This year’s Super Bowl commercials included 3 freemium mobile games, with Evony, Mobile Strike and World of Tanks competing for attention. Many people wonder how mobile games could possibly advertise alongside ‘real’ businesses like McDonald’s and Pepsi. Are these mobile games generating sustainable revenues or are they just burning their investors’ cash?
@thekenyeung burn VC $ burn.
— Adam Singer (@AdamSinger) 5 February 2017
Freemium mobile games rely on user acquisition to drive growth. In the past, games used online, in-app and search ad campaigns to acquire new users. But, as acquisition costs have skyrocketed over the past few years, large app developers are tapping into more traditional marketing channels like billboards, buses and TV.
The NY Times reports that a 30 second Super Bowl ad slot cost $5 million this year. That seems high at first glance, but the ads reach some 110 million people. In fact, the cost per viewer of a Super Bowl ad is often less than in other primetime slots.
As I remarked 2 weeks ago, the biggest mobile game developers already spend large sums of money on TV ad campaigns. The decision to advertise at the Super Bowl seems like a reckless waste of cash at first, but it could actually be (and probably is) a very sensible and profitable decision.
Mobile Games Generate Large Revenues
Data from Think Gaming says a top grossing mobile game can expect to make over $2 million per day in revenue. The top 50 games together generate over $10 million in the United States alone.
So dropping $5 million on a Super Bowl ad might represent 2-7 days revenue for a popular mobile game. That does not seem so extreme even if the success of the campaign is totally unknown.
But mobile games are not just an art. They are also a science. Game developers at this scale really know how to monetize their audience, making games that retain players and get them spending over a long period of time.
This ability to monetize users is a precursor to running expensive marketing campaigns. If the lifetime value of a player is greater than the acquisition cost, it makes sense to run a campaign.
But it is not just about new user acquisition. A Super Bowl ad is a broadly targeted campaign, which helps to reactivate players that have previously abandoned the game. It could also help boost engagement amongst existing players and help convert free players into paying players.
TV Ads to Become More Common
Large mobile game developers have been using TV advertising for the past 3 years or so. It is now very common in the UK (and presumably the US) to see mobile games advertised at primetime. This year’s Super Bowl saw ads for 3 mobile games, up from just one in 2016.
With the increasingly aggressive campaigns run by mobile game developers, acquisition costs have also risen. The average cost is now over $4 and is increasing rapidly.
As costs continue to rise, I expect more game developers to explore alternative marketing channels like TV and outdoor advertising.