Sometimes I meet with fellow designers and game devs for a quick coffee out in town and whenever we talk about how well our projects are doing we get weird looks thrown our way from people not affiliated with our group. This happens especially when we’re talking about revenue (though without mentioning user acquisition costs). Pretty often we have people walk up to us and ask why do people spend so much money on our mobile games?
Your Answer Upfront:
People spend a lot of money in mobile games because it’s convenient for them to spend a few cents to a few dollars at a time in order to progress in a game they enjoy. A few cents to a few dollars at a time doesn’t have a big impact on their finances but most people don’t realize that they are being trained by these games into spending/purchasing recurrently. A lot of free games are designed to establish recurrent spending habits without making the players aware that this is happening and can end up spending thousands of dollars in a game over the course of months or even years.
In this article we’ll talk about how exactly different types of games earn revenue, why more and more developers shy away from making premium games and why seemingly free games make so much money. In the end I’ll try to offer my best explanation on why people spend so much money on mobile games.
How do we make money from mobile games
I think it’s important to understand exactly how the developers earn their revenue before diving into why people spend so much money on mobile games.
The topic of how I (or we when talking about developers at large) make money from mobile games is a topic that my relatives like to ask me about every single time I have a family event and we sit down at a table.
It’s also a common question I get from people I meet after I tell them what I do exactly. How can I make enough money to sustain myself when most mobile games cost less than $3 or are free.
Work for hire/development for other people’s projects
This is my main source of income at the moment and I’m not one to shy away from saying this. 80% of my monthly income comes from working on other people’s ideas. It’s not that their “ideas” or “design” are better than mine, quite the opposite in a lot of cases (hence why they hire me).
My clients have deeper coffers than me and when it comes to making free-to-play games well…. you need money to make money.
When doing work for hire said work falls into one of two categories:
- I either work as a programmer to implement someone’s else ideas and get a game to market
- I consult or work as a game designer and design a game that can reach specific goals and tackle subjects that my client wants.
Sometimes I wear both the hats of designer and developer where I design, define AND implement a game for my clients. Other times I adapt an existing design and bring it to mobile (porting a PC game to Android or iOS).
On a good month? This can bring me anywhere between $1500 to $7000 in revenue at the end of the month. Note that there are many months when I’m working on my own games and I see $0 in revenue until those games come out.
Very rarely, I receive a performance bonus. Let’s say a game for my client perform way above expectations. Maybe the CPI was extremely low or maybe it got amazing reviews from the community and more people than expected downloaded and played it. When situations like this happen and the client is interested in keeping me around longer he or she SOMETIMES offers me a bonus, either as a thank you or as a way to encourage me to perform very well in the future.
What this means is that, when this happens, I tend to feel like I have to get future games to perform even better, get the numbers up a bit more and I make the same bad decisions (for players) like other devs do.
Imagine what would happen if a client would tell me: “Ciprian, you’ll get 3X your payment if the Average Revenue Per Paying User (ARPPU) is above $1.50”. I’d fight tooth and nail for the minimum in-app purchase in the game to be at least $1.51. So it’s important to know how financial incentives can affect design, economy and progression decisions.
There’s actually a funny story regarding this. There was a LiveOPS producer at a publisher I used to contract for that wanted to raise the Average Revenue Per Active User at all costs, his words. So I submitted my formal proposal to just ban non-payers. That would skyrocket the ARPAU through the roof.
Now imagine the situation where you’re not getting paid per game / prototype / hour like I am, mostly. Imagine I’m getting a percentage cut out of a game’s sale (or the sale of in-app purchases or ad revenue).
How incentivised would I be to find the “right balance” between how high the prices can get and how much the players, on average, could afford to purchase?
Besides I’ve been in cases where I worked with publishers that financed my games. When the game would release they would have had to recoup their investment and then we would do the revenue split. Imagine this situation for your favourite game on the store that filled to brim with in-app purchases. Of course they’d want to nickel and dime you, all the money they got went into the development of their game and now they want their cut.
So they’ll blast you with VIP tiers, special offers, tailored offers and even *gasp* targeted tiered tailored offers (there’s a story about this at the end of the article).
Working and releasing my own games
My own releases account for very little of my monthly income and usually have the most impact in the first two months after release. I have to say that most of the income from my own titles, so far, came from Linux, Mac and Windows sales (PC) as opposed to mobile.
The reason for this is that I just cannot afford to properly market a mobile game in order to see any substantial revenue from it, you’ll see why in the next chapters.
I started with PC game development and that’s where most of my fan base is, however, I released far more games on mobile than PC games but most of the mobile games were for my clients.
This is something I would like to change and it’s part of the reason why I started this mobile gaming blog. The idea behind it is to slowly build traffic and get my work known to mobile gamers worldwide.
I believe that by offering honest, useful and helpful information I will slowly, and steady, attract people to this blog which, in turn, will offer me a stable source of eyes and traffic that I can leverage for my own future mobile games.
Back to the topic at hand, my own games bring me anywhere from $1000 to $5000 in revenue in the first two months after releasing them. These are usually games released on Steam.
I also develop games for retro computers and retro platforms (like the Commodore 64 or 68K Macintoshes). They don’t make much money (around $100-$400 on release) but they keep me sane and happy. Working on them makes me more happy than making crappy mobile titles for clients (hey, I said I’m honest).
Right now I’m in the process of porting some of my Steam games over to mobile for a couple of case studies for this blog. I’ve already released the first case study from an original, completely free, mobile title that I developed and released in January. You can read about the game and the case study in this article titled “How Many Organic Downloads Can Your Game Get Without Marketing?“.
Now, you might look at how much money I can earn from work-for-hire vs my own titles and ask yourself how do my clients make money from their games that they can afford to pay me up to $7000 a month.
How do paid mobile games make money
Paid (or premium) games have been a thing ever since the personal computer industry appeared onto the scene. It’s the oldest forms of monetization for my industry and it’s easy to explain.
Jack and Jill want to buy a game. They go the store (physical or digital) and, in exchange for their hard earned cash, they get a game (digital or physical).
In the mobile gaming market premium games are usually priced between $0.99 to $30 with most games being priced on the lower side of the spectrum ($0.99 – $9.99). This is different from to the PC gaming industry where games are priced anywhere from $0.99 to as high as $199 (if you take collector’s editions into account) with most games sitting somewhere between $4.99 and $60.
Going back to the mobile gaming market, it’s not uncommon to see a premium, paid game offer in-app purchases and this is especially true for games priced on the lower-end of the spectrum. I personally believe it’s a mistake to price a game at $0.99 and ask for in-app purchases when you can probably just make it free and get a tad more eyeballs on the project, but I don’t have the data to back up this assumption (yet).
What do those premium games offer with their in-app purchases? Rarely you might see consumables (potions, energy refills, weapon/bullet packs) but more often than not you’ll get content, in the form of DLCs. Paid content in premium games takes the form of:
- Extra levels/missions/campaigns
- New characters or character skins (not only humanoid creatures but also vehicles like cars or spaceships)
- Weapons and items that cannot normally be obtained through regular gameplay
- Donations to further support the developers
A good example of a premium mobile game with in-app purchases is Neverwinter Nights which can be purchased on iOS for $9.99 and offers DLCs and content via in-app purchases that vary in price from $0 to $4.99. Going by my bank transactions, in order to access all the content in Neverwinter Nights mobile you’ll have to spend around ~$30.
You might ask yourself: why sell a game at a premium price and offer in-app purchases in it? Why not just bundle the content with the game and price it higher?
The fact of the matter is most mobile gamers are newcomers to the gaming scene and they aren’t used to spend money in games. Adding $3 to the upfront cost of the game can alienate a lot of your target audience just on that basis alone.
It’s a lot easier to fragment the content of your game and offer it at a lower cost. If people like it and want more they can purchase the rest of the content vs having them pay a lot more upfront. Think of it this way: if you’re not sure about a game, would you buy it for $0.99 or $23.99? Wouldn’t it be better to get it for free or for $0.99 and then purchase the remaining content at your own pace?
Incidentally, this brings us to our next subject: games with a $0 up front cost or, better said, free games. Let’s see how free mobile games make money.
How do free mobile games make money
I want to point out that I wrote a lengthy article on this subject and I’ll summarize it here. If you want the in-depth version you can read the article titled “How Do Free Mobile Games Make Money“.
Free mobile games earn money by selling in-game content via in-app purchases or through displaying ads to the players. How much they earn depends on how much money they spend on user acquisition in order to bring players into their own game. When releasing a free game on the market, publishers and developers look at how expensive it is to bring users into their game and then analyze their own game and decide if it’s worth to continue development.
The difference between premium games with in-app purchases and free games with in-app purchases lies in the design of the game. In most cases, when you buy a premium game, that game can stand on its own and doesn’t require any additional purchases to enjoy the full experience.
With free games you mostly have to purchase content (or watch ads) in order to progress or, at the very least, you’ll have a much harder time progressing without doing any purchases. A good example of this is “Warriors of Waterdeep”, a D&D free to play game that we reviewed a few weeks ago.
In Warriors of Waterdeep you reach a point where progress is gated by many things. From diminishing returns in levelling your party (and getting curb stomped by enemies) to time gated content or lack of inventory upgrades. It’s a game I deeply wanted to love but I can’t. However, if you spend a little bit of cash when needed the game can be quite enjoyable.
Where premium games require an upfront investment, free games require you either sacrifice your time or your money in a constant-loop of acquisition and progression. For just a tiny bit of money thrown at the game you get a tiny bit of progression to go along with it. Rinse and repeat ad-infinitum.
In some cases free games (like hypercasual games) might not have any in-app purchases. Those games usually require you to progress through a game without paying in exchange for watching display and interstitial ads.
Those games are designed to catch you in a constant play-reward loop, with bite sized gameplay sessions where, at the end of a challenge or level, you get a small reward to help you progress. Where the monetization comes in is not too dissimilar to Warriors of Waterdeep’s economy loop but, instead of paying to progress, you watch an advertisement, earning the developer revenue (which can be as low as $0.02 / view). In exchange for 30s of ad time your rewards in those games increase by a factor of 2x to 20x.
What’s interesting is that most mobile gamers have only experienced this “free” monetization model. Ever since smartphones exploded onto the scene there’s a huge huge HUGE segment of the population that grew up with free apps + in-app purchases.
The most vile thing the mobile industry has managed to do is educate people into spending small amounts of money at a time to obtain anything. A lot of gamers have been taught that it’s okay to “bribe” the game a little bit to get what they want.
Now that we know this we can move onto the question this blog set out to answer.
Why do people spend so much money on mobile games?
People spend a lot of money in mobile games because it’s convenient for them to spend a few cents to a few dollars at a time in order to progress in a game they enjoy. A few cents to a few dollars at a time doesn’t have a big impact on their finances but most people don’t realize that they are being trained by these games into spending/purchasing recurrently. A lot of free games are designed to establish recurrent spending habits without making the players aware that this is happening and can end up spending thousands of dollars in a game over the course of months or even years.
I’ve said this a few times on the blog: People don’t want to spend $10 up front for game to purchase/unlock/obtain the content completely but they’re okay with spending $60-$150 on in-app purchases spread over the course of a year.
You think I’m exaggerating when I say that people spend up to $150 in a year on a game? The average revenue per user is around $140 in 2022 according to Statista. I think that’s a pretty conservative number from my own experience. Now, this doesn’t mean that all players spend $140 since some of them spend $2-$5-$10 while others can spend thousands upon thousands of dollars.
Check out this article by Forbes that teaches parents what to do if a kid “overspends” in a mobile game. They offer an example of a kid that spend $650 on virtual currency for a game. There are many more examples of kids spending thousands like this article from AppleInsider where a kid spent $16 000 on a game.
What you don’t hear is the articles about adults who do it. For a few years I contracted as a game designer for an adult games publisher and I personally saw adult users spending $500 – $5000 on consumables and unlockables for a free game. I remember watching a good friend of mine adding purchasable content to the game, on the fly, from their backend services in order to see just how much a few players were willing to spend on targeted offers. It went something like this:
- Beginner Special Offer Pack: 10 time skips, 20 potions 100 gems – $15
- Advanced Pack: 10 time skips, 500 gems, 1 mail slot – $40
- X Character Pack: 1 new character, 2000 gems, 2 mail slots, 20 time skips, 40x offline income – $150
- Special Character character packs – 10 characters, 50000K gems etc, etc – $750
Now, the list isn’t exactly accurate in the content that was offered to users due to a few reasons: it’s been years since this happened and my memory is hazy (a lot of drinks were consumed by the team when that game launched) and the second reason is that I want to protect the identity of the developer of said game. If anything, he was the most moderate of all developers releasing games with that publisher and I saw him repeatedly side with the players vs the publisher when it came to content for the game.
My experience when I was working on Frozen: Free Fall, a match-3 game based on the Frozen intellectual property isn’t too dissimilar, however that game benefitted from a team that loved the product and respected the users. In the game if you were close to winning a level but ran out of moves you could spend $1-3 on extra moves to finish it. With hundreds of levels to complete a game and a rabid fan base, how many people do you think purchased extra moves at least 20 – 50 times, especially in the end-game content? That’s $100 dropped right there.
Think about it this way – if you’re facing a problem and you could spend 99c to solve it, wouldn’t you? Everyone would. But if you’re facing 10 000 problems at once and you have to drop $9,999 up front to get rid of them, you probably wouldn’t.
The trick that the mobile gaming industry pulls is that they’ll throw 10 000 problems at you, but they’ll do it one at a time and you’ll be happy with it.
Where To Next?
When I started writing this article I wanted to keep it under 1000 words in length, but I couldn’t. There was so much stuff to cover in order to drive the point home and I’m 90% sure I didn’t cover it all. Luckily, I touched most of the subjects in other articles on this blog that you might be interested in.
Like I mentioned previously, there’s a big article just on the topic of how “Free Mobile Games Earn Money“. There’s another one that talks about “How Much Money The Average Mobile Game Makes” and another one that explains why “Free Games Make More Money Than Paid Games“.
If you want to see more articles like this check out our Editorial section. I cover a ton of subjects similar to this one and mark them as editorials.
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