5 Tips For Good IAP Monetization
When it comes to revenue, the global video game industry is measured in billions of dollars. For 2021, the estimated worth is over 170 bn dollars. Just for comparison, that’s more than the film and video streaming industry combined.
So, you want a piece of that 170 bn dollar pie and have common questions—how to approach monetization in games? Who creates and runs live offers and sales? How to drive spending in your game?
After 2 years in gaming, these are my key learnings that have helped me design better monetization mechanics.
1. Monetization features must be an integral part of game design process
One of the first questions I ask my colleagues from other studios is—who is in charge of designing monetization mechanics in their companies?
There is no single answer to that question. Some studios have a dedicated monetization specialist. Others have game designers that are in charge of monetization.
Whichever model you choose, one thing is crucial—design of the monetization mechanics must be well thought out from the very beginning of the game design process.
Designing a game or a feature and adding an in-game-shop in the end is not enough. If your monetization relies on collectables, and you realize during the soft launch that you need considerable resources to create just one collectable, you are in trouble. Hitting 50% D1 retention won’t mean much.
Whether it is a new game or just a new feature, the team should, from the beginning, discuss how the new feature fits into the current portfolio of features, what the goal of the feature is, and how it affects monetization. For example, the common belief our team shared is that a 20% increase in average session length will automatically translate to a 20% increase in revenue (the longer the players play the more likely they are to spend money in the game, right?). Thus, we thought that an increase in revenue would come by itself. However, this is not always the case. Sometimes new features can steal players’ attention from the parts of the game which they usually spend the most money on. Playing more is good, but it also matters how the players spend time in the game. Whoever is optimizing the IAP revenue needs to be involved in the game design process from the start.
2. Designing monetization features should be done with the entire user journey in mind
People have started spending significant amounts of money on games. While most people find this irrational, monetization specialists in studios are trying to offer high-value experience to players.
Depending on the genre, highest value players can spend from 100 dollars to 100,000 dollars. These people have been considered by many as crazy.
But the key question is what they buy. Do they buy coins, gems, boosters, skins? No. They always buy only one thing: entertainment.
People pay to have fun, which in-game items help them do. So, is someone who spent $100 on cinema tickets in one month crazy? How about someone who went to Disneyland and spent $200 dollars for six hours of fun? When you stop thinking about $200 dollars (which you could have spent on shoes) as something you spent on virtual currency and start viewing that money as the price for being entertained on demand over the next six months in those small moments when you need it (commuting, waiting in line, flying…), then this does not seem so irrational anymore.
This is important to have in mind when designing monetization mechanics. You should view a game as a journey that lasts for months (and preferably years). It is not enough to create a couple of points in the game where users spend money or to create a collection with only three items to complete it. You want to design a game in such a way that, if someone wants to spend $1000 dollars, they can do it. Even though people who spend significant amounts of money in mobile games may seem irrational, they actually optimize their time spent in the game very well. In order to achieve high LTV of payers, monetization specialists must understand how payers optimize their progression.
3. Creating demand for in-game currency is the key to a successful monetization model
When one says monetization, the first thing that comes to mind is in-game shops, offers etc. Even though designing shops and offers is an important part of monetization mechanics, it belongs to the supply side of the trade.
The primary driving force behind in-app purchases is the demand for the in-game currency.
People buy food not because it looks good on the shelf, but because they are hungry. Okay, they might buy extra stuff they do not need at that exact moment (this is where typical marketing tricks come in handy—bundle packs, sales, etc.), but the key to healthy IAP monetization is creating the need for the in-game currency. If you are selling skins in your game, make sure the player’s friends can see it. If your game is competitive, the pack should give a player an advantage. When you succeed in creating demand for the in-game currency, then you optimize with offerings.
4. First encounter with purchasable items is very important
Players develop paying habits from the first moments in the game, so we make sure that the value we offer for purchasing is not too volatile along the journey.
Do not make a mistake by thinking “let’s just convert a player with a cheap pack, and then we will offer them more and more expensive packs”. Depending on the game economy, this can be counterproductive.
The players’ first encounter with purchasable items is very important—it anchors the value of items in their minds. If you sell 100 coins with 90% discount for $0.99 in a starter pack, you will have a low chance of selling 50 coins for $4.99 afterwards. Remember, a game should be observed as a long journey. Though it is true that early conversion is very desirable, continuous spending on higher price points is something that is making most of the money. When introducing and testing starter packs, it is not enough to focus on increasing conversion only—conversion value must be taken into account as this is something that affects how willing the players will be to reach higher price points.
5. Test, test, test
Constant tweaking and testing is a key to upgrading your monetization model. No one can tell for sure if something is going to work other than your players. Getting an idea and testing it sounds easy, right? Well, getting the ideas might be easy, but testing can be tricky. These are the guidelines that help us come to better conclusions. Firstly, we try not to be biased in forming hypotheses. Do not assume that “there is no way players would buy this because of…” You would be surprised how the best performing features can sometimes be counterintuitive. Secondly, when testing a concept, we try to be bold.
When you measure output based on changes in input, double or triple input in order to have a clear impact. If you suspect time gate at level 10 is killing retention without too much of an impact on monetization, do not reduce waiting time from 12h to 10h and hope to see the effect.
Cut it out of the game completely and see what happens. This will save you time and give clear results. Finally, we plan our tests thoroughly. Whether you are AB testing a feature, or just releasing the feature and monitoring its performance, it is important to know what you are doing. AB testing is in the domain of data science, and you cannot just run it on Firebase without understanding how it works. In case you do not have a data scientist, check out the presentation about common pitfalls of AB testing by our Lead Data Scientist.
So, you started monetizing from IAP, what now? Find out what works best for your game. Learning from others and from your own data is equally important. Internally—spot opportunities through data analysis, form hypotheses and test them. Externally—play other games, talk to other industry professionals and google. This is where you will get most of your ideas.
However, keep in mind that every game is unique. What works best for other games might not work for yours. Even though features might not be unique, player demographics, playing habits, purchasing habits and countries that you focus on present a combination that is probably unique.
The key to a successful IAP monetization model is a healthy economy that creates strong demand met by a well-developed offering system. And it goes without saying—players must have a lot of fun!
Strahinja Divljan Lead Business Analyst