In-game ads: the optimal monetization model?
The Gaming industry has been one of the fastest-growing sectors of the worldwide economy for the past few years, and with predictions of revenues reaching more than $300 billion by 2026, it’s here to stay.
Game monetization is a whole world on its own, and there are various models to choose from. We will cover the basics, but our focus will be on monetization through offerwalls.
Most common monetization models in the gaming industry
Premium monetization is a way of selling games where the player pays for the whole game up front. This can be in physical or digital form, and the publisher receives a fixed payment from every player. However, this method can create a high barrier to entry for some players and does not allow players to invest more in the game.
Some games offer options for players to get more from the game and for the publisher to earn additional revenue. Downloadable content or DLC represents additional content that can be purchased after acquiring the base game, and are often cheaper than the base game but offer less content. They are typically offered at a price that reflects the amount of new content provided.
Microtransactions are small in-game purchases that unlock content or features and can often be made multiple times. They are common in free-to-play games and can also be found in some premium titles, and they can be cosmetic or affect gameplay.
Microtransactions can be controversial when they give paying players an advantage in multiplayer games through features that aren't just cosmetic. A safer approach is to offer players the option to pay to make certain things easier to achieve, allowing non-paying players to still achieve the same results with more effort and time. This can help make the game feel fair for everyone.
In this method of monetization, players must pay a subscription in order to play the game or access certain features. The subscription is typically purchased in blocks of one or more months, and the content is only available as long as the player continues to pay. This can provide a stable stream of income for developers. World of Warcraft is the most successful subscription-based game, but subscriptions are becoming less common in favor of battle or season passes.
Early access allows players to purchase a game while it is still in development by paying upfront, similar to the premium model. This allows developers to receive additional income and helpful feedback from players during the development process. In successful early access models, developers typically set a lower price that reflects the current state of the game and increase the price as the game becomes more complete.
Play-to-earn games are a new type of game that uses blockchain technology and NFTs to create an in-game economy with assets that players can sell for real money. Players can improve the stats of these assets by playing the game and then sell them or hold onto them for a higher price.
Developers profit from these transactions and some play-to-earn games use well-known cryptocurrencies, while others use their own proprietary currencies.
Ads are commonly used to monetize free-to-play mobile games. These ads can take various forms, such as banner ads, loading screen ads, or pop-ups, and are used to monetize players' attention.
Rewarded ads, which offer in-game currency in exchange for watching a video ad, are the most effective and lucrative type of ad. In fact, more than 80% of players prefer free-to-play games with ads over paid games.
In-game advertising through offerwalls
Offerwalls are a type of in-app ad that can help developers monetize non-paying players. If your game relies on in-app purchase (IAP) revenue, you’re missing out on monetizing 95% of your user base.
Some developers are worried that in-app ads will cannibalize IAPs, but offerwall users are 10 to 14 times more likely to make in-app purchases. One of the reasons is that they have the option to earn a glimpse of the premium experience through your offerwall. Offerwalls also have high eCPMs (cost per thousand impressions) because advertisers are willing to pay more for them, as they bring in engaged, high-quality users.
Over 80% of players are thankful to have opt-in ads as a method of additional interaction with your game, one that helps them advance by investing time instead of real currency. Important to note is that the ads must be customized to fit the game's user experience. Offerwalls also improve player retention, as they are most effective with players who are already very engaged with the game and want hard currency badly.
Retention rates among offerwall users are 5 to 7 times higher than among those who do not engage with them.
The chart below shows the share of gaming app revenues split into IAPs and in-game ads (source: Statista, 2021).
How well do offerwalls perform?
Offerwalls have significantly higher eCPMs compared to other ad formats and they are extremely popular with mid to hardcore gamers. According to ironSource, mid-core games have an average eCPM of $980 and an average ARPDAU of 8.5 cents. RPG games have an eCPM of $1,670 and an ARPDAU of 14.5 cents.
A Kongregate article found a significant boost in in-app purchase rates of non-payers that engaged with offerwalls. Comparing in-app purchase payers who engage with offerwalls to those who don’t, payers who engaged had a 26% higher average revenue per paying user (ARPPU). These payers also make 19% more purchases than payers who do not engage with offerwalls. The data suggests that engaging with offerwalls has a positive impact on the game and has a positive correlation with higher ARPPU and more purchases.
Non-payers who make their first transaction through an offerwall are 4.5 times more likely to make a purchase compared to non-payers who do not engage with the offerwall. This happens because they get a "taste" of the value of virtual goods through the offerwall reward and then come back later to make a purchase on their own.
So which model is the right one for you?
The most effective way to monetize a game depends on the expectations of the players who will be playing it. If players have already paid an upfront fee for the game, it is best to use a subtle monetization approach so that they do not feel scammed or pressured.
On the other hand, for free-to-play games, it is more acceptable to use a more aggressive approach with in-game purchases, such as microtransactions or loot boxes, as long as it is within limits.
It is important that players can achieve similar results whether they pay or not, as this allows them to continue enjoying the game without feeling frustrated by paywalls. It is also essential to consider the long-term effects of a monetization model, as player expectations and industry standards may change over time.
It is best to define the monetization strategy early in the game's development process and to continuously reassess it to ensure that it is a positive and integral part of the player experience.
So what about offerwalls, are they a necessary evil or an optimal monetization model?
Offerwalls are not what they used to be, and they are extremely versatile. Whether you’re trying to finance your new project or you just want extra revenue, offerwalls are a great alternative to aggressive and intrusive advertising.
Still not sure about this? Send us your concerns and let’s have a chat!