Nintendo’s much-anticipated mobile game, Super Mario Run, could already be running out of customers willing to pay the $10 fee for full access, according to Slice Intelligence cited by Business Insider
Despite accounting for almost 30% of total revenue in the App Store, the number of paying users is already dropping away, suggesting that revenue generated early was largely from early adopters and could indicate that the existing monetization model isn’t sustainable.
MARIO’S IMMEDIATE SUCCESS WAS LIKELY A RESULT OF MULTIPLE FACTORS
Mario’s immediate success was likely a result of multiple factors, including strong brand recognition, prominent ad placement within the App Store, and, to some extent, nostalgia for the Super Mario title. However, the shock of the high price point has led to around half of users leaving one-star reviews. And although it’s likely that the game will see an uptick in purchases through the holiday period, these negative reviews could heavily mute the future potential revenue of the game.
Moving forward, Nintendo will likely explore new avenues of monetization for Super Mario Run. There are several solutions Nintendo could investigate to raise revenue potential and mitigate negative feedback from customers.
LOWER THE PRICE OF THE GAME
- Lower the price of the game. Nintendo’s decision to charge $10 for full access to Super Mario Run garnered lots of negative attention. By lowering the price point, the company could not only cater to consumers, but also boost revenue, according to data by Apptopia shared with BI Intelligence. The game is converting only 1% to 4% of users who have downloaded the game; but by dropping the price down to $2, its conversion rate could surpass 10%, resulting in a boost of ~$20 million by the end of the holiday period.
- Offer in-app purchases. While the pay-to-play app monetization model has its benefits, such as a more immediate revenue stream, in-app purchases (IAP) are far more effective at generating revenue over time. For instance, in just two months, Pokémon Go generated about $400 million primarily through micro-transactions for IAP. And while interest has certainly cooled since its launch, the game is still raking in revenue. IAP currently accounts for just less than 50% of total global app revenue, however, this is projected to grow to ~72% of total revenue by 2020, BI Intelligence estimates.
OVER THE PAST EIGHT YEARS, DEVELOPERS HAVE FLOCKED TO CREATE MOBILE GAMES
Over the past eight years, developers have flocked to create mobile games as smartphones became a mainstream consumer device. Technological evolutions including faster processors, larger screens, more input points, and better overall graphics capabilities, combined with dropping prices, brought the ability for gaming via smartphone to audiences larger than ever before.
In that growth and through that transition, smartphones as a gaming arena experienced its own evolution. More developers flocked to this medium, and the gaming sections of app stores became saturated. While mobile gaming apps using an up-front paid downloading model, wherein consumers paid a typically nominal fee to download an app, flourished in the early days of mobile gaming, the deluge of apps led to a change in monetization strategy.
MORE APPS STARTED USING THE FREE TO PLAY MODEL
More apps started using the free-to-play (F2P) model, wherein a consumer can download an app for free, and is then later monetized either via in-app purchases or in-app advertising. Since that transition, most consumers have been conditioned to expect quality mobile gaming apps for little or no cost.
Jessica Smith, research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on mobile gaming that examines how the mobile gaming market has been affected by the transition to F2P monetization.
It also takes a close look at how saturation in the mobile gaming category, combined with the standard F2P model, has led to numerous issues for developers, including spiking marketing costs, the premium on acquiring users who will spend heavily within a game (called whales), and the impact that it’s having on mobile gamers who do not spend in-app. The report then identifies innovations in mobile app marketing and engagement that seek to alleviate the issues of F2P and inadequate monetization in the fact of mounting marketing costs.
Here are some key takeaways from the report:
- The mobile gaming app market is so big it makes other app categories seem small by comparison. Mobile gaming apps accounted for 20% of active apps in Apple’s App Store in March 2016, according to AppsFlyer. That’s more than double the second most popular category, business apps.
- It’s only going to keep growing as quality smartphones become more accessible and more consumers look to their smartphones for gaming. In the US alone, 180.4 million consumers will play games on their mobile phones in 2016, representing 56% of the population and a whopping 70% of all mobile phone users, according to estimates from eMarketer.
- This quick growth is resulting in numerous growing pains. Saturation in the market has led to the dominance of the free-to-play (F2P) monetization model, which in turn has led to sky-high marketing costs.
- As marketing costs for mobile gaming apps has skyrocketed, so has the tendency for apps to focus on the very small segment of players who spend money in-app. This has resulted in game mechanics that optimize the amount of money being spent by this small user group, which can often alienate the large swath of users who do not spend money in-app.
- There are numerous new solutions coming to market that offer developers and publishing houses a diverse selection of monetization models which combine in-app purchases with other methods.
In full, the report:
- Sizes up the current mobile gaming app market and its future growth trajectory.
- Examines the role of free-to-play (F2P) games in the greater mobile gaming ecosystem.
- Identifies the major threats and opportunities inherent in the current mobile gaming market and in peripheral markets such as marketing.
- Explains the current monetization conundrum wherein the vast majority of revenue comes abysmally small segments of mobile gamers.
- Presents new approaches and solutions that can help mobile gaming apps monetize without alienating swaths of mobile gamers.