How can developers be smarter about making money from their mobile games?
Money has been an enduring theme during today's Mobile Games Forum conference in London - how developers can make more of it in the App Store era specifically.
A panel session this afternoon focused specifically on flexible billing and micro-payments.
"The plain download model as such doesn't really work in the long run," said Andreas MacMahon of Accumulate. "Flexible pricing options is effectively the way to go."
Accumulate's technology is all about helping people sell games using pay-per-play, rental and try-before-you-buy models. The company's focus is on operators, although it's also keen to work with handset makers.
Tony Pearce of Player X (now part of Zed) provided some historical context, reminding the conference that fragmentation was the big problem in the mobile games industry three years ago.
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"Fragmentation is still the issue, but it's fragmentation of pricing now," he said. "We don't want to be led down a route where the consumer is deciding the price we sell games at. It should be the publisher and retailer."
He also warned that the industry is in a transition period, where publishers and developers need to "pull the reins in and work out what we're trying to say to consumers - otherwise we're going to end up with everything being free, which is the way people are pointing."
AdMob's Andy Smith responded quickly to this point, saying that there is a "worrying indication of price expectation in games". AdMob asked its UK network of iPhone and iPod touch gamers how much they would expect to pay for their favourite games.
"The majority came in at a pound or under," he says. "This whole expectation of free or close to a pound is certainly there in the marketplace."
The gap between these consumer expectations and the fact that handsets are getting more sophisticated (yes, 'console-quality graphics') is the problem for mobile games firms.
Sunil Gunderia from Walt Disney Internet Group said "we can't really fight the tide", looking to ad-funded models and micro-transactions.
"To the extent that we can get something out into the marketplace on the back of Toy Story 3, getting that into ten million people's hands is very valuable to the company," he said, saying that micro-transactions will be key to then making money from that (free) game.
Nicholas Lovell from GAMESbrief disagreed with Pearce, saying consumers have always set the price for their games - by pirating them, or buying them secondhand, or shopping around for the best deal in stores.
"The idea that the publisher 'sets the price' is in my view just not true," he said. "Free does not equal free. Free means 'use free as a marketing strategy' - get through the door, and then find ways to extract money from them on a continuous basis, whether that's through advertising or micro-transactions."
Magnus Jern, from Golden Gekko, works with brands on mobile apps, and said that 99% of the apps his firm made last year were offered for free to consumers.
"With the free model you can basically distribute it to almost all mobile users," he said. "That's one of the incentives for brands today to make everything free. You're not going to reach as many consumers [if you're not free] as you would otherwise."
One of the concerns in the mobile games industry is whether free trials and Lite demos work to upsell people to premium games, or whether they simply cannibalise premium revenues because consumers just play the demos.
Unsurprisingly, Accumulate's MacMahon opted for the former. "If the games are good, if the content is good and the pricing is right, consumers will pay," he said. "The more you use the likes of try-and-buy, ultimately the higher your aggregate revenue will be."
Lovell pointed out that one challenge of 'free' is that the monetisation strategies that have worked best, have done it in social environments - for example Facebook.
AdMob's Smith talked about some of the key discovery methods for users in its network, with Lite demos being the leader - around 50% of iPhone and Android users had done this, and 70% of iPod touch users. Second was word of mouth.
Pearce came back to his main concern - that the industry is slipping towards everything being free, and monetised with micro-payments. "We are in the business to make money, and not everybody will be able to make money from free games with internal payments. There'll be too much free stuff out there!"
What are operators doing? Pearce works with them on their games offerings, and says that flexible billing is a way for operators to make premium prices from games, in a way that's affordable for the gamers.
Neil Holroyd from Orange chimed in from the audience, saying that operators have to deliver a "proper lifecycle policy - some will pay £10, some will pay £8, some will pay less". So Orange only offers flexible pricing to its pay-as-you-go customers in the UK - "our pay monthly customers are happy to pay the premium prices".
He also said free trials hadn't worked for Orange, but "paid trials" had - customers paying for a day's rental for example - with conversion rates ten times higher than for free demos.
"How do we find the balance in discounting versus free, or free versus paid?" he asked. "We've had flexible pricing for two years now, and all we see is cannibalisation of our premium downloads into those discounted ones."
