We love to celebrate the stories of how today’s connected mobile devices have created micro-businesses in poor countries, spurred protests that overthrow dictators, and reconnected separated loved ones. But let’s face it: The biggest impact is that a billion-something of us are using these mini-supercomputers every day to play games. Now game makers have figured out something scary: Fewer ads drive greater profits.
Mobile games continue to become more addictive and entertaining, as nearly 1,000 new games enter app stores each day in a war for our attention. My most recent personal addiction is “Clash of Clans.” For you non-clashers, think of it as a very basic form of “World of Warcraft” in the “tower defense” genre. You start with a small village base and spend time building defense, reaping resources, and attacking strangers.
A New Way of Approaching Freemium
“Clash of Clans” is a freemium game. “Freemium” has traditionally been code for, “supported by annoying ads.” But as recently described in an excellent article in the Wall Street Journal, this and most of the other hottest games on the market are completely ad free.
You might assume that these game makers are just another flavor of VC-backed startup that is taking losses for now in hopes of pushing ads or stealing privacy down the road. Instead, they are printing money already, thanks to in-app purchases. Little things like the ability to skip a level, get a hint, or speed up a spell. SuperCell, which makes “Clash of Clans,” had revenue of $1.7 billion in 2014, up from $570 million a year before.
The secret of these games’ success is that they make the best possible game experience to lure in as many players as possible, then convert a tiny fraction of regular players to pay for extras. According to the Journal: “Less than 3% of all mobile game players make any in-app purchases, but they spend a rough average of $5 to $25/month.”
Cutting Advertising Improves Revenues
Now other game makers are getting in on the act. “Candy Crush,” another top-performing game, took a risk and cut advertising completely last year. According to Sebastian Knutsson, the brand’s chief creative officer: “If you interrupt with ads, [people] play less.” Since cutting ads in Q4 ’14, players spent an average of $23.42 per month on the company’s games, up 35% from $17.32 the previous year.
The winners are obviously the game makers and the people who pay to play them. The losers are the advertisers that have lost another opportunity to get their message in front of potential customers. After all, Americans are spending a staggering average of two hours per day playing games, up from 1 hour 20 minutes in 2012.
The Future is Not an Ad, Ad, Ad, Ad World
The bigger implication is that this could signal a shift in how entertainment properties approach the market in an increasingly ad-free format. With the exponential rise of content options vying for our limited free time, creators must do everything possible to maximize the audience’s enjoyment. Balancing the “ad load” with consumers’ patience, and dealing with upfronts, ad sales and programmatic technology is a distraction that will never improve the product—and probably worsen it.
Meanwhile, new ways to pay the bills are evolving. People are getting more used to tapping that “buy” button for payments on their phones. Paying Netflix subscribers devour 35% of U.S. bandwidth each evening with an ad-free experience that continues to add original programming. Musicians have figured out how to give their work away for free in order to build an audience. The bigger the audience, the more raving fans will pay for everything from concert tickets to ringtones to vinyl records.
Don’t Hate the Game, Help the Player
So what do you do if you’re an advertiser? Instead of finding new ways to inject interruption, start creating content that is entertaining and/or useful to your audience. In a world where it’s only getting harder to force an ad message on your audience, the only choice is to create advertising that adds value and marketing that people choose to engage with. Heck, they might even pay you for it.