Mobile game marketing now a contest of numbers
The mobile game industry is clearly maturing. In years past, mobile game makers would develop their titles mainly on intuition, with marketing plans based mostly on hope and word of mouth. Today, however, the business is a sport of mathematics--of carefully targeting the correct demographics, of fine-tuning the marketing spend to acquire the right paying customers and of tweaking a game so that it's fun to play for free but even better if a user spends a little money.
This is the reality that Mark Dooley lives in. Dooley is vice president of marketing for game maker Digital Chocolate, a company that has been in the business for more than a decade. Although Digital Chocolate has never enjoyed a breakout title like Angry Birds or Words with Friends, the company continues plugging away with a small but successful lineup of Facebook (NASDAQ:FB), iOS and Android games.
I spoke with Dooley about the company's newest game, Crazy Penguin Wars: Tiny Duels. A team of 12-15 Digital Chocolate designers developed the game for Facebook, and last month the company brought the title onto iOS. The physics-based combat game is worth highlighting due to its ordinariness--like virtually every other mobile game today, Crazy Penguin Wars: Tiny Duels is free to download and entices users to spend money on upgrades like better weapons. (According to Flurry, games account for 80 percent of the $10 billion-a-year app industry, and the freemium approach used by Crazy Penguin Wars: Tiny Duels and others is by far the most common type of mobile gaming business model.)
With that in mind, how is Dooley planning to drive interest in Crazy Penguin Wars: Tiny Duels? He said the company's marketing strategy breaks into two major buckets:
1. Nonpaid user acquisition
Dooley said Digital Chocolate has a suite of other mobile games that it can use to promote its latest offerings. That means that the company can put Crazy Penguin Wars: Tiny Duels into the ads that are displayed inside its other games like Galaxy Life, Millionaire City, Zombie Lane, Army Attack, Crazy Penguin and Rollercoaster Rush. Dooley said that Digital Chocolate's click-to-install conversion rates in these internal channels typically reach 10-30 percent, which Dooley explained is the percentage of people who install the advertised game after seeing an ad for it).
Dooley also said Digital Chocolate will team with other game developers in order to insert its ads into their games. So for example that would put ads for Crazy Penguin Wars: Tiny Duels into games like Fruit Ninja. In turn, Digital Chocolate would advertise Fruit Ninja inside the company's own games. However, Dooley explained that Digital Chocolate will only show these cross-promotional advertisements to its customers who haven't spent any money during the past 30 days. Dooley said Digital Chocolate is "a little more protective of those players" who do spend money in the company's games and will therefore use its ad inventory to continue to try to get those customers to spend even more money inside Digital Chocolate games.
Dooley said that Digital Chocolate generally will pursue cross-promotion deals with five to 10 other developers.
For both internal and external ads, Dooley said Digital Chocolate will use its own ad-serving platform or third-party ad vendors like PlayHaven and Chartboost.
2. Paid user acquisition
Like most major developers, Digital Chocolate also spends money to advertise its games through advertising companies like Flurry and Millennial Media (NYSE:MM). Dooley said the company generally buys new users on a "click per install" basis, which means Digital Chocolate will create a banner ad for Crazy Penguin Wars: Tiny Duels and that ad will then be displayed through Millennial or Flurry's ad network. For every user who clicks on the ad and installs the game, Digital Chocolate pays $1.75, for example, knowing that it can reasonably expect that user to eventually spend a total of $2 on in-game purchases (Digital Chocolate has plenty of historical data to guide these calculations). Dooley explained that Digital Chocolate carefully selects what types of users see its ads-- Dooley said the company is now starting to find "pockets" of valuable users, like French men aged 18-35 for example, who are much more likely to spend money in a game than other demographics.
Interestingly, Dooley said Digital Chocolate is in the beginning stages of kicking off a video advertising campaign. He said the company plans to create video ads for games like Crazy Penguin Wars: Tiny Duels that would be displayed through ad vendors like AdColony, Applifier and Vungle. Dooley said initial results show that video ads are much more effective than banner ads in obtaining quality users, likely because the ads show off the actual mechanics of the game and therefore appeal more directly to users who would want to play the game.
Dooley also confirmed that Digital Chocolate has been advertising its games through Facebook's mobile News Feed, which he said has yielded better results than ads through Facebook's other channels.
So what is the expected result of all of Digital Chocolate's user acquisition efforts? Dooley said the company's "conversion rate" ranges from 1 to 7 percent. This conversion rate is the percentage of users who download the company's game and then spend money on an in-app purchase, and the figure varies depending on the type of game. For example, in-depth strategy games typically yield better conversion rates but entice fewer users, whereas casual games usually entice more users but have lower conversion rates.
Paid and nonpaid acquisition strategies continue to evolve. For example, Dooley said that the industry continues to chase pockets of high-value customers, like French men aged 18-35, and that the cost to advertise into these pockets has increased as a result. Advertising costs also increase during specific times of the year, like the holidays.
Another factor that can dramatically affect a game's marketing strategy is an app store promotion. Dooley said one of Digital Chocolate's games, Galaxy Life: Pocket Adventures, was featured in the "Strategy" gaming category in Apple's (NASDAQ:AAPL) App Store. Although Dooley declined to say how that promotion affected Galaxy Life: Pocket Adventures downloads, it was clearly a big win for the company. "All app developers try and strive to impress Apple enough so that Apple will give it featuring," Dooley said.
But if Apple doesn't smile on a game with an App Store promotion, then a developer like Digital Chocolate is left to pursue the paid and nonpaid marketing strategies that are quickly becoming commonplace in the mobile game industry. And, as this market matures, those strategies are beginning to rely far more on number crunching than intuition and hope.--Mike | +Mike Dano | @mikeddano