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Mobile Dev Memo
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Competition for user attention is intensifying in a winner-takes-all economy.
Rising in-app advertising revenue in mobile games may disadvantage the small developers who depend on it most. That is the central argument of this May 2015 analysis, which examines what a bifurcating mobile games economy means for competition. Some studios build deep free-to-play economies, while others, such as the makers of Crossy Road, rely on advertising-driven monetization.
The argument draws on App Annie data for 2013 to 2014. In-app advertising revenue grew 70%, roughly matching growth in in-app purchase revenue. Total revenue per device rose 20% while the smartphone and tablet install base grew 40%. Among nearly 3,000 developer respondents, almost 50% expected to earn from in-app advertising, versus 70% for in-app purchases. Among more than 1,200 respondents, about 90% earned less than $10,000 per month from advertising. Digi Capital data showed games investment fell 7% in the first quarter of 2015.
From this, the analysis reasons that venture capital is receding rather than fueling mobile ad spend. The dominant ad buyers are therefore the largest developers. In 2014, Supercell spent roughly €400 million and King $455 million on marketing, though those figures cover all channels. The winner-takes-all dynamics of the top grossing charts make marketing-led competition effectively impossible for newcomers, which also explains weaker VC appetite for the category.
The resulting dilemma is that small developers with simple, viral games and no marketing budgets or funding often have advertising as their only viable revenue model. By selling ad inventory, however, they send their users into the portfolios of large incumbents, which use analytics to route players to games they will enjoy. Small studios thus subsidize the user acquisition of their biggest competitors, facing a choice between fueling rivals' growth and competing on balance sheet strength. The author acknowledges that not every clicking user churns from the source app, but treats this as a secondary point.
Mobile Dev Memo · 2026
