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