King’s decision to pull all its in-game advertising from mobile, web and tablet shouldn’t be seen as a judgement on the effectiveness of advertising, but rather as a decision to put the user experience ahead of advertising revenue. With the rise of freemium and paymium apps, we’ve seen rapid growth of in-app advertising both as a key discovery channel and way to drive installs. In addition to this, it signifies advertising as an earner in its own right for any publisher with a big installed base. At first glance then, King’s decision seems to run contrary to the trend of using more advertising, rather than less. After all, with the daily spend on install based advertising passing $80,000 in order to get to the top of Apple’s app store, many developers are prioritizing advertising spend above everything else.
The reality is that King understands very well that there’s a trade-off between in-app ads and retention rates. High retention rates are vital for getting to the top of the app stores if you’re not willing to spend your way to get there. Yes, by reducing advertising spend you may decrease the flow of new users and lower your ARPU, if the number of highly engaged, loyal players that spend more on IAP rises to more than the amount lost from the decrease, the net revenues will be higher.
For a game that is engaging and monetizing as well as Candy Crush Saga, there is an opportunity cost to showing advertising. Poorly integrated advertising can be very jarring and deliver a poor overall experience. This has certainly been an accusation leveled at many freemium games in the past, even those from chart-topping developers. For an app to be successful, retention is as important as acquisition. Retention drives the majority of IAP over time. So King may well have seen that there is a far bigger upside in terms of keeping users playing its games than there in generating revenues through advertising. In response, it has adjusted its strategy to fit this new model.
Perhaps one of the lessons here is that effective In-app advertising isn’t about cramming ads into every spare inch of a game; it’s about fitting into the UI in an unobtrusive way that doesn’t detract from the user experience or gameplay. Done well, advertising is a vital part of the business model behind the majority of apps. Some developers create a user experience which is actually optimised so that the display of adverts like interstitials is seamless within transitions and loading screens, while some will look to focus on in-app purchasing for revenue instead. There is no set method for turning a popular app into a cash-generating one: any developer that takes the advertising route needs to think carefully about how and where in-app ads appears in their games, in the same way they would think about in-app purchasing or the price strategy for a premium title.
Chris Hanage is Managing Director for Europe at mobile distribution and monetisation company PapayaMobile. Prior to joining PapayaMobile in September 2011, Chris spent two years as Business Development Director at branded mobile internet and operator portal site developer Momac.