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Understanding Mobile Game Revenue: It’s (not) all about the whales (if you’re big enough)

With the recent news about how profitable mobile games are, it's increasingly important to understand who the pays for these games. While common knowledge states that a very small population of whales fund these games, the truth is far more complex

The Data
The most common perception of mobile games is that they are primary funded by whales, a small percentage of users who spend thousands of dollars while most play for free. And this perception is not without merit. A 2016 study by Appflyer reports that

Gaming Apps Are All About Whales

It is a well-documented fact that a very small percentage of gamers contribute a significant share of the in-app revenue in gaming. It’s called the whales phenomenon. In line with this trend, our data showed that only about 3.5% of gamers spend money in-app, but those users are big spenders, spending 30 times more than the average gamer (paying and non-paying) with $9.39 vs. $0.32 a month per gaming app.

So clearly, whales are king, and the developer should prioritize them at all costs. Except maybe not. In a 2017 GDC talk, EEDAR reports that about 47% of mobile revenue in North America in 2016 comes from people who spent $0.01 to $99, who account for 41% of the playerbase, while whales are 7% of the playerbase. This is a stark contrast from common knowledge and the appflyer study. This further backed by the free portion of their 2017 mobile report, which reports the same player ratio, but with more revenue coming from the whales (the whales became whalier).

So what gives? How can two market research companies produce seemingly contradicting reports? A hint comes from a survey by a guide website, Appbank.net, did about Fate: Grand Order, the second top grossing mobile game in Japan. The most shocking finding is that 20.6% of players have spent 200,00 yen ($1,800) the past year. In fact it was the largest segment in the survey, with F2P players only at 13.3% These results are so far from the expectation that it demands an explanation. While the EEDAR data is NA and the FGO survey is Asia, I doubt the ratios between the regions is that far, especially when they're not that different in the AppFlyer study. My best guess is that this sample is biased heavily towards heavy players, as this is a guide website after all. This matches up nicely with EEDAR's report that Heavy Players account for the majority of the revenue (61%).

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Conclusions: Making Sense of the Data

Now he're my guess as to how to use the information from these reports: Different games can have very different user spending profiles. The appflyer study looks at the average spending profile Per App. But the thing is, a person can play multiple apps, and will most likely concentrate their spending on one app. It makes sense since you want to maximize the bang for your buck, and dividing an average year spend of $33 over multiple games is not going to get you very far. This means that the biggest mobile hits probably take the lion's share of the mid-spender segments, which mean the smaller apps are left to win over the big spending whales. This results in the somewhat unusual situation that the market leaders are actually encouraged to be more consumer friendly than their smaller competitors. This also means that for niche games, they pretty much have no choice but to cater to the whales, ensuring that they stay niche.

Another interesting data point comes from how spending is directly proportional to how much one plays. This information is interesting, when you consider that some of the most used form of microtransactions in bigger games is the "Pay to skip the grind" version. It seems that this version is in fact counterproductive for developers who want encourage spending in long term games: by paying to skip the grind, you make them play less, which then makes them less likely to pay in the future. This might not be a problem for shorter single player experiences but long playtime multiplayer games might be cannibalizing future sales for current ones. In fact, you can see the opposite strategy in Fate: Grand Order: The more a player rolls the gacha, the more characters they get to level up, encouraging to play more. And there is no mechanism for a player to open his or her wallet to skip that grind. Similar mechanics are present in Granblue Fantasy, another big Asian mobile game. Basically, the key take away seems to be microtransactions shouldn't discourage your players from actually playing the game.

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Finally while most of this data concerns mobile, a lot of it applies to the PC F2P market as well, which has a similar spending/revenue profile as mobile.

TL;DR

  • Light spenders ($0.01 to $100 a year) actually account for a significant portion of the mobile population (41%) and revenue (30%-49%)

  • However, it is likely that these light spenders are actually concentrated in the biggest games, which means niche titles are left to court whales

  • Pay-to-skip-the-grind microtransactions might actually be counterproductive and cannibalize future sales. Microtransactions should encourage players to play more, not finish the game for them.

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