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[Gamesbriefers] Should you monetise children’s apps with ads?

By on July 7, 2013
CC image by Anthony Kelly

13th June

We asked the Gamesbriefers ‘how do you decide whether to put ads in your games?‘. Separate to the discussion about ads vs. microtransactions, a parallel question emerged about how to monetise children’s apps…

Stuart DredgeStuart Dredge Journalist at The Guardian

I’ve had a couple of meetings with smart, trusted contacts in recent days where they’ve predicted a walloping great crackdown on IAP in kids’ games, and that advertising is going to offer the only sustainable business model for children’s content – with the challenge being how to ensure the ads are age-appropriate, COPPA-compliant etc.

Adults’ games swing towards IAP, kids’ games swing towards ad-supported? That’d be an interesting trend to watch.

jaspurewalJas Purewal Lawyer at Osborne Clarke

They’re both just as fraught with legal risk. Both the US and EU are hostile to online marketing to, and data collection from, kids – particularly those under 13. The legal rules against this already exist and in some cases have already been applied against games companies with significant fines ensuing.

On the IAP side, this is climbing up the regulators’ agenda, with the UK leading the charge so far. We don’t yet know exactly what the results of that will be but on any view it will lead to at least guidance, and possibly restrictions, on IAP marketed to kids.

Using advertising and IAP in kids’ games isn’t going to disappear (far from it), but it will become more complicated (just as monetisation of nearly all other kids’ products has become over time). Regulation will therefore become a factor in Nicholas’ question of if/when to turn off advertising in a game.

andy payneAndy Payne CEO of Appynation

The OFT are investigating this right now. As I am involved in that consultation, I cannot comment right now, but suffice to say, there will need to be some consensus on this issue between Apps producers, platforms and regulators in order to protect children from overt selling techniques.

I have plenty of theories where this will end up, but they are only theories. But it is an issue right now at the highest levels within UK Government and has attracted the EU Commission also.

Stuart DredgeStuart Dredge Journalist at The Guardian

It’s a real issue for developers of children’s apps. Parents don’t buy paid apps (in large numbers). They’re increasingly afeared of IAP (even the un-scammy kind) and they’re suspicious of ads. Devs caught between a rock, a hard place and a hard, rocky place.

That said, both Fanta and McDonald’s have released children’s apps / games in recent months, so clearly some of the big consumer brands aren’t being put off the area…

richard firmingerRichard Firminger Managing Director, Europe at Flurry

The challenge with “bigger brand partnerships” is like all native advertising and sponsorship, they are not scaleable.

I have close business associates trying to do this kind of stuff and they complain of long lead times, complex deals that greatly impact internal resources and update cycles, relatively low deal sizes (hundred of thousands not millions) and it being difficult grow this type of business – typically advertisers will do it only once – examples like Madagascar 3 and Outfit7, Samsung and Rovio prove the point.

5th July

Since this discussion has proved so interesting, we followed up on this topic during the Children’s Media Conference

nicholasbwNicholas Lovell Director of Gamesbrief

I recently got an email asking for advice on how to monetise children’s apps. It opened with “Clearly, IAPs aimed at children are immoral”. I declined the consultancy role. In a world where parents won’t pay for apps upfront, don’t like ads in kid’s content and are fearful of IAPs due to some abusive practices, what is the solution?

harry holmwoodHarry Holmwood CEO of Marvelous AQL Europe

I think this is an extremely challenging problem, and the main reason I steer clear of apps that target children, for now at least.

At the moment, it feels like the most viable children’s apps will be those that somehow create brand awareness and lead to sales of physical ‘stuff’ – toys etc. But that’s a big play, and way out of the reach of most developers. At the moment, there’s too much of a disconnect between being able to purchase in an app (or purchase an app), and the cash that children may have readily available. Parents may be happy to give their children coins and notes, but sensible ones won’t give them their credit card, and most kids don’t have an iTunes card to hand to spend on purchases. To get one, they have to go to a store and hand over their cash, which puts a huge barrier between them and a purchase.

I think, in time, the concept of children having their own digital wallet will become much more normal and, once that happens, maybe we will see children purchasing in-app, or buying apps in greater quantities. In my experience with my own children, though, they’re extremely reluctant to spend money on any digital content – there are just so many other things they can play, for free, that they have never made any in-app purchases, despite having iTunes credit in their accounts. This is potentially a bigger problem – the new generation has an extremely short attention span, and an endless number of exciting distractions to entertain them. I think the most successful children’s apps will tap into playground culture – the much smaller, walled ‘social network’ that a child lives in has great possibilities for fun, app-enhanced play, both alone and with other children.

eric seufertEric Seufert Mentor at Gamefounders

I can’t provide any valuable insight because I don’t have kids, but I think that points to the larger problem — making broad guesses as to how key demographics use a product without being able to test those assumptions is not conducive to satisfied customers. The “gatekeeper / entertainment consumer” paradigm isn’t rocket science, and I think most developers understand it. Likewise, I doubt very much that many developers are out to intentionally generate revenue from kids unscrupulously by enticing them to make small purchases hundreds or thousands of times. So perhaps the reason a valid, sustainable precedent for IAPs in kids’ games hasn’t been established yet is that either 1) kids get bored quickly and don’t retain for long enough to make the freemium model work, or 2) not enough developers have kids and understand how kids think.

pecorellaAnthony Pecorella Producer for virtual goods games at Kongregate

I think the question of “children’s games” is perhaps a bit broad and should be split out a bit by age and goal (education vs. play). For younger kids I think paid and extensible games are probably your best bet, especially if they are educational. We see paid games like Toca’s variety of educational activites charting decently, even if briefly. I’ve seen an interesting educational model (I can’t for the life of me remember the name of it…started with an A I think) that was free to download but parents can buy additional modules. It was very targeted at the parents, providing reports of time spent on each subject, the strengths and weaknesses of the child, improvements over time, etc. By involving the parent deeply in the process you could actually only upsell to the parent directly but also provide compelling reasons to do so. If the game is truly educational I think parents are much more likely to be willing to spend money on your game.

Once you start targeting older children who might get an allowance and start to have a concept of money and resources then I can see more traditional F2P / IAP models working as long as you maintain an allowance system for the parents to implement. The parents could pre-purchase a large amount that gets automatically given out to the child on a daily or weekly basis. To really work though this would require a “parent mode” on the device – otherwise I don’t think there’s any reasonable way to lock out purchases from the child if they happen to be the one to download the game first. Subscription models, as mentioned above, do work as well, albeit clearly not as well as a robust IAP model.

Of course in each of these cases you’re going to be limiting your overall revenue per user, on top of limiting your audience. We’re not going to see a children’s app stay in the top 25 grossing apps for long, if at all. So I think it’s important to go into it with realistic expectations. If this is something you’re passionate about and talented at then I’m sure you can support a studio and make some decent money, but you’re not going to be a Supercell or GungHo off of children’s games, at least not if you’re ethically sound about it. The day you start targeting “child whales” you should probably rethink your life choices.

Stuart DredgeStuart Dredge Journalist at The Guardian

I don’t even know where to start on this one, head scrambled after doing a 45-minute presentation on kids’ apps at the Children’s Media Conference. I made an entire room give a shocked sigh en masse with a screenshot of Snoopy’s £69.99 IAP though 😉

I think there’s maybe mileage in building dedicated mobile ad networks for kids’ apps. More experiments needed on that front, if only to show that shoving standard ad units/networks into children’s apps isn’t good

And other stuff. Sorry, really am scrambled. I’d also say, though, that if you’re looking for Puzzle & Dragons-style lucrative success, kids’ apps isn’t the place to be. And maybe that isn’t a problem. Toca Boca has been ‘profitable for some time now’ and is building its brand. That seems encouraging. Or at least would be if the path to profitability for the next 10 Toca Bocas was clearer.

Oscar ClarkOscar Clark Evangelist for Applifier

I know some parents will not balk at spending £69 on a physical present for their kids, but its harder to feel good about spending that amount on virtual goods – even over time. I might choose to spend more than that on a game over time, but its rare although if I do its because I’ve embraced the game entirely. But spending that on others is usually harder; not least as its on the coldest-side of my Hot-Cold Empathy Gap psychology.

Pitching the right level of spend that makes the game feel good to players and avoiding building an ever growing money pit is important for all games, even I it seems it will cap your revenue potential. But for me that’s a good thing… lets make better games rather than leave players feeling used. That thinking is essential in my opinion if you want to make a great game for adults or kids. The focus on the quality matters in terms of engagement, trust and lifetime value. Make sure the design allows people to pay something, but don’t overly focus on squeezing the monetization for all its worth. The funny thing is I believe that you eventually make better revenue if you focus on the playing quality and player delight.

Better targeting with Ads is a good idea for everyone. I’m sure that its not just the adult/gambling/etc services that don’t want to be exposed to a child audience. Although I suspect a dedicated mobile ads network for children will probably have a whole bunch of legal/commercial/policy issues which I for one wouldn’t want to have to tackle.

Dylan CollinsDylan Collins Executive chairman at Fight my Monster

I’ve had exactly 33 conversations about this topic over the last two days at Children’s Media Conference. Insane.

Aggressive IAP design is going to become much harder to use in the kids mobile space-lots of our big brand customers are talking about pulling back from it. The most practical ‘safe’ monetization option in short-medium term will be premium ad network (with appropriate partners etc.).

An ad network isn’t the optimal game monetization mechanic. But I simply don’t see any viable alternatives for now. Apple’s upcoming Kids category is nice but will really just impact pre-school kids. They could obviously fix everything with a kids wallet and some OS-level stuff but I just don’t think it’s a priority for them right now. Important point which people miss: App Store is a monetization platform, not a content platform.

Fundamentally though, the kids app market (and other platforms) is *hard*. Yes, Toca Boca, but they’re the exception which proves the other thing.

pecorellaAnthony Pecorella Producer for virtual goods games at Kongregate

Yeah, I suppose I ignored the clearest success in this area recently: Skylanders.  It’s a pretty clever implementation of IAP that fits into a model that parents and kids understand and can put value on: action figures.  It provides a nice, controllable gate for parents to monitor the spending, but also allows them to spend big if they deem it appropriate.  Of course the scope of building physical figures and doing actual distribution is outside of what most app developers would even begin to consider, but as the game has grossed over $1B Ben’s correct that the potential for something to be big is clearly there.

Stuart DredgeStuart Dredge Journalist at The Guardian

I’ve heard a few people draw attention to Rovio’s revenues being much less than GungHo / Supercell / King, and the suggestion that they’ve missed a trick, or been underperforming in comparison. But suddenly today I thought: are Rovio deliberately holding back from going full throttle on IAP because they know they have lots of children in their community?

I’m not saying they are, but it did make me wonder if that’s what’s made them more cautious with the rollout / level of their IAP. Open to being told that’s a silly suggestion though.

also… I would really like to see some proper, detailed research into parental attitudes on all this stuff. What do THEY think is acceptable and unacceptable?

Because whenever this conversation comes round to the ‘Pfft, if parents buy £70 toys there’s nothing wrong with £70 IAP’ point of view, I always want to shout “BUT PARENTS DON’T THINK THAT. AND THEY’RE YOUR CUSTOMERS!”

But I have not one shred of actual proof beyond chatting to a few people at the school gates about all this, and would love to see some data. My gut feeling (from that super-limited focus group) is that developers might be shocked at how hardline many parents are on IAP of any kind, not just the high stuff.

I blame the media! 😉

Eric-Hautemont1Eric Hautemont CEO of Days of Wonder

I could also be that Rovio feels, like Activision and a dwindling few others ourselves included, that the current freemium craze on mobile isn’t sustainable, klds or not… at least not in the long run, and not for most players.

Even for giant successes like Supercell I find it interesting to see that they seem to have a hard time sticking to their #1 top grossing spot in the US these days… they’re now consistently # 2 to #4, which must be a fairly big difference $-wise.

I know I might sound like a broken record, but people were giving me the same weird look when I was arguing against the sustainability of the social gaming model on FB, 3 years ago. And look at where most of these folks (Zynga, etc.) are these days. 😉

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Every week, we all ask our august panel of luminaries a burning question in the world of free-to-play and paymium game design. Or we ask a broader question on the future of the industry. We’re not going to announce who is a GAMESbriefer. You’ll just have to read the posts to see who is saying what to whom. We have CEOs and consultants, men and women, Brits, Germans, Americans, indies, company people and much more besides.