The ultimate guide to UAM - Part 1: Monetization

Published:14 Apr 2021Author:HomaRead Time:6 min read

Developing a mobile game is not just about designing environments and creating increasingly challenging levels. It’s an investment. The creators put in their effort, skills, time, and funds, and expect the game to return more value than they invested. This profit will make up for what they spent in creating the game, provide them with the necessary funds to improve their product, and develop more games in the future.

However, profit doesn’t come by itself. Actually, a team is in charge of ensuring profit, or more precisely, user acquisition and monetization (UAM). User acquisition involves how much you’re going to spend to get a user to download and play your game. At the same time, monetization focuses on how you’re going to make money off this user’s activity. We’ll leave UA for the second part of this series (coming soon) in order to concentrate on monetization.

Note: If you’re stuck on a technical term, take a quick look at our mobile game marketing cheatsheet to learn all about it

What is monetization?

Monetization relies on maximizing the user’s lifetime value (LTV), meaning the average revenue that each user will provide throughout their entire lifetime within the game. To maximize this revenue, developers need to optimize monetization. For this, publishers like us use various monetization methods to ensure games are profitable.

There are two principal ways of making money off a Hypercasual (HC) mobile game: in-app purchases (IAP) and ad revenue through in-app advertising (IAA).

In-app purchases

They’re usually divided into three categories:

  • Consumable: They aren’t directly used in the game experience but can improve it or accelerate it, or be saved for later use inside the game (currency, boosters…)
  • Non-consumable: They directly affect the game experience, such as skin packs, loot boxes, new environments, playable characters, or the usual “Remove Ads” option.
  • Subscriptions: Mobile game subscriptions are becoming more popular, and a lot of games are adopting the “Season Pass” strategy that unlocks the game or its premium features.

However, HC game developers don’t pin all their hopes on IAP. In fact, they represent only about 5% of revenue in HC games.

Games like Sky Roller, Harvest It, and NERF! Epic Pranks propose many IAP options.

Ad revenue

Most of HC games’ earnings come directly from IAA. Ad revenue is much more delicate because it involves multiple factors:

  • Session length: The games are designed to retain the player as long as possible. The longer they spend time on the game, the more they’re exposed to ads and the more the ad impressions.
  • Retention rate: Developers don’t want the player to play the game for ten minutes and just forget about it. The game should also incite the user to play it over several days, weeks, or even months. This, too, increases ad impressions.
  • eCPM: The effective cost per mille is a measure that lets ad networks calculate how much they’re paying for every thousand ads they show in a game, meaning for every thousand impressions. For example, if the game displays a particular ad from an ad network and gets $0.03 for that ad, the eCPM is $30.

Ad impressions are essential, and game studios are always looking to find the best methods to display ads. Of course, they should always look out for the limit after which there will be too many ads for a user to enjoy their game and just uninstall it. Three types of ads are used here:

  • Banner ads: They can be shown in the menu and inside the game during the entirety of the user session.
  • Interstitial ads: They appear at natural pauses inside the game, like during a loading screen.
  • Rewarded videos: They immerse the user in the ad in exchange for a reward, which gives the user an incentive to watch the ad, making it the one with the highest eCPM for ad networks.

To summarize, ad revenue means multiplying the number of impressions by the average eCPM. Add the IAP revenue, divide it by the number of users, and you’ll get your app’s LTV, which will help you determine its profitability.

How to calculate LTV.

However, monetization involves a lot of work and attention to detail. That’s why the UAM team collaborates with various partners to facilitate and automate its work.

Monetization partners

Two categories of partners play an essential role.

Monetization networks

These networks, such as Facebook, Unity or Applovin, work as intermediaries between the game publisher and the companies looking to advertise their products. Developers provide them with ad inventories (the available space to display ads in their app), and the networks fill them with their clients’ ads.

Developers leave some space in games UI for ads.

Monetization networks are essential because they monetize the game and are the developers’ primary source of earnings. And they make it very easy, too: instead of negotiating with every publisher looking to advertise their product, monetization networks directly provide the game developers with ads, making payments and transactions much more manageable.

However, game publishers are always looking to display ads with the highest eCPM to maximize profit. Because of that, they need a second category of partners: the mediation networks.

Mediation networks

Just like monetization networks work as intermediaries between the game’s developers and other publishers, mediation networks such as IronSource, Applovin MAX, and Mopub are intermediaries between monetization networks and developers. Their job is to fill every individual ad slot with the highest-paying ad.

How does this work? Whenever a user opens the game, the mediation network directly fills the gap in ad slots. For this to happen, its engine scans through multiple monetization networks and sees what ads they have to offer. Then, it chooses the ad with the highest eCPM to display it to the user. Thanks to that, the developers can be sure that they’re getting the highest revenue out of their ad inventories.

Mediation networks are also beneficial because they fill the ad slots with their large supply of ads (compared to a single monetization network that can sometimes struggle to fill the slot). They also only need one software development kit (SDK), which helps avoid SDK bloating and, therefore, hurting the app’s performance. Some mediation networks are also auto-optimized for avoiding traditional waterfalls to save time and resources

Mastering how to use monetization and mediation networks is crucial for developers if they want to maximize profit. However, that’s only a part of the UAM equation. Check out the second part of our series to learn about UA and other UAM partners.

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