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What’s the lifetime value of an ad-funded gamer?

By on May 25, 2011
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Exent is a business that makes money in an old world of gaming.

They’re not focused on fighting against the free-to-play virtual goods business models of Facebook and browser-game companies like Bigpoint. They are still trying to persuade casual games companies that the “try-before you-buy” model is broken.

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Speaking to Gamasutra, Kobi Edelstein, vice president and general manager of Exent’s Free Game Services division, focuses on the rapid downward price pressure on casual games that have fallen from $20 to $6 in a few short years (and I suspect the trend is still further downwards).

He says that the ad-funded model, where players can play for as long as they like as long as they are prepared to watch the ads, is more attractive.

“What we’re seeing – from the ad supported side – is users bring in lifetime values in the $5-$8 range."

Compare that to a traditional try-before-you-buy model, where if you:

  • take 100 users
  • Assume a 2% conversion rate
  • Sell at an average price of $6 per game
  • You need to sell 20-30 games per 100 downloads, which just isn’t going to happen.

I think Edelstein is right that ad-supported is better than try-before-you-buy for these games, but there are several (massive) caveats:

  • These are around or before game ads, not in-game ads. They suit certain types of game well, but not all games.
  • Advertising is a volume play, so they need games with broad appeal, not niches.
  • It’s a strategy that doesn’t take any notice of the whales, who might spend tens or hundreds of dollars on a single game.

In short, I think ad-supported is a better business model than try-before-you-buy. But it is unlikely to be as profitable for an individual developer as a solid virtual goods business.

But now you’ve got these numbers, you can crunch the figures yourself.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com
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