Over the last several months, King and Supercell have crossed the $1 billion revenue mark. Both companies are also close to achieving another milestone, which Nicholas Lovell at Gamesbrief spotted: the half-billion dollar marketing spend. With King spending more than $455 million on marketing its titles, and Supercell passing the $400 million mark last year, the huge outlays of these businesses in comparison to the rest of the market is notable.
Let’s examine how and why mobile gaming marketing spends have increased and what developers can do to avoid these costs.
CPI costs are rising
The simplest reason for the increase in marketing spend is the increasing pressure on Cost Per Install (CPI) advertising prices.
As e-commerce apps and other mainstream brands enter the space mobile gaming had historically called its own, CPI install prices have increased. According to industry statistics, we’ve seen a 7% increase of CPI year on year. And with the industry placing more importance on shifting more away from CPI costs alone to considering Lifetime Value (LTV) when purchasing users, the cost of a high quality user has gone through the roof – now standing at , with the cost of a loyal user at $2.90 – a 61 percent year on year increase.
How to avoid this
You can’t avoid completely avoid costs for acquiring users as CPI increases, but you can deal with them in several ways. The first is to ensure your organic marketing efforts are up to speed. While keyword optimization, improving store assets, and bumping up app reviews with feature improvements may only make a slight difference to your overall performance, this low-cost marketing approach can consistently shave small amounts off acquisition CPI spends.
The second is to make sure you either test as many channels as possible or use a provider that allows you to manage multiple networks at once to get value for money.
New ad formats have increased costs
Over the last two years, new advertising formats have been brought to market that have proven vastly more effective — and more expensive — than before, driving up the cost of marketing on mobile.
Video advertising and native advertising are particularly strong examples, as they both deliver clear performance improvements over traditional formats such as banner ads and interstitials.
But the strong performance of these formats mean inevitable pressure on prices. According to TechCrunch, video ad spend doubled from $720 million in 2013 to $1.5 billion in 2014, while in the native space, Facebook’s news feed ads have driven its revenues on mobile to over $1 billion per quarter. That’s a lot of money to compete against.
How to avoid this
If new formats are increasing marketing costs, game marketers have only one real solution to look at: finding a new one.
Admittedly, this was easier a few years ago when the space was underdeveloped and the infrastructure to support dynamic formats didn’t exist. But opportunities are still out there, particularly in channels run by big players who are only now waking up to mobile.
Pinterest, Instagram, and even Google Play store ads remain in the early phase of operation, meaning marketers can find high quality users where others have not yet ventured. First-mover advantage is still significant, even in the mobile ad world.
Need a mobile marketing strategy?
Learn how brands succeed with mobile marketing automation.
TV advertising is expensive
More expensive than these new advertising formats are the traditional formats that mobile marketers have started exploring.
In particular, the costs associated with creating a successful TV ad has spurred a rise in marketing costs. Though Supercell’s Super Bowl TV ad delivered a 20-place chart rise in the U.S. and over 30 million YouTube views, it cost $9 million to air. When you add the cost of creating bespoke creatives, licensing famous songs, and the cost for running ads across channels, the price of advertising outside of mobile rapidly increases.
How to avoid this
Ultimately, mobile marketers won’t be able to advertise on TV without some budget. Although not every slot is going to be as expensive as a the Super Bowl, the costs of getting the creative right will be high.
You have alternatives, and for games none are stronger than YouTube and Twitch. By using free-to-download streaming software such as QuickTime to record from mobile devices and by investing in a decent mic, marketers can create everything from smart-looking trailers to entertaining weekly content.
While it’s not a Super Bowl ad, if done correctly, mobile marketers can effectively circumvent the cost of television advertising by appealing to streamers and YouTubers who might feature the game for free. This list from TinyBuild features hundreds of potential streamers.
Defensive user acquisition requires investment
Finally, the ultimate truth about the top of the user acquisition market is that it has become more defensive – a shift that requires money to work.
At PocketGamer Connects London, Rovio’s Eric Seufert noted that the principal driver of the LTV acquisition philosophy is the need to retain players. As this is an inherently defensive move, it means King and Supercell must invest in the equivalent of the drawbridges, towers, and castle walls in their games to keep the top position.
As the fight to hold users intensifies, margins will ultimately come down. Examining Supercell’s results, we can see that a threefold increase in revenues only led to a doubling of profits as marketing ate into the business, a trend that will extend to the broader industry.
How to avoid this
The simplest and most effective way to get “defensive” is to launch retargeting and re-engagement advertising. Instead of paying a premium for a new user, these options allow marketers to find those who’ve downloaded the game and stopped playing as well as re-engaging regular users with targeted users — at a fraction of the cost of purchasing users.
Bottom line: Costs will increase, but you have some effective hacks to keep spends down.
Brett Orlanski is the VP of business development at GrowMobile by Perion, the number one provider of effective of mobile advertising products.