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How to Choose The Right Business Model For Your Game?

Building a game is not good enough anymore. A lot of effort goes into research, designing, selecting the right tools and technology, and more. Now that you are thinking of monetization strategies, that means you have won half the battle.

But what about the other half?

With rapid digitization and increasing screen time, online gaming is a growing industry. As per a Statista report, revenue in the online gaming segment is expected to reach US$ 1.8bn in 2020.

When it comes to monetization in the gaming industry, the strategies picked by game developers are mostly dependent on the following three factors:

Game Genre – This is driven by the engagement and skill levels of the game. The type of game could be sports, role-playing, simulation, action, etc. Low engagement and low skills games typically monetize on ads as their primary source of monetization. And as the engagement and skills level of the game increases, then monetization strategies also become hybrid and can be like in-app purchases or subscription models.

Gaming Device – Depending on the gaming device like PCs, gaming consoles, mobiles, etc. you need to select a monetization strategy that makes it most appropriate for the end-users.

Market Trends and Norms – Once your game is developed, you can also study what are the strategies adopted by other market players in a similar category of games. A good benchmark would be a comparison in terms of game type; the technology used, and target audience understanding, etc.

Different monetization models that exist in the gaming industry

  • Advertisements – Remember, the good old television commercials that used to come in between your favorite show? This model is like that only.

Probably the most popular monetization strategy amongst all. Depending on the game design, you can monetize your game by placing advertisements in between the games. You can earn via banner ads, affiliate marketing, branded content, ad-free gaming experience, etc. As mentioned above, this strategy works well for low-skill and low engagement level games.

  • Licensing – You can sell licenses for the distribution of the game. There are publisher websites like GamersGate, Game House, Itch.io, Kongregate, etc. This is usually a one-time deal that you make with the publisher/s. If your game is unique and interesting, then you can demand a good price from publishers.
  • Subscriptions – Big players like Nintendo, Sony, and Microsoft are focusing big-time on subscription-based models. Using this monetization strategy offers the end-users an opportunity to try and explore different features of a game by giving a monthly fixed subscription.

This model may also have options of pay per user, pay per device, and pay per license models.

Although the subscription-based model is very popular with PC games, it is now gaining popularity with mobile games as well.

As per a few reports, the Average Revenue Per User (ARPU) and the amount of time spent on playing are more in subscribed users as compared to non-subscribers.

  • In-app purchases – Giving extra lives, in-game bonuses, currency, etc. can all be included in in-app purchases (IAP) models. This strategy is often used along with other monetization strategies to have more cost advantages.

Such games can be developed by small teams and offer more opportunities for long-term business KPIs for the game developers.

  • Freemium – This model is often associated with subscription or IAP models. It is suitable for games where you want to offer certain features of the game free so that it holds the gamers’ attention, and then monetize on that by asking them to pay for full-version or features of the game.
  • Other models – Other strategies could be selling your game merchandise or resources via online or offline channels. Another unconventional method could be to have a donate option on your game page and ask the gaming community to show some love towards the game developers.

Now that you are aware of the different monetization strategies, it also makes sense to have an idea of what should not be done before finalizing the game monetization strategy.

Mistakes to avoid while choosing a monetization strategy:

  • No diversification – A lot of game developers initially used only one monetization strategy in order to make money. This often leads to lesser income over a period of time.

If possible, explore the opportunity of hybrid monetization strategies. You can go in for a mix of in-app purchases and advertisements or subscriptions and selling merchandise as your monetization strategy. This will ensure that your ARPU is high and you have a higher lifetime value for a particular customer.

  • Ignoring the socio-geographic and socio-economic influences of gamers – The demographic influences and psychological impacts of gamers in every country varies. In-app purchases are relatively higher for people with medium income as compared to that of higher-income ranges. Similarly, as a game developer, you need to be sure of how you are going to price your in-app purchases, subscription models, etc. in a particular geography.

To conclude, keep a note of the mistakes to avoid and you can pick either of the monetization strategies that go well with your game type. For expert advice please feel free to connect with us.

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