How Hybrid Monetization is Unlocking New Growth for Mobile Gaming
We’ve all heard that hybrid monetization, the strategy of combining multiple revenue streams such as ads and in-app purchases (IAP) in an app to maximize profitability, is a trend that’s seeing a significant uptick in adoption this year within the mobile gaming industry. What you may not have heard are the specific tactics and mindset shifts required for app developers and marketers to achieve success for themselves.
AppLovin’s VP of Global Business Development, Daniel Tchernahovsky, sat down in a recent PocketGamer podcast with industry veterans Peggy Ann Salz, founder of MobileGroove, and Brian Baglow, founder of the Scottish Games Network, to share his insights.
From the importance of leveraging data to deeply understand user behaviors and design games that cater to various engagement levels, to using machine learning to optimize user acquisition and monetization, to the necessity of maintaining a culture of experimentation in all things, Daniel highlights the ways studios are finding new growth in this new post-IDFA world.
You can check out the full PocketGamer podcast here as well as some of Daniel’s key takeaways below.
The growing approach of hybrid monetization
There is an exciting intersection of two main approaches to monetization: ad-driven games and those with strong IAP that monetize player engagement. Historically, these models were quite separate, but they are now morphing, merging, and converging. This shift has been driven by the desire of many app companies to blend these strategies, and over the past year and a half, the trend has come to fruition. The fastest-growing user acquisition (UA) strategies now combine both IAP and ad revenue, leading to significant growth across the AppLovin platform and the industry at large.
“[Hybrid monetization] is probably one of the key drivers of growth for the industry as a whole. For many games that don’t have ads today, by creating ad opportunities within their apps, they can allow other games to grow as well, and that grows the entire pie,” says Daniel.
Response from developers on hybrid monetization
Hyper-casual games, because of their shorter and more frequent gaming sessions, have always been more ads-driven. The audience has no complaints because it aligns with their expectations. Alternatively, successful IAP-based games may be reluctant to incorporate ads due to concerns about quality and revenue cannibalization. Despite these concerns, there has been a shift in the market over the last few years, with companies now dedicating efforts to fine-tuning their hybrid monetization strategies.
As Daniel pointed out, “I’ve talked to many founders and developers at these IAP businesses who still have this idea of ads muddying the quality [of the game]. The truth is users want to engage with them. It’s not like you’re forcing an interstitial onto them. Most of these games actually are going in the rewarded direction.”
For hybrid monetized apps, focus UA on behavior
UA strategies have evolved from targeting specific apps or sources and paying a flat rate per install to a more sophisticated approach. Previously, users from different backgrounds were targeted as if they were of the same quality, leading to inefficiencies. Recent innovations allow for identifying and targeting various user segments based on their behavior, such as retention, engagement, and ROI. This shift in user acquisition enables more precise and effective growth strategies, ensuring that users are engaged and monetized according to their specific behaviors.
“[At AppLovin], we moved from the idea of you just targeting an app, to telling us what type of behavior you’re seeking. We will find those users for you. And that opens the door to more complexity because now you’re not just saying: This is how much I want to pay for a user. Instead, you’re saying: Hey, look, I have different profiles of users that I’m looking for,” Daniel explains.
“For example, a marketer might want to target profiles for retention and engagement, ad returns, or IAP returns in the first seven days,” he says. “They now have confidence that a growth partner can effectively bring them users who exhibit the desired behavior. The task, now, is for the studio to figure out how they want them to behave.”
Scalable growth requires experimentation
Experimentation is crucial for the success of any mobile game. Companies that allocate a portion of their budgets to trying new ideas and campaigns tend to see better results. It’s important to test various buying strategies, including campaigns optimized for IAP, retention, and ads. Customizing goals and strategies for each channel and geo will enhance effectiveness. The focus should be on optimizing overall returns rather than just hitting target metrics. This approach helps companies adapt and thrive in a competitive market.
“I think that what sets the best companies apart from the ones who aspire to be them is the constant reassessment of goals, deep audience segmentation, and building and testing predictions. Those are the things that really make you an expert power user of growth,” Daniel notes.
For more insights like these, listen to the full discussion with PocketGamer.