Archive for the 'Business Models' Category

Making Casual Games Pay

Like many other creative industries, the games industry is not just about helping people have fun. It’s an industry, made up of businesses, and those business exist to make money.

In the post Ad-Supported Gaming, I described three different models for using advertising as a way of making computer games pay. In this post, and the ones that follow it in the topic, we’ll consider some of the other business models that support games and gaming, and look at how the distribution models for different sorts of games compares with the distribution of other digital media such as music, movies and even books.

But for now – let’s consider casual games, which in many cases need to (appear to) be “free” to the end-user, or they won’t play them… And if they are being sold, then they need to be affordable (which means they need to be sold in volumes large enough to cover the cost of development and distribution, though not played in such large volumes as if they were purely ad-supported).

The following opinion piece – The Future For Casual Game Revenue Growth? – that appeared on the GamaSutra news site tries to identify the different ways in which the developer of a casual game can make a living. Try to answer the following questions based on your reading of it:

  • what are the three main ways of covering the development costs of, and ideally securing a profit from, casual games that are identified in the article?
  • how does the use of advertising in casual games compare with advertising on television?

The article identifies three main ways of raising revenue:

- In-game advertising, in which advertising space is sold within a game; the developer uses ad-revenue to provide them with an income;
– “the direct route”, whereby “a direct connection [is made] between independent developers and gamers”; here, the developer tries to sell direct to the end-user. This position is contrasted with ‘selling out’ to a publisher who is likely to market the game in a traditional way;
– “increase the perceived value of their games by upping the price”: that is, sell the game as a “superior product”, a counter-intuitive and potentially risky strategy in which differentiation of the game is achieved by pricing it above that of competitors, some of which are made to look cheap, and – one hopes – of lower perceived quality!

Several other approaches are mentioned in passing in the closing section: “promotional contests to award points to those who purchase new games, thereby increasing sales and loyalty. In-site ads, merchandising and game trailers, which are sold as advertising elsewhere”.

Casual games are seen to be similar to television sitcoms in that “…in exchange for the ability to play and be entertained for a short period of time, people are willing to watch ads” (these ads correspond to the interstitial or pre-roll ads that were described in Ad-Supported Gaming). However, it is also possible “to integrate dynamic in-game advertising platforms into the game. [That is, in-game advertising.] With the constant connection, the adverts can be altered based upon a player’s moves, or even their geographic location, providing targeted and more effective advertising. … It wouldn’t be surprising if in-game ads soon become integral to the content of a game, offering clues, extra levels or other hidden rewards for the player who clicks through.” In-game advertising, even in casual games, offers the potential for interaction. By engaging the player emotionally in the game, they may well be forced to pay more attention to the promotional message or advertised goods (for example, if you have to go in search of the missing Nuvo Cola can…!)

Can you think of any other “routes to free” for casual games? Post your thoughts back as comments… Here are some ideas to get you started: Lions, Tigers, Free Games… Oh My!.

Ad-Supported Gaming

One of the most influential business models – for web companies at least – over the last few years has been ad-supported publishing. So it is not surprising that adverts are also being used to generate revenue in the context of computer games. (Advertising also contributes significantly to underwriting the costs of traditional publishing. If you have ever wondered why many glossy magazines have so many high profile adverts, that’s why!)

How do you think advertising could be used to provide an income stream for the publisher of a computer game? Think about whether any games you have played brought you in contact with adverts from other companies, or browse through some of the posts on Business & Games: The Blog, to give you some more ideas.

Making Games Pay the Advertising Way

Looking across the ad-supported gaming market as a whole, there appear to be three dominant ways of using adverts to support computer games:

  • “Ads around the edges”;
  • Advergames;
  • In-Game Advertising.

Let’s look at some of those models in a little more detail.

“Ads Around the Edges”

Many online casual games are hosted on websites such as Kongregate or games.co.uk that contain adverts. The games are the hooks that pull people into the websites where they are forced to view adverts. The ads may appear as banner ads along the top of the screen, or in a sidebar alongside the game. Alternatively, the advert may appear as a “pre-roll” advert that plays in the game window before you are allowed to play the game.

Not surprisingly, Google (which is an advertising sales company…) has got into the game advertising business with its Adsense for Games product that operates in both these ways, providing opportunities for publishers place “appropriate” adverts alongside Flash games on gaming websites, as well as ‘embedding’ pre-roll and interstitial (“ad-break”) adverts “within” the game.

Advergames

Advergames are games that are heavily branded and as such essentially “are” the advert. Advergames typically present a game world that reflects the advertiser’s branding, or at least the message the advertiser wants to communicate, and in so doing potentially engages the interest of the player for many valuable minutes in what advergame developer Skyworks calls “branded interactive entertainment”.

Advergames are typically casual games, although two extremes are possible: for example, a pre-existing game may be bought “off-the-shelf” and rebranded with a particular company logo (a digital equivalent of company branded giveaway pens!); or they may be custom designed for a particular campaign.

The custom design route is particularly evident in large corporate advertising campaigns, where the advergame is just part of a wider campaign, and is likely to have production values as high as the other parts of the campaign (photo ads, TV adverts, and so on). As you might expect, such advergames can be very expensive to develop.

A good example of a game developed as part of a wider campaign is the Honda Problem Playground website. The rationale behind the website – and its role in the campaign – is described here: Honda Joy of Problems and how it got there.

Visit the Problem Playground website and play some of the games there. How would you know that this game is an advergame if you came across it whilst looking for a new online game to play? What message is the Problem Playground trying to communicate? Post your thoughts as a comment back here.

Now read through the “How it got there” article – does the rationale for the game described there fit with your interpretation of the game?

Have a look round for some other high profile advergames and see if you can identify what sort of message they are trying to communicate. Here are a couple of examples to get you started: Stella Artois advergame and Guinnes “Legend of the Golden Domino” advergame.

In-Game Advertising/Product Placement

In-game advertising places adverts within the game itself, either as an advert inside the game, or via product placement (giving a particular make or model of car a prominent place in a racing game, for example).

Watch the following promotional video from IGA Worldwide, a video game advertising agency. As you are doing so, note down the different ways that adverts are placed into the games. Does the setting of particular genres of game make in-game advertising more or less appropriate? What would be a good example of “in-context” advertising within a game? And what might an inappropriate advert be?

For more examples of contemporary in-game advertising, see the Case Study showreels from the IGA Worldwide advertising network.

Revenue streams for in-game advertising are determined in different ways for the different modes of in-game placement. For example, adverts shown on in-game billboards might be paid for using a “traditional” internet advertising model – “CPM” (cost per thousand impressions). For every 1000 views of the advert, the advertiser will be charged a certain amount.

For each of the three modes of ad-support described above, write down the pros and cons of each approach, either in a blog post that links back here, or as a comment to this post. Some of the things you might consider are: time/cost to produce the ad; time spent by the viewer watching the ad; likely reach of the ad (how many people are likely to engage with it, is it amenable to a “viral” (word-of-mouth) distribution model); and so on.

Further Reading:: if you would like to learn more about ad-supported gaming, this History of In-Game Advertising is well worth a red (it includes video walkthroughs of several early advergames), as well as the more comprehensive Advertising in Computer Games MSc thesis (MIT), both of which are by Ilya Vedrashko.


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