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A Survey of Casual Games Business Models
Opportunities for Developers and Publishers
While we spend most of our time talking
about nitty gritty details in the casual games
space, it is often good to take a step back
and review the industry from a high level.
Occasionally it’s good to organize what you
know in a way that provides a more cohesive and
complete picture than you might get from day to
day. This high-level analysis of the casual games
space was performed by Microsoft Casual Games
for this issue of Casual Connect. Please note
that this analysis reflects the Microsoft perspective
and may differ slightly from information
presented directly from the Casual Games
Association.—ed.
Vladimir Cole,
Jonathan Bankard,
& Andy Peterson
Casual Connect Magazine Casual Connect Magazine
Overview
This article provides an overview and
introduction to casual games business
models with an emphasis on developer and
publisher opportunities. Though these
more traditional software development and
publishing opportunities generate the bulk
of industry revenues and profits, they’re
not necessarily the most profitable lines
of business. The attached industry map
provides brief insight into the context for
the core models and outlying opportunities
within casual games.
Passive Monetization Active Monetization
Subscriptions
Subscriber
Retail &
Microtransactions
Transactors
Targeted ads
Registered users
Ads
Unregistered users
$$$
ARPU
$
Game business models can be thought of
as a pyramid: at the base of the pyramid are
the mass of customers who play games but
haven’t yet pulled out their wallets. These
consumers nonetheless enjoy playing games
and can be passively monetized through
advertisements. Some subset of this group
will be willing to “register” (in order, for
instance, to save high scores or engage
in community features) enabling more
highly targeted advertisements. A smaller
percentage of consumers (“transactors”)
will proceed to actively purchase games or
virtual game objects, while even fewer will
enter into recurring billing relationships
(subscriptions). Frequently business models
will overlap: For instance, the virtual objects
that a player chooses to purchase for a given
game may also include product placements.
Advertising-Supported Games
Developers and publishers create games
that command the attention of consumers
worldwide. Advertising agencies and their
clients need a bit of that attention and are
willing to pay for it. Games, in particular,
deliver an engaged, active audience.
In brief, there are four ways to monetize
games through advertising.
1. In-game advertising appears in the
middle of the game experience. Firms
including Double Fusion and Massive
work with developers and publishers to
insert dynamic advertising “containers”
into games. These containers can then be
filled and refreshed as ad sales teams sell
these virtual spaces.
2. Around-game advertising doesn’t appear
inside an experience but instead appears
around, on top of, before, or after the
game experience. Games might be framed
with standard-sized advertising banners
and towers. Short, pre-roll advertisements
front a game experience (with video or
static images) while post-roll (bumper)
advertisements end it, like a caboose.
Advertisers are also fond of interstitials
(mid-experience commercial breaks).
3. Product placement is more subtle than
either of the first two options. Instead
Business Models
of a standard ad format, products
themselves (such as a can of Pepsi or a
t-shirt featuring a corporate logo) might
be placed into games as items a character
uses. Additionally, gamers might be given
the option of purchasing Nikes or Pirellis
for their avatars or cars instead of generic
shoes and tires.
4. Advergames are games that serve as
advertisements. Burger King, Toyota,
and the U.S. Army are just a few of
the entities that have commissioned
games to drive brand awareness, brand
engagement, and consumer preference.
Strengths
• They’re Dynamic: Print advertisements
don’t change. In-game or around-game
can be changed on the fly, enabling
better targeting and fresher campaigns.
• They’re Interactive: Game advertising
firms cite research that consumer
memory is aided by interacting with an
advertisement, a benefit that can be
expected to translate into higher sales.
• They Overcome the Payment Barrier:
Rather than require gamers to plunk
quarters into a slot or enter credit card
information into a form, advertising
gives game developers and publishers
the opportunity to monetize game
attention passively. With conversion rates
of traditional casual games hovering
at between one and two percent,
advertising offers an opportunity to
monetize the other 99% of consumers
who aren’t willing to pay directly for
the pleasure of gaming. According
to research from eMarketer, in-game
advertising is projected to grow at 23%
per year to nearly $2 billion by 2011. Like
other forms of media content, games
also stand to grab a share of the $600
billion worldwide advertising market