like. Therefore popularity brings more visibility and a larger player
base. Which on the other hands equals bigger revenue. That is why the most
po
pular games
claim about 54% of all revenues.


T
he figure below is

by Fields (2014) and

describes how revenue generated
which leads to more revenue.




8



Figure

1
.
Re
investing revenue generates mor
e

customers (Fields
, 2014
)


In their article for MIS Quarterly Garg and Telang (2013) did a study which
proved that
that an increase in the rank on the top
-
paid list

of the app
-
store

in-
creases the rank on the top
-
g
rossing list as well
. In Carares (2012) study it was
made clear that the
public bestseller status of top ranked apps is

a very im-
portant
determinant of demand, and that the

willingness to pay that is attribut-
able to bestseller status

declines very steeply
for the top 10 products
. The down-
fall

is even steeper

and

the effect

be-
comes negligible at

higher ranks.

Therefore, u
ods he describes as industry standards
, which are:

advertising, popup a
d
s

inside
other games, review sites, iTunes and Google features
ix

and teaming up with a
publisher or platform.

features an app, on their front page or other pages,

which makes finding the app
easier.



The aim of this

Bachelor’s Thesis
is
to explain what a mobile game is, what

and
w
hat to consider while
?

This will be base
d on studying
different types of games and which strategies work best with them.
-
game advertising, in
-
app purchases,
freemium, paid games and paywalls/subscriptions.
Definitions for a mobile
game and

Apple App Store will be given by addressing to literature written
about the subject.




9



The research questions are:




the Apple App Store?



tion
strategy?


The research question
s

presented

above

will work as the framework for this the-
sis
.


10


2

WHAT ARE MOBILE GAME
S?

According to Unger and Novak (2012) Mobile Games are games that are played
on mobile phones, palm computers and media d
e
vices such as iPod

Touch an
d
iPad
.
Mobile Games were long thought as a casual option for traditional games
but past 10 years have proven that the gamers are beginning to see mobile games
as equals to traditional games
.
Nowadays some mobile games are even consid-
ered hardcore
, in other words games that are aimed at serious gamers who put a
lot of effort in to it and play that game

(Unger & Novak, 2012)
.

Recently the hardware of mobile devices have
evolved tremendously,

which has
led

to mobile games resembling t
raditional games. The difference graphic wise
fore people who never saw themselves as gamers have now become a part of the
wider audience (Unger & Novak, 2012).


To understand wh
at a mobile game is it is important to un
derstand what a
video game is.
Wolf (2001) says that a video game consists of elements. These
elements are:
conflict against an opponent or circumstances, rules

what can or can
not be done, the use of

some player ability, a valued income such
as winning or losing, or getting the highest scores.
The Oxford dictionary de-
scribes video game as:



A game played by
electronically manipulating

images produced by a computer program
on a

monitor
or other displa
y.



A few well known mobile games featured on the Apple App Store are Clash of
Clans, Hay Day and Boom Beach from the Finnish Developer Supercell, Rovio
entertainments
x

Angry Birds series
xi
, Candy Crush
xii

from King
xiii
,
Cut the rope
xiv

and Best Fiends to name a
few. Many so called AAA developers have also
adapted their older games to the mobile platform, for example some entries in
the Final
Fantasy series by Square
Enix
xv
, have been adapted to the iOS, Android
and Windows Phone platforms.


11


According to Salo and K
arjaluoto (2007) Mobile games can be roughly clas-
sified into single
-

and multiplayer games.
They also provided a figure about dif-
ferent game types:



Figure

2
.
Mobile game types (Salo & Karjaluoto, 2007
)


Even though onl
y three g
enres are presented under every major class, there are
plenty of differen
t genres for

games.

Koivisto (2007) uses the term “snack
game” in her paper mobile games 2010. Se defines snack game as a game that is
played only for a short period of time when the
user is bored or waiting for
called snack games. She also says that snack games are here to stay. As the mo-
bile phone is small and always with the user.

12


3

APPLE APP STORE

In the case

of this thesis I am limiting myself to discussing the Apple App Store
for mobile devices. App Store is also available for the OS X operating system,
which is the OS MacBook and ordinary Macintosh computers use.
Apple App
Store is the mobile app store for
the iOS mobile operating system developed by
Apple.
Jansen and Bloemendal (2013)
define an app store as
an

online curated
within one or more multi
-
sided software ecosystems.

The
figure

below

describes
the
Conceptual Model of an App Store
.



Figure

3
. Conceptual Model of an App Store

(Jansen and Bloemendal,
20
13)



acteristics, fea
tures and policies for their app store. Which then defines how the

13

developers (those who provide the apps) and the end users (customers) interact
with each other.

The Apple App Store was released
on
July 11
th
,
2008. Back then it launched
with only 550 apps

for the first generation iPhone. In 2011 it had roughly

over

500,000 apps (Baker, Dane, McCann & Tyson
, 2011
).

Pierce (2012) on the other
hands claims that in February 2012 there were over 300

000 apps on the App Store,
with a growth rate of 13

000


15

0
00 apps a month.
The amount of apps and
games have been rising steadily since then.

are the Android App Stores Google Play and Amazon App Store. While they do
nce both iOS and
Android try to attract the same customers.


Apple App Store offers apps for all devices using the iOS mobile operating
system.
These devices include iPhone, iPad and iPod touch (Baker, Dane,
McCann & Tyson, 2011). As of lately Apple App S
tore also features app for Ap-
ples iWatch.
Pierce (2012) claims that in 2012 there were over 200 million iOS
devices owned by people all over the world.
The App Store can be accessed
straight fr
om a mobile device or via a

web browser. Most apps, especially
games,
are free to download but some apps require a purchase. To purchase apps or
perform in
-
app purchases Apple App Store require the customer to enter his or
her credit card information.

According to Baker, Dane, McCann and Tyson (2011),
hods used on the Apple App Store are:
micro

transactions,
downloadable content (DLC), free apps, freemium apps, in
-
app purchases, free
-
to
-
play apps

(F2P), lite apps and Long Tail Strategies.

Pierce (2012) on the other
into pure app sales, advertising and in
-
writers.
-
game transaction, digital download,
pending on the source
,

the name of each method may vary.
Paid apps o
n

the
Apple App Store are divided into two types of apps, which are premium and
non
-
premium

(Baker, Dane, McCann & Tyson, 2011)
.
Pierce (2012) calls these
paid apps for pure app sales.


Even though there are success stories such as Angry Birds, they are qui
te
unique. Still, the Apple App Store offers great opportunities to developers as it is
an

exponentially growing platform both measured in revenue and amount of
apps. For example in 2011 there were 20,000 new apps per month (Baker, Dane,
McCann & Tyson, 20
11).





14


4



tion may differ from person to person. In this thesis the terminology will be the
same as Baker, Dane, McCann and Dyson(2011)
, Fernandez (2012),
Kuusi
sto
(2014)
Pierce (2012)

and Fields(2014) used
.

According to Fields (2014
, 21
) a mone-
tizatio
r
game.


On a macro level monetization mean
s the business model and logic behind a product and
your users pay you.


In t
his thesis a closer look
is taken
In
-
game advertising
, freemium, In
-
app purchases and microtransactions, paid
the literature will also be briefly discussed.



According to
Alha


(2014)
Free to play is
a
n

increasingly popular rev
e-
nue model for free to play games.
with free to play games it is safe to say that free to play popularity is increasing.
They also claim that free to play mo
dels are good for two reasons:
it makes flex-
ible pricin
g possible for users with different levels of willingnes
s to pay for addi-
tional content and

it also enables a wider audience for the game because of the
initial download being free.

To support the claim about free to play being the
more popular solution Ku
usisto (2014) provided the following figure by the Re-
search
Company

Gartner:




15




2012

2013

2014

2015

2016

2017

Free down-
loads

57,331

92,876

127,704

167,054

211,313

253,914

Paid
-
for
Downloads

6,654

9,186

11,105

12,574

13,488

14,778

Total
Downloads

63,985

1
02,062

138,809

179,628

224,801

268,692

Free Down-
loads %

89,6

91,0

92,0

93,0

94,0

94,5


Figure

4
.
Mobile

App

Store

Downloads,

Worldwide,

2010
-
2016

(Millions

of

Downloads)

(Kuusisto, 2014
)


The figure above had actual amounts of dow
nloads until 2013 and
ther
eafter es-
timates for 2014
-
2017.

According to the estimates the amount of free games are
consistently over 90% and rising.


ness models. Osterwalder and Pigneu
r (2010) claims in their book

Business
model generation: A handbook for visionaries, game changers, and challengers
,

that a business model consists of 9 elements: customer segmentation, value prop-
osition, channels, customer relationships, revenue streams,

key resources, key ac-
tivities, key partnerships and cost structures.

These elements are also present in



4.1

In
-
game advertising

In
-
game advertising refers to advertisements displayed within the game. Com-
panies that provid
e advertisements for mobile games are for example Google
xvi

and their AdMob service
xvii
. AdMob offers banners, full screen ads and video ads,
which the developers can implement in their game. The developers are paid per
impression
xviii
.
Games with in
-
game advertisi
ng are usually free Munir (2014).

In
-
game ads are also relatively easy to implement and are
one of the main ways
a developer can make some additional revenue with their free or lite apps (Baker,
Dane, McCann and Dyson, 2011).

As Clemons (2009) suggests in
his article, advertising can have a negative
impact on the customer. They can perceive the advertisement as an annoying
thing, and stop using the game that uses in
-
game advertising. Clemons (2009)
also claims that with the help of smart phones and mobile c
omputing a new form
of advertisement has been starting to get popular. This form of advertisement is
called Contextual Mobile Advertising. It differs
from so called traditional in
-

seen as a less annoying way.

Fields (2014) discusses several ways of ad placement in his book. Fo exam-
ple offer walls fromwhich the user can pick a certain add which awards them
-
game goods, if the
16


player watches that ad in question and advertainment, which is basically a game
that works as an advertisement. Fields (2014) uses Burger King’s XBOX line of
games, Sneak King and Big Bumpin’, as examples. Both of them have reportedly
sold over 3 million c
opies.


4.2

Freemium

T
he term Freemium comes fro
m combining Free and Pre
mium.
Fields (2014)

de-
fines a Freemium as model that allow users to play the game without cost and
instead encourage them to pay for items or services in an a la carte in
-
game fash-
ion.
A f
reemium game is always free to download but if the player wants he can
invest real life currency on premium content, subscriptions, microtransactions,
features or other items (Baker, Dane, McCann and Dyson, 2011).

Freemium is a
relatively new term but the
model itself has been around for a while (Baker, Dane,
McCann and Dyson, 2011).

Fields (2014) argues that the freemium model have
rapidly become the standard for mobile games with much depth.

He also in-
apter, as parts of the free-
mium model.

That is In
-
game advertising, In
-
app purchases and microtransac-
tions, paywalls and subscriptions and lite/free games.


4.3

In
-
app

purchases

and mictrotransactions

In
-
app purchases and microtransactions are almost the same
thing. Accord-
transaction and in
-
app purchase are that microtransactions are used when the
player buys in
-
game goodies in exchange for real life currency while in
-
app pur-
chases refers

in
-
game com-
modities or not
.

Commodities are in this case
virtual goods such as clothes, items,
currencies and tokens (Lehdonvirta, 2009).

Fernandez (2012, 336) describes an in
-
d to collect payments in
-
lock additional features and content in the game.


Microtransactions are usually a s
mall amount of real life money users

spend
on
an

in
-
game commodity. These purchases does not tend to be critical in term
s
of success or enjoyment of the game, even though they can offer a lot of custom-
ization options
and ways

to accelerate and enchance gameplay (
Baker, Dane,
McCann &

Dyson, 2011).



As microtransactions can be seen as a part of in
-
app purchases all in
-
app
purchases are not microtransactions.
In
-
app purchases are always made
within

the app
, in this case within the game. M
icr
for the purchases made, so does in
-
app purchases.
This can be
done by

entering
a
Apple ID and

its

password, then the app charge
the

credit card which is con-
nected to the players Apple ID

(
Baker, Dane, McCann &

Dyson, 2011)
.

When
browsing games in the App Store, all games which contain in
-
app purchases or

17

microtransactions have a warning on their App St
ore page. In
-
app purchases can
also be turned
off

in any i
-
device’s settings
(
Baker, Dane, McCann &

Dyson, 2011)
.

Fields (2014) gives a few examples of common in
-
app purchases. For exam-
ple, the user has limited energy, which refreshes as time goes by, but i
f the user
wants to speed this process up he can buy instant refill as an in
-
app purchase. A
certain resource only drops or spawns once a day, which effectively gates the
user’s

progress, the user can though buy this resource with in
-
app purchases.
Some rep
-
app purchases. Some rewards
which take a long time to unlock can be unlocked instantly with in
-
app purchases.
So called grinding, which means repeating the same task over and over again to
reach a certain goal, can be

speed up by buying boosters as an in
-
app purchase.

Alha, Koskinen, Paavilainen, Hamari and Kinnunen (2014) claim in their
paper Free
-
to
-
Play Games: Professionals’ Perspectives
, that some games which
feature in
-
app purchases offer both a soft currency and
a hard currency. Hard
currency is bought via real money transactions while soft currency can be earned
in
-
game. Hard currency can also be exchanged for soft currency while this is not
possible the other way around. Soft currency can be used to buy basic it
ems re-
lated to gameplay while hard currency is used for premium content often exclu-
sive to paying players only.
According to
Kyung and Min (2015
)

approximately

35% of mobile apps in the App Store are free apps, and around 80% of these free
apps include in
-
a
pp purchase option.



4.4

Paid games

the App Store (Pierce, 2012.)
According to Baker, Dane, McCann and Dyson (2011)
paid games can be divided in to two categories: premium and
non
-
p
remium
.

What defines them are the price for which they are sold. Premium games are
priced over a certain threshold while non
-
premium games are priced under that
same price. This price threshold changes over time and depends on many varia-
bles, such as numbe
r of downloads or particular niche (Baker, Dane, McCann &
Dyson, 2011)
.

Paid apps do not rely on advertisements, are more polished and
unique than free apps

(does not necessary apply to freemium and games with in
-
nd longer lasting support
(Baker,
Dane, McCann & Dyson, 2011)


Baker, Dane, McCann and Dyson

(
2011
) claims in their book that paid apps
have higher expectations from their users than free apps. They say that the users
expect
an

app which has been polished
and is almost perfect in terms of quality.
Free apps do not have the same expectations.


18


4.5

Paywalls and subscriptions

Paywalls and subscriptions are similar to freemium, except that it does not limit
features but content (Munir, 2014). According to Dane, McC
ann and Dyson (2011)
different reasons the user have to pay for the subscription or removing the pay-
for continuous support, for technical help, for getting questions answered,

for
streaming services, for access to specific groups, for sharing, for communication,

According to Fields (2014) sub-
scriptions are more common with massive multiplayer online roleplaying games,
which ha
ve significant back
-
end server components, mobile games with sub-
scription plans are therefore rare.

4.6

Other methods

free apps and lite apps (Baker, Dane, McCann & Dyson, 2011).


Down
loadable content (DLC) are featured widely in games. Examples of
various DLC packs are: extra levels, new content and new game modes (Baker,
Dane, McCann & Dyson, 2011.

DLC are very similar to in
-
app purchases, but
while in
-
app purchases are done in
-
game a
nd added straight to the game itself,
DLC content can be standalone downloads, which may not be built in to the game
(Baker, Dane, McCann & Dyson, 2011
)
.

Fields (2014) describes DLC as content
which can be bought and is not a part of the gore game “package
”.


Purely free apps

are as they sound, free apps with no strings attached
. These
games may though include attempts to cross
-
sell other items to the player. If the
free apps contains for example microtransactions or DLC
: s
, that app is called
Freemium (Bake
r, Dane, McCann & Dyson, 2011).



Lite apps
refer to apps that are restricted versions of a full app (Baker, Dane,
McCann & Dyson, 2011).

These restrictions may be for example gated features.
Traditionally the full game is downloaded from the app store, bu
t recently the
lite apps have had a chance to upgrade to the full version via
an

in
-
app purchase.
An example of this new way of upgrading to full version would be Mahjong
Towers Touch
xix

(Baker, Dane, McCann & Dyson, 2011).






19

5

DEVELOPMENT RECOMMEN
DATIONS

W
h
at is taken in
to consideration while
m
cussed i
n this chapter.

This chapter is divided into three

sections:
All games,

free
and paid games, as the starting point
for a free and a paid game is different

(Baker,
Dane, McCa
nn & Dyson, 2011).

In this thesis free games include those games
which uses
in
-
app advertisement, freemium,
in
-
app purchases,
paywalls
/sub-
scriptions

and lite apps, purely free app and downloadable content models as
e other hand include premium and
non
-
premium apps.


5.1

Recommendations for mobile games

While without

risk there is no reward, it is important for every app is to minimize
the risk.
Baker, Dane, McCann and Dyson (2011
)

offers there points which should
be ta
ken into consideration with every app.



Create a polished app
: As this may seem as a no
-
brainer
but
it is not
always followed, usually because of lack of resources, knowledge or
time.



forehand.
aim to have a as big exposure as possible in the smallest amount of
time during the launch. This way the marketing campaign will have
the biggest possible impact.



Have a plan B
:
Consider many differe
the game have advertisements and it does not work out, be ready to
try a second option.



Continuously build

app awareness
:

Even after the launch of
the

game,
developers have to
keep on promoting it on Facebook, Twit
ter,
compa
ny
webpage, different review channels.

5.2

Recommendations for free to play games

When creating free games
many things have to be considered
. Firstly
how to

cre-
ate reve
nue, how
other games

made by the developer can

promote
the new
game
and what other elements
turn
a

game into a

revenue
-
generating device
(Baker,
Dane, McCann & Dyson, 2011)
.


The following things can be done to
engage customers
: adding buttons in
-
game to more games from
the same developer
in
-
game achievements, im
plementing game center
xx

and add
developer’s

web-
site name to
the games

splash
pag
e
. The icon for the

game is also important. A
few things to consider while planning
the

icon are: it has to be relevant
to the
20


game
,
it

has to be readable, It has to be highly p
olished even if
the

game is not
and if a premium version of
the

game
exists,
the icons have to be different on
both the free

and paid version of
the

game
.

It has also been
speculated

that app
ratings
affect the games popularity, not only the amount of down
loads. Therefore
it is suggested
to ask

the

users to rate
the

game (Baker, Dane, McCann & Dyson,
2011).


When
advertisements

are considered to be implemented into the game,

it
is important to consider things such as ad placement, when and where the game
i
(2009) suggested in his article, advertising can have a negative impact on the cus-
tomer.
Despite this Baker, Dane, McCann and Dyson (2011) claims in their book
that 2010 mashable.co
m released an article claiming that ad spending was $87
million and was expected to reach nearly $900 million in 2015. In the same article
Rovio entertainment estimated that that they made $1 million a month in 2011 on
the Android platform alone via in
-
gam
e advertisement.
Therefore it is im
portant
to

consider

ad placement, as it can be crucial for
the
gam
e
. Not only to maintain
the usability but to also find the best engagement and most frequent hit spots
without causing an interruption to the experience (B
aker, Dane, McCann & Dy-
son, 2011).
In the same book
Baker, Dane, McCann and Dyson (2011
, p 165
)

dis-
cussed that in July 2011, mobclix.com released research statistics on app usage
and advertising patterns.




The most time spent on apps for iOS and Android us
ers

occurs in the
late afternoon (4 p.m. to 6p.m.) and evening (9 p.m. to 11 p.m.).



The morning (8 a.m. to 11 a.m.) is the time most users are most en-
gaged with ads.



App usage is highest on the weekends, at 38 percent of overall time
spent.



Of the top 100
free apps, 82 used iAd
xxi

(Yes, it is possible to use more

fill rate)



Of the top 100 free apps, 56 used analytics tools to help with cam-
paigns.



An amazing 67 of the top 100 free apps used a mediation s
olution
provider such as Mobclix
xxii
, AdMarvel, AdMeld
xxiii
, and Neaxge
xxiv

ads.)

Baker, Dane, McCann and Dyson (2011) also came up with a few things to con-
sider while implementing ads to
a

game:



Ad
mediation tools should be used so that ad fill rates and priorities re-
main high



High engagement is needed for the game. I
to generate revenue
.


21



It is recommended to use analytics tools to examine and
if necessary to
reorganize
ad campaigns, to maximize the profits.



If possible many
mediation solutions

should be used. So that should no ad
be served, another network most likely will.



the

ads to the medium. In other words, try to make
u
the players
.


According to
Baker, Dane, McCann and Dyson (2011)
freemium

apps are
one of the most profitable business models on the Apple App store. According to
them when the co
mpany Flurry reported
in January 2011,
that of the top 100
games, 39% of the revenue came from freemium games and 61% of premium
games. In six months the shares had shifted and now freemium games generated
65% of all the revenue.

As discussed in chapter 4,

the freemium model offers
for it (Baker, Dane, McCann & Dyson, 2011). Baker, Dane, McCann and Dyson
(2011) compiled a list which described what kind of features and commoditi
es
were sold in freemium apps by the top 100 apps on the App Store. According to
them Freemium apps with
downloadable content (
DLC
)

offered for example,
new l
evels, modes, characters, theme
packs, texture packs, sound packs, voice
packs, animation packs an
d editing tools. They also gave examples of microtrans-
actions: virtual currency (which were the most common example), removing ads,
buying a full version, in
di
vidual/packs of features, virtual goods (charac
t
ers,
clothing, in
-
game tools, weapons, items and
so on), themes, customization op-
tions, game aids (such as the Mighty Eagle in

Angry Birds

player to

skip levels), power
-
ups

(he
a
lth, boosts, and so on), achievements, new

developers and

store sav-
ings (in other words discounts on actual or virtual goods).

By virtual currency
Baker, Dane, McCann and Dyson (2011) refer to

a own currency system in
-
game.
Real money can be exchanged

into virtual currency
, which is
use
d

to do pur-
chase
s

in
-
game.

Baker, Dane, McCann and Dyson (2011)
present

a strategy they
call Long Tail Strategy.

“In a Long Tail Strategy, more is earned

from
m
a
ny unique goods as a whole than a few
popular goods”


The Long Tail
Strategy is featured in Figure 5
.

22



Figure

5
.
Long Tail Strategy
(Baker, Dane, McCann & Dyson, 2011)


In other words

by having a broad selection of different virtual goods the potential
sales are higher than just by concentrating on a few and popular goods.

As the
more popular goods
have high sales but the less popular goods

may bring in total
even more revenue.


As already discusse
d

din the introduction, according to the documentary
show Kuningaskuluttaja( 1.10.2015)

only 3% of the users of a app, spend money
on in
-
app purchases, the
refore a wide user base is required.
According to Leh-
donvirta (2009)
so called pay
-
to
-
win purchases are not welcomed by players.
Therefore, it is important to consider what users are ready to pay for. Leh-
donvirta (2009) claims that goods that improve and e
nhance the game experience


5.3

Recommendations for paid games

Baker, Dane, McCann and Dyson (2011) divided paid apps into 2 categories, pre-
mium and non
-
premium, were the price was the defining
thing. They also wrote
a list of things to consider when creating premium of non
-
premium paid apps.
For non
-
premium

they argues these things
are important to consider
:



Higher

:

Usually when developing a high
-
ers tend to make it pa
id. But it is recommended to considering freemium
-
grossing games
are nowadays free with in
-
app purchases.



Aspiration

to generate immediate revenue
:

Immediate revenue can
lly when dealing with investors. This is
only possible with paid apps.


23



Supporting

it with a lite version
:

Especially if the lite version of
the

game
contains in
-
g
ame advertisement. Removing these

ads can be a potential
way to get users
to
buy the full vers
ion.



One

or more unique features
:

Having unique features which other games
do not have, can partially justify the cost of a paid app.



Little

the chosen

niche
: Having

an idea that has not
been done
before
, a new hybrid game genre, or pe
rhaps there are only a
the game with
a lite version
.



Identify

one or more in
-
app purchase possibilities
:

In
-
app purchases are
one of the best ways to long term revenue in today’s App Store.



Other ga
mes

that can feed visibility of
the game
:

When
the developers

already have some released games, it is easier to justify a paid one. These
earlier games can be used to cross
-
promote
the

new game.



P
otential to lower price when sales slow
:

As prices slow down
, one way
to counter this is to lower the price of the game.



S
tand out from free apps as being more valuable
:

Paid apps can be per-
ceived by users as more valuable than the increasing amount of free apps
on the App Store.



There is less risk for a free app
:

If
it is not a certainty that he game has

unique features,
is
a polished product,
and
have
enough

visibility
. It
the

games.



More complexity
:

Especially for first timers, paid app wi
th a lite app, can
be more complex and cost more for than going straight away with a free
app.



$0.99 apps along with lite or free version can do well
:

For
immediate rev-
enue and perception as a high
-
quality product.

A game with the price tag
of

$0,99 along
users

engage
d with the game, which may

justify the $0,99 price tag.

They also did the following list for premium apps:



Having

:

The number one reason for
suc-
ceed
ing wi
th a premium
-
priced app.

This often requires a

p
opular license,
unique features

or other similar niches.



S
upporting

apps on a different platform
:

Developers who

already

have
a popular game/games

on a different platform
. Can make the new game
work seamlessl
y with the ones on a different platform,
which
may justify
the price tag.



Delivering

exceptional value
:

The game should deliver

exceptional value
to the users.
Baker, Dane, McCann and Dyson (2011) gives Smurfs’ Vil-
lage
xxv

as an example.
In that game
virtual
currency

can be bought

as in
-
app purchase
s
.

The biggest in
-
app purchase is worth $99,99.

Y
et many us-
ers decide choose to pay for it.

24




Future price drops can stimulate sales
:

As a last effort tactic, the develop-
ers can lower the price of their premium app.



i
Pad has great potential for premium apps
:

are huge opportunities i
n releasing premium apps for iPa
d.

To accompany these two lists by
Baker, Dane, McCann and

Dyson (2011) they
also reminded that both non
-
premium and premium apps have their downsides.
Non
-
premium apps will have less downloads than free games, which are usually
countered by also offering a lite or freemium version of the same app.
The imme-
diate
nature of non
-
premium apps revenues may cause spiky revenue, as reve-
nue is only generated when a new users purchases the game. Non
-
premium
non
-
premium apps are priced $0,99 or u
nder are considered to belong to the im-
pulse
-
buy territory, therefore it is risky to price the game over that point.


According to them premium apps require original content and features

which
cannot

be easily copied. This requires huge investments in the

features.
Premium games may also be created around trademarks and patents. That said,
premium apps are expensive to develop. Which at the same time is their biggest
risk.


Baker, Dane, McCann and Dyson (2011) claim
that to succeed with a paid
app, the fol
lowing things are
need
ed:

unique features, increased support and
post
-
apps in the same niche, they do not include in
-
game advertisements, lasting
value, not being to expensive and knowi
ng when to drop the price and having a
plan for long
-
term revenue from the app.



25

6

RECOMMENDATIONS FOR
T GAME TYPES

As already earlier discussed in this thesis there are different kinds of mobile
games.
Salo and Karjaluoto

(
2007) divided mobile game
s

roughly into two cate-
gories: single
-

and multiplayer and Koivisto (2007) used the term snack games
to describe small games which could be played for only a small amount of
when needed.

Earlier the quality requirement for games wi
-
pre-
mium are required (by the customers) to have a higher quality than for example
free to play games with in
-
game advertisement
(Baker, Dane, McCann & Dy-
son, 2011)
. Wh
ile the requirements for freemium games with in
-
app purchases
in
-
2015 as the trend has been going t
year (Kuusisto, 2014). Free to play games are being more popular every year
and it would be logical for them to also have to have bigger quality require-

that influences the
earlier in this thesis.



In chapter 5, things to consider while developing paid
games were dis-
cussed. It was made clear that premium

or non
-
premium

games are expected to
be of a very high quality and content wise they has to have no or very little com-
It was also discussed what was needed to suc-
ceed

with a paid games, this was done by:
unique features, increased support
and post
-
apps in the same niche, they do not include in
-
game advertisements, lasting
value, not being too expens
ive and knowing when to drop the price and having
a plan for long
-
term revenue from the app. As long as these criteria’s are filled
n
-
premium game de-
pends on the content and the overall quality, as discussed in the earlier chapters.

Non
-
premium games should also be accompanied with a lite version of the same
game, to lure in additional customers, who are not ready to spend money on a
g
ame without testing it out first.


In
-
game advertisement was also discussed in the earlier chapters. Accord-
ing to the literature, games with in
-
game advertisements does not have the same
quality requirements than other mobile games have.

Therefore they do

not have
to be very advanced content wise, particularly long and the overall quality does
not have to be that high. That is why
in
-
game advertisement
are the right mone-
tization strategy for
slack game
s and other simple games. It can also be argued
based o
n the low quality requirements that in
-
game advertisement may be the
right choice for new developer who are monetizing their first game.

26



-
app purchase, DLC, paywalls
and subscriptions are a little bit harder. As th
e amount of free to play games are
steadily rising (as shown in chapter 4, figure 4.), it is safe to assume that the qual-
ity requirements by the customers are also rising. Free to play games also include
lite version which are commonly used as a complement

to non
-
premium games,
some games are also using in
-
game advertising. In
-
game advertisement can also
the major model. AdVenture Capitalist
xxvi

is a mobile game which implements
both mic
rotransactions and

in
-
game advertisement.

This game is still considered
freemium. Therefore, based on the literature the freemium, in
-
app purchases,
DLC, paywalls and subscriptions are recommended to be used when the game
does not fulfill all the criteria’
s for a premium/non
-
of high quality and have lot of content/potential for content.

Many popular
games use a strategy where they implement in
-
app purchases in all its forms and
optional video ads. Games by Rovio, Seriously, Boomla
goon
xxvii

and Supercell
are examples of such games.






27

7

SUMMARY

In this Bachelor’s thesis
Apples Mobile App Store was introduced, mobile games
were defined and
the App Store

were discussed. Later on i
n the thesis things that are good to take
in

to consideration

in mind
,

were addressed.
specific types of games were discussed.


Unger and Novak

(2012) defined Mobile Games as games that are played
on mobile phones, palm computers and media devices such as iPod Touch and
iPad. Apple App Store was defined as the mobile app store for the iOS mobile
operating system developed by Apple.
While “
An onli
that allows developers to sell and distribute their products to actors within one
or more multi
-
sided software ecosystems.
” was the definition
Jansen and Bloe-
mendal (2013)
used to describe what a
n

app store is.

In
-
app advertisement,
free-
mium,
in
-
app purchases, paid apps,
paywalls
/subscriptions

and lite apps,
purely free app and downloadable content


(Baker, Dane, McCann & Tyson, 2011)

in this thesis.
In the
next
chapter games were divided
in free and paid games, and things to consider
while
m

in mind

was discussed.

of a game.

As a conclusion it is possible to s
AAA games can easily charge a higher price, while new
lesser known games do
need a lite or free version of the game with a possibility to buy the full version
for a small price. Freemium games with in
-
more popular. Most of the highest
-
grossing games on app store are free
mium
games, which use in
-
app purchases to generate revenue to the developers. It is
also important to remember that in
-
app purchases have to enhance the gameplay
in some way, not function as so called pay
-
to
-
players. Also
, only 3% of the users use in
-
app purchases. In
-
game advertisement
require the initial purchase. Ad driven games can also have a negative impact
because of the ads which may dri
ve the users away from the game. T
vertisement may not be a similar turn of though
.

It is also important to notice that
paid apps tend to have less downloads than free apps and that the threshold to
try a free game is lower than with a paid app. T
his is usually countered by offer-
ing a free or lite version of the paid app in question.

Paid games do also need to
be more polished and unique than free game. The pricier the game the more
unique in every way it has to be. Free games or games with in
-
game

advertise-
not have as high expectations from the users as freemium and paid apps have.

It
28


is also worthy to point out that paid apps priced in the premium category are
expensi
ve to develop because of different variables that drive the development
costs up.


erational opportunit
apps bring immediate revenue for a limited time while free to play usually re-
quires a lot of customers as the revenue gen
erated to the developer is much
smaller than with paid games, still one free to play customer can generate infinite
times of revenue for the developer.



29

8

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i

https://play.google.com/store

ii

https://www.microsoft.com/en
-
us/store/apps/windows
-
phone

iii

http://supercell.com/en/games/clashofclans/

iv

http://supercell.com/en/

v

http://sup
ercell.com/en/games/hayday/

vi

http://supercell.com/en/games/boombeach/

vii

http://bestfiends.com/

viii

http://www.seriously.com/

ix

https://play.google.com/store/apps/developer?id=Featured+App

x

http://www.rovio.com/

xi

https://www.angrybirds.com/

xii

http://candyc
rushsaga.com/

xiii

https://king.com/fi/

xiv


xv

http://www.square
-
enix.com/

xvi

https://www.google.com/intl/fi_fi/about/company/

xvii

https://www.google.com/admob/

xviii

https://support.google.com/admob/answer/3269069?hl=en

xix

https://itunes.app
le.com/us/app/mahjong
-
towers
-
touch
-
hd/id414338750?mt=8

xx

https://developer.apple.com/game
-
center/

xxi

http://advertising.apple.com/

xxii

http://axonix.com/

xxiii

https://www.doubleclickbygoogle.com/

xxiv

http://www.nexage.com/

xxv

https://itunes.apple.com/us/app/smurfs
-
village/id399648212?mt=8

xxvi

http://www.kongregate.com/games/hyperhippogames/adventure
-
capitalist

xxvii

http://www.boomlagoon.com/





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