San Francisco based Swrve has released their first 'Mobile Games Monetization Report', looking at volume and percentages of in-app purchasing in freemium games. While the numbers and conversion rates seem low, they match up closely with the historical data for the shareware model that has been the mainstay of mobile and indie gaming for over twenty years. Freemium is the new name, but the business model remains the same.
The report highlights what many have long suspected. A significant portion of revenue in the freemium space comes from a very small pool of users who are willing to spend their way to the end of a game. 50% of a typical game' revenue is derived from 10% of the playing customers. Looking at total usage, that means half of the revenue stream is coming from just 0.15% of the user base.
Swrve also showed how immediate the revenue gathering can be. 50% of players making a purchase will do so within the first twenty-four hours, and 60% of the total revenue per play is collected within the first fourteen days.
There is a definite sense that freemium games are 'chasing high rollers' who are downloading and making purchases as quickly as possible. The high rollers are also responsible for the big value in-app purchases - while purchases over $50 may only make up 0.7% by volume, by income they make up 9% of the total revenue.
The majority of mobile games now follow a freemium model. As someone who enjoys a 'pure' gaming experience and feels that many freemium games feel little more than digital temptation to part my money and I as quickly as possible, the data from Swrve shows where the priorities for game developers will be... the 1.5% of players who spend their money in the game.
What I find interesting is that the percentage of people who download a freemium title at no cost and go on to make a monetary transaction is a similar percentage to the number of people who would download a free trial (shareware) version of a mobile game and unlock the full version - which is traditionally in the 1%-2% range depending on the title.
The idea of freemium is a laudable one, and there are certainly good ways and bad ways to implement the model in a game. The genre of freemium has managed to change the habits of gamers around the world. Mobile games are now expected to be free at the point of download, and playable in some form without making an extra purchase. But opening up a game to the point where developers are happy with the product, that still costs roughly the same in the world of freemium as it did to unlock the later levels of DooM or Wolfenstein 3D in the days of shareware trial version.
The name may have changed, and the idea of a trial version has been cloaked by the perception of free game, but the basic business model of game development and the underlying numbers are still the same. What freemium offers above the more traditional model is the ability to turn users into an ongoing income stream through continued purchases, and the ability for some users to pay significantly more to the developers if they wish.
Like any business, repeat sales and maximising income per customer are the two keys to financial success in the world of mobile gaming.
The figures released by the San Francisco based Swrve in their 'Mobile Games Monetization Report' have been collected through January 2014 using data from their own network of applications. Swrve will be releasing a monthly report on the activities of players and purchasers in the freemium space to help identify trends, and you can follow them online at swrve.com.
