In this article Vikas Gulati of AdColony shares advice for game developers with regard to protecting themselves against rising regulations and diversifying their monetization strategies.
By now, most technology and online-first companies have tasted the bitter pill of legislation, having poured valuable resources into meeting standards of new regulatory acts such as GDPR. Health care and medical companies, too, are more than familiar with how their company’s health – and stock price – can rise or plummet with the passing of a single new law.
Mobile gaming companies, on the other hand, have been relatively protected from the potentially devastating effects of such regulation. They’ve been free to develop creative ways to monetize that are unique to their industry and their users. That time is over.
Senator Josh Hawley of Missouri has introduced legislation that would ban randomized rewards to players through microtransactions, “manipulative” design features and pay-to-win mechanics – including progression systems – in video games targeted to minors, and would prohibit children in accessing them in games aimed at adults.
What he’s specifically referring to is something called “loot boxes,” or virtual mystery prizes that video game players can redeem for other virtual items, such as equipment (weapons, armor) or customization options that they’d otherwise have to pay for.
There is always a chance that the law won’t pass. But there is also a good chance that it will; despite Apple’s move to require odds disclosure, overall, the industry does not seem poised to self-regulate. And when both gambling and kids are involved, I’ll bet the public is going to weigh in – and strongly – on this ethical debate.
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When the law does pass, mobile publishers who bank on revenue from these “prize crates” could find themselves crippled with a loss of a significant revenue stream. Ubisoft, for instance, makes more money from player-recurring investment (e.g., loot boxes, microtransactions) than it does from digital game sales.
If you’re one of these publishers who will get hit hard by this legislation, I offer my condolences.
What I can also offer is a way out of this mess. It’s not a magical solution, and it won’t fix everything overnight. It will, however, be a smart strategy that will protect the downside as our industry grows and becomes less Wild West and more formally regulated. Every mobile game company needs a fully diversified, stable mobile monetization plan for sustainable, long-term growth. These are the key ingredients.
In-app purchases are a 100% valid way to make money with your app. But if you’re going to charge money, be obvious about what you’re selling. Loot boxes, for example, are a monetization misfire because consumers see them as an attempt to “nickel and dime” them, further proof that the developer’s main motivation is to “screw them over.” Loot boxes are technically under attack because of how politicians and lawyers are equating them to gambling, but that group would never have even known about them if gamers had not issued a public outcry – and that discontent was not about the ethics of gambling, it was about how they felt unfairly treated.
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Value exchange is not limited to in-app purchases, where the user gives you money and you give them a reward. You can also gain value in the form of advertising revenue for the user’s attention. I’m not talking about the value of an impression of a video ad, which may or may not be watched to completion. I’m referring to the higher value of a user watching a video ad in its entirety, which they will do because at the end of that ad they will be rewarded with something they truly want, like-gated content, a level up, virtual currency, etc. The value they receive is far beyond mere free play.
Of course, there is something to be said for the creative and innovative ways that mobile app developers are monetizing users. I fully encourage experimentation with new revenue models. But mobile advertising is fully established and is ensconced within the mobile app industry, so much so that many apps make all of their money from it – relying on it completely. There’s a reason they’ve put all their eggs in this basket. Because consumers now expect to see ads, there is no outcry (when they’re executed well). And because there is space within mobile advertising to innovate and optimize, fine-tune your advanced monetization or introducing new demand sources.
Also Read: Are Game Makers Learning to Love Mobile Ads?
“The Protecting Children from Abusive Games Act,” if it passes in any form close to the initial proposal (there’s no doubt it will change), will change everything for some companies, and some things for most. But with the right planning and actions taken now, it doesn’t have to be the end of the world.
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