I chatted about the economics of publishing mobile free games on the Ipad/Iphone, here's my notes. They are just my repetition of one guy's loose talk.
Developers create their products with no advance. Often small teams working incredibly hard. Perhaps 3 months around the clock for two guys. Maybe more. Two or four times more. Most developers go from game to game so they develop tools and frameworks that they reuse. They get half the revenue.
Publishers of free games aim to get volume by becoming a top free game in the app store. To become a top App, they need to have large number of downlaods. Tehse are achieved by spending marketing money on....paying for downloads. It seem that there are some companies, called CPI companies, that have drones of people that download games on demand. Actually for money. A quick search of companies and systems for incentivized downloads produces a range of discussions of how Apple is cracking down on it and whether it is good or not for the industry. Here's one from last year on CPI Economics.
A publisher, I was told, might spend $100K or $200K on incentivized downloads at $1 or $2 per download. This could be as few as 50K downloads or as high as 200K. This gets you into the top charts. Being in the charts means that you might get an actual real user to download you.
Apparently, the charts are recalculated daily and one day in teh top of the carts can produce 15K real downloads, still for free. This publisher makes his money on virtual goods. So they hope that out of each ten downloads, one or two users will turn out to be a real player. A real player might use the game 30 times. During that time, he'll buy between $5-$20 goods. Let me see if this works.
Spend $100K for 100K downloads.
Lets say have two days in the charts so 25K downloads.
Get 2.5K real users.
.25K spend $10 each resulting in $2,500 in revenue.
Woops, these numbers don't work. Not at all.They are off by two zeros, two orders of magnitude!
Legal White hat (he said) CPI companies: Flurry.com, tapjoy.com
Top game companies: EA,Zynga (New Toy, who did Words with Friends), GRE (Japanese), Kabam, Backflip, 6Waves, Motion math, duck duck moose,.
Advertising that they could embed it CPM. Perhaps $.01/day / user (assume 15 minutes).
Farmville at peak was growwing $1M per day on virtual goods.
Another issue is that companies with installed bases of apps can drive in app downloads of new apps. So the big guys make money since they have free marketing. And the big gusy mostly got big by being first out on Facebook when you could grow with spam!
Google Play and Amazon have Android apps stores. Good for 10-30% of Iphone marketi.
Shows: GDC, Media Bistro,com
Flurry has good stats. josh@ was my friend who provided me with these thoughts....
Better Sources:
http://www.onlinemarketingrant.com/ 12 months old
http://tomasztunguz.com/2011/04/21/the-case-for-mobile-cpi-advertising/ 15 months old
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