Published on October, 11 2023
In 2023, the mobile gaming market stands as the most profitable side of the gaming industry. Its monetization methods range over numerous practices, be it in-app purchases, subscriptions, ads, or offerwalls, like our very own platform.
But how did it all start, and what was its road like getting to where it is now?
In this blog post, we’ll cover the brief history of mobile gaming monetization and its climb to the top of the revenue charts of the gaming market.
The arrival of the App Store in 2008 marked a turning point in the gaming sphere, similar to the influence of iTunes on the music industry. With just a click, consumers found themselves able to download a fresh game within seconds. Initially, the App Store hosted a modest tally of 500 apps, but it quickly showcased its potential by raking in over $1 million in daily revenue from paid apps during its debut month.
The trajectory towards becoming a profitable domain was propelled further as mobile games transitioned from premium models to the more accessible free-to-play (F2P) approach. This shift paved the way for alternative revenue streams, prominently in-app purchases and advertising.
New technology had greatly altered the mobile industry landscape. The app purchase methods underwent a transformation courtesy of the iPhone and its App Store. High app fees gave way to minimal charges per app, making it a more viable strategy to offer numerous games at a lower price, given the broad distribution channel furnished by the marketplace.
The growth of app markets marked a transformative time in the tech industry, simplifying the process of installing games from trusted developers. However, when it comes to actual purchases inside the apps, the initial model had its constraints: profits were confined to a single purchase per game.
To remedy this, Apple introduced a game-changing concept in 2009: In-App Purchases (IAPs).
This innovation created several ways of monetization strategies, most notably the freemium model, which offered users free access while monetizing additional features on a per-use basis.
Mobile game developers soon recognized a prevalent aversion among consumers towards paying for apps. Even a nominal price tag of $0.99 could deter demand. To combat this, in 2009, Apple facilitated in-app purchases within free apps, thereby opening a fresh monetization channel for Free-to-Play (F2P) games.
F2P not only broadened the audience base, welcoming casual gamers to a risk-free trial, but it also underscored a strategic trade-off: abandoning upfront charges to promote a higher volume of downloads. The growing popularity of this model exerted pressure even on premium games to transition to a freemium structure.
Fast-forward to 2016, Apple incentivized developers to delve into the subscription model, extending the subscription option to all categories within the App Store — a privilege previously reserved for select categories like news and streaming apps. Although technically branded as Free-To-Play (F2P), this monetization strategy often necessitated a monthly or annual subscription fee for players to fully engage with the game, introducing a nuanced approach to app monetization.
In the early days of gaming, it didn't take long for developers to realize the potential of leveraging games as platforms for displaying advertisements. The first form of in-game advertisement had taken place quite a while back. This notion was pioneered by Adventureland in 1978, which incorporated a self-promotional advert for its subsequent game, Pirate Adventures, marking the inception of in-game advertising.
The ascent of the internet propelled in-game advertisements to new heights, establishing them as a favored monetization method for independent video game creators.
Prompted by more profitable ways of monetization, publishers began to pivot their attention towards advertising. They transitioned from pursuing high-spenders, to casting a wider net across the mobile user base: the aim was to engage everyone rather than solely the affluent few. This broad net of in-app advertising enabled publishers to monetize a larger faction of their user base.
Initially, there was a certain amount of doubt among publishers regarding the reliance on in-app advertising. They feared that monetizing through ads would prove detrimental to preserving a stable and optimized user experience, as well as the fact that advertisements might undermine in-app purchases (IAPs).
However, in-app advertising saw an increased growth accompanied by an evolution in creative ad formats. To publishers’ surprise, ads tailored to the game interface showed remarkable success, enhancing both user experience and IAPs. For instance, interactive ad formats like offerwalls and rewarded videos proved to be mutually beneficial for all stakeholders, and opened up a whole new prospect of revenue…
As ads proved surprisingly successful in the mobile market, the industry was quick to introduce new forms of it.
Since 2008, offerwalls and rewarded videos gradually became one of the major contributors in the world of mobile app monetization, bringing the users new ways of earning in-game currencies and discovering new apps. Alternatively, both rewarded videos and offerwalls have become a way of acquiring new users for the publishers and, more importantly, a significant new source of revenue.
The increase of Free-to-Play (F2P) games has ushered a wave of casual players into the mobile gaming arena, setting the stage for the meteoric rise of hyper-casual games, swiftly carving a niche for themselves.
Known for their simplicity, hyper-casual games resonate well with the contemporary mobile gamer, whose preferred gaming moments often coincide with multitasking at home. This evolving gamer persona has turned a demand for low-commitment entertainment that can be enjoyed in brief sessions.
Today, hypercasual is the leading genre in the global app downloads and has been steadily on the rise throughout the years with no indications of slowing down.
The trajectory of mobile gaming monetization reflects a tale of continual adaptation and innovation. From its beginnings marked by premium apps, the landscape evolved through the introduction of In-App Purchases (IAPs) and in-app advertising, transitioning towards more user-friendly Freemium and Free-to-Play (F2P) models. This evolution significantly broadened the revenue horizons, facilitating the rise of hyper-casual games, which further emphasized the relationship between user-centric game design and ad monetization.
The diversification of monetization strategies, coupled with a deeper understanding of gamer preferences, has considerably amplified potential revenue, making mobile gaming a lucrative venture for developers. Formats like offerwalls have seen a surge in the mobile gaming market thanks to their revenue generation and potential to acquire new users and retain the existing ones.
As the industry moves forward, the emerging technologies and growing monetization models hold promise for even greater revenue, underlining the rewarding commercial potential of the mobile gaming sphere.