content that drives players to spend money as they enjoy games more and more. He compared the freemium game model to letting patrons into a night club without a cover charge for a taste of the music and vibe at the venue. “You want to take it to the next level and have more fun; you’ve got to buy a drink,” Huang said. “You want to have even more fun; you’ve got to buy other people drinks.”
That is a change from the early days of mobile games when rigid paywalls were common and many popular titles were derived from console games. “The charts were dominated by premium $2.99 to $9.99 games,” Huang said. Business models changed as more game makers got in the market, driving a race to the bottom in terms of pricing. “Suddenly, small scrappy developers that came from the console world made games almost equal to what EA was putting out there, but gave it away for free,” Huang said.
Now consumers are more accustomed to paying incremental fees for mobile games, Huang said.
Adopting a freemium business model paid off for SkyVu Entertainment in Omaha, NE, according to CEO Ben Vu. Vu spoke alongside Huang, detailing how his mobile game company, the maker of “Battle Bears,” increased its revenue 500 percent in 2012, as compared with 2011, thanks to the change. “The moment we switched over to the freemium model we realized we were getting the same brand loyalty, just with more people,” he said. “Then we saw revenue benefits from it.”
Fellow panelist Nick Bogovich, executive director of mobile for GSN Digital in Waltham, MA, said the freemium model lets game makers attract many more potential players. “If you put up that paywall, you’re impacting that top of the [user acquisition] funnel,” he said. “The goal is to get as many people using the core loop of your game.”
A core loop is a repetitive cycle of activity at the heart of many games. This can include buying, developing, and selling virtual resources and then starting over again.
The Santa Monica, CA-based media company GSN (the Game Show Network) broadcasts televised game shows and publishes digital games for the Web and mobile. Bogovich, who works in the company’s interactive division GSN Digital, said casino and strategy games make money by encouraging players to buy in-game goods. “All of them tie back to some sort of virtual currency or resource that you cultivate,” he said.
Dave Bisceglia, CEO of The Tap Lab in Cambridge, MA, said it is getting easier to entice mobile users to pay as they play games, thanks to many consumers storing their credit card information on secure mobile commerce platforms. The Tap Lab is a developer of social mobile games.
Meanwhile, Nathan Camarillo, studio leader with DeNA New York, said it is important to have a monetization model in place as mobile games are being designed. “You don’t try to make a game, then try to figure out how to make it free-to-play,” he said. Camarillo suggested looking at how people spend money in the real world to form ideas for generating revenue within games. DeNA New York is a division of Tokyo-based DeNA Co., a developer of mobile and e-commerce platforms.
The mobile games industry will continue to grow as long as developers and publishers keep finding clever ways to make money. Not every mobile game, though, pairs well with such strategies as buying virtual items. Zynga’s Huang said titles such as “Draw Something” and “Words with Friends” tend to attract large numbers of daily players, which means using less obtrusive revenue streams to keep from irritating the audience. “You’re going to mainly monetize off of ads and other things,” he said. “Those games need to go viral or they won’t be successful.”
