Key Takeaways:
- Monetization is essential for AR and VR games.
- In-app advertising is not best for these games.
- In-app purchases drive continuous revenue and encourage players to invest in games, driving higher engagements.
- Subscription passes are good; however, developers should work with platform manufacturers to increase the subscription cost to generate more revenue.
According to GlobalData’s recent report, mobile gaming generated $124 billion in revenue in 2023 and is projected to increase to $195 billion by 2030. China is at the forefront of this market, contributing approximately 31% of the global revenue, making it the leading country in mobile gaming.
The world of game development combines creativity with the need for strategic monetization. Successful game development involves more than just creating engaging stories and gameplay; it also requires effective ways to sustain the game financially.
The gaming industry has drastically changed, with improvements in graphics, gameplay, and revenue generation. Previously, buying a physical game disc was the main way developers made money. Now, the industry uses a range of monetization strategies beyond the initial sale to support the continuous development process.
Understanding these revenue-generation methods is essential for experienced developers and those new to the field. In this article, I will explore various monetization strategies in game development, highlighting how developers can generate revenue while maintaining player engagement.
Monetization Strategy #1: In-Game Advertising
Credits: Unsplash
According to a report by Statista, in-game advertising spending is expected to hit $45 billion by 2025, demonstrating a compound annual growth rate (CAGR) of 11.7%. In-game advertising offers developers a significant advantage, enabling them to provide games for free while still generating revenue through in-game advertisements. Some strategies include banners, interstitials (full-screen ads that appear at natural transition points, like between levels), and rewarded ads, where players receive in-game benefits for watching ads.
The immersive nature of AR and VR games can make standard advertising disruptive, potentially detracting from the user experience and, thus, less acceptable to the audience.
Monetization Strategy #2: In-App Purchases (IAP)
79% of Games use In-app purchases. In-app purchases are a major source of revenue in the mobile app industry, accounting for 48.2% of earnings. This compares to 14% from ad-based revenue and 37.8% from paid app downloads. This data highlights the significance of in-app purchases as a primary monetization strategy for developers, indicating a strong user willingness to pay for enhancements or additional content within apps.
My take on this from my experiences; in-app purchases can offer a continuous revenue model. Offering in-app purchases can increase user engagement and retention. Players who invest in a game are more likely to continue playing and engaging with the content. This is vital in the competitive gaming market, where keeping players interested over time is crucial. In-app purchases give players the option to tailor their gaming experience with their spending capactities. Players can choose how much they want to invest in the game, which can make the game accessible to a broader audience.
Tip:
To encourage players to make in-app purchases, integrate psychological triggers into your game design. Use techniques like scarcity, offering limited-time items that create a sense of exclusivity; urgency, promoting items available only for a short period to prompt immediate action; and social proof, where you showcase purchases by other players to validate the desirability of the items.
Aligning game design with these triggers can make IAPs appear as a natural part of the gameplay experience, thereby increasing the likelihood of purchases.
Monetization Strategy #3: Subscription Models
Xbox Game Pass, PlayStation Plus, and Apple Arcade are examples of subscription services available to gamers. According to various reports and SEC filings, these subscriptions are attracting an increasing number of paying customers who might not otherwise engage due to the high cost of games. For instance, Microsoft reported having 33.3 million subscribers in 2023.
Although the revenue shares from these subscriptions may not match those from standalone in-app purchases, they do bring in more players who would otherwise be deterred by the costs of games.
However, as previously discussed, AR and VR games entail high development costs. To address this, developers and platforms could consider creating a specific, higher-tier pass for these games. Such a tier would cater exclusively to AR and VR gaming, helping developers recoup their investment in these games.
Monetization Stategy #4: Virtual Goods and Skins
Credits: Fortnite Chapter 2
Virtual goods and skins play important role in the monetization strategies of many popular games, providing substantial revenue streams for developers. Here are some examples on how developers are generating revneues:
Apex Legends(2019): Respawn Entertainment’s battle royale game quickly gained popularity partly due to its engaging cosmetic items. Players can purchase skins for characters and weapons, which are purely aesthetic and do not affect gameplay.
Genshin Impact(2020): This action RPG by miHoYo features a gacha system where players can spend real money to obtain random rewards, including character outfits and weapons. The game’s stunning visuals and frequent updates keep the player base engaged and spending.
Call of Duty: Warzone(2020): This free-to-play battle royale mode in the Call of Duty franchise monetizes through the sale of skins and cosmetic items via its “Battle Pass” system, as well as direct purchases from the in-game store.
Valorant(2020): Riot Games’ tactical first-person shooter offers a variety of skins for its weapons, each with unique visual and sound effects, enhancing the game’s appeal. The skins are available through direct purchase or by unlocking them in seasonal battle passes.
Fortnite Chapter 2 (Launched 2019): Continuing the success of its predecessor, Fortnite’s Chapter 2 brought in fresh skins, emotes, and other cosmetics that players can purchase to personalize their gameplay experience. Fortnite’s frequent collaborations with movies, music artists, and other pop culture elements have kept their monetization strategy vibrant and highly successful.
When discussing monetization strategies in gaming, it’s essential to focus on approaches that deliver predictable revenues while enhancing player engagement and satisfaction. Subscription services, like Xbox Game Pass and PlayStation Plus, have proven effective by providing consistent revenue through monthly or annual fees. These services also increase user retention by continuously offering new and exclusive content.
Looking to the future, we can see further innovation in gaming monetization. One area ripe for growth is dynamic in-game advertising, which can blend seamlessly with the gaming environment without disrupting the player experience. Another exciting prospect is integrating blockchain technology, which could introduce new forms of in-game economies where players can truly own, buy, sell, or trade their digital assets legally and securely.
As gaming technology evolves, so will how we think about and implement monetization strategies. Keeping a close eye on these developments will be crucial for staying ahead in the rapidly changing gaming industry.
