The Future of App Monetisation: An Industry Outlook

let's talk to michael michael from uh facebook audience network michael uh is um basically going to uh talk to us about the future of app monetization um so this is an industry outlet michael uh hopefully everything's all working with you i can't quite see a video at the moment ah perfect that's what we like to hear coming through loud and clear so without further ado michael you tell us all about uh the future of monetization from facebook's point of view i will leave you to it and uh we'll speak at the end of that excellent so thanks very much first of all oscar for the warm introduction and for having me as part of the the pgc event and hi there everyone in the audience and thanks so much for joining me today so building on oscar's introduction it's it's just a real pleasure to be together with you as oscar mentioned my name is michael and i'm here to give you a look at facebook audience networks app monetization industry outlook which

offers industry insights into the future of app monetization along with recommendations on how gaming businesses can prepare now for growth ahead and you know i was thinking about this and i'm guessing that most of you are interested in this topic for similar reasons to why it's so important to me fundamentally we work in an exciting and extremely dynamic industry and the constant developments and changes that are happening all the time they really require us to stay focused on being deliberate on iterating on the way that we work in order to ensure optimal experiences on our platforms and in our games but at the same time building a strong and a stable business model which allows for us to continue to reinvest in how we build for the ecosystem so just nuts and bolts here in terms of format for this session i'm going to talk through some pertinent content presented in slide format hopefully you can all see for about 15 to 20 minutes and then we're going to wrap up with a few q a just a heads up that a few of the slides towards the end of the deck are

particularly content rich so when we get to that point i'm going to pause and i'm going to give you a chance to read through the key themes on each of the slides before i go into additional perspective and it's always nice to have a goal by the end of the presentation i'm really hoping that each of you will have learned something new that's relevant to how you work and develop games and for you to be as excited as i am about the future prospect of how together we can continue to drive impact in experiences and business outcomes by leveraging these insights and others across the ecosystem on platforms as developers and for our game players so it goes without saying that 2021 has brought in for the mobile game businesses so it's worth taking time to examine how these shifts impact monetization across the in-app economy and tangible actions publishers and

developers should now be taking so today we're going to talk about the current state of that monetization and some of the exciting possibilities looking all the way towards 2025. then i'm going to offer some practical recommendations for gaming businesses on how you build sustainable monetization solutions into your game now but while also preparing for the future in developing our app monetization industry outlook we interviewed 25 thought leaders from across the industry including ad tech executives industry analysts game publishers and other leaders in the space you get a glimpse of who who is in that cohort here but before looking at what the future holds let's ground ourselves and talk about the current state of that monetization hmm most app businesses have had to adjust to ad tech changes this year personalized ads and user level measurement were significantly

restricted with apple's ios 14.5 now personalized ios 14.5 are limited to those who at least opt-in to apple's app tracking transparency prompt or affectionally known as att which can impact the relevancy of ads for players as well as ecpms and measurement for developers so all this has affected the way mobile game businesses market monetize and measure their apps and many of us wonder whether personalized ads will fade and how user acquisition models will change but we know that disruption historically has spurred innovation and we believe publishers and developers will use these changes to position themselves for growth ahead and as becky ann hughes of blue mobile said change leads to new opportunity so one such area of opportunity is the

ongoing growth of mobile gaming and in-app ad revenue mobile gaming is now the fastest growing segment of the global games market according to nuzu and industry analysts agree on sizable growth by 2025 even if there are short-term fluctuations in line with that view global research firm amdia predicts a rise of get this 21.3 for in-app ad revenue in games this year and that's compared to just 6.4 rise in revenue for non-gaming apps in 2021 we're seeing that more people are eating apps daily with the increasing sophistication of app-based games and entertainment in all regions categorically app annie's state of mobile report showed an average of 4.2 hours daily time spent on mobile apps in 2020 along with a seven percent increase in demand for new apps and e-marketers time spent with mobile 2021

suggests that nine minutes of the daily increase in time spent on mobile is gaming specific and that most of that rise will hold for 2021 and beyond meaning it's not just a temporary rise from 2020 shelter in place or lockdown measures for game publishers the accelerated shifts to bidding and hybrid monetization that were predicted in 2020 are fundamentally playing out globally and across platforms even as we speak today bidding is not just a priority but an absolute imperative beyond 2021 you'll need to be on bidding to monetize efficiently effectively facebook audience network now works with most major mediation partners to allow access to all the impression opportunities offered through facebook and this is great news for publishers because now instead of you spending time checking price floors across multiple countries to maintain waterfalls you can see every placement that applies

to every country and every user that means more time to focus on your monetization strategy for example with the time you save you can spend time testing different rewarded video entry points and frequency making sure to balance in-game reward rewards alongside in-app purchases which brings me to my next point now the value of the [Music] monetization mix is also clear a balance of in-app purchases and in-app ads is widely accepted among publishers on facebook audience network melsoft is one of the many who see success when integrating both ads and iap as a unified strategy so integrating in-app ads to create incremental revenue streams and then reinvesting that additional revenue back into growing their game industry analysts like candace mudrick at nuzu recognize

that a diversified monetization model should now be common practice from for developers so we just saw that the current state of app monetization holds both disruption and opportunity for mobile game publishers and developers now let's explore what we see happening in 2022 and beyond as game developers innovate and adapt innovation will drive greater value across the player the publisher and the advertiser ecosystem as people play more mobile instant and cloud games developers will connect more players across multiple platforms which enables new types of quality advertising experiences for people which in turn opens greater monetization opportunities for publishers you can see how much of an ongoing value exchange it is so looking at ad revenue specifically we'll continue to see growth in in-app

game revenue from ads in fact idc forecasts a compound annual growth rate of 17 for mobile game ad revenue this means more money going to publishers this year in the years ahead with the in-app revenue forecast to be more than 53 billion us dollars in 2024. that's a pretty big number by any account moving forward in addition to that we're going to see more quality ads as businesses are incentivized to provide positive ad experiences for players the demise of those spammy ads and is something we can all celebrate one significant area of innovation for 2022 is the mobile to cloud evolution many mobile publishers and developers already build instant games which just to clarify are no download games but that still allow

graphically rich play at the same time facebook is making a very large infrastructure investment to support cloud gaming and this is going to help drive the industry towards frictionless play across mobile instant and cloud platforms here on the slide as jason riven vp of facebook play suggests imagine you can see and try all games right from the same cloud platform then download only the ones you want to to your phone you'd probably play more and spend more in those few games you were able to test and deliberately add to your mix in this mobile to cloud shift there's more value for players because they can have deeply immersive cross-platform game experiences there's the potential to integrate in-game rewards and in-app purchases across both cloud and mobile where players access in-app purchases in the same game on both a cloud platform and an app and

this monetization converges across platforms publishers and developers will see greater return to get to this future we'll see more games designed with monetization in mind from the very start gone are the days of build then monetize successful publishers are changing the ways their teams are organized bringing user acquisition monetization and development into almost a single process as games are built with monetization in mind we'll continue to see uses of rewarded video ads that are advantageous to players and profitable to publishers with generous in-game rewards like battle passes or free lives also by 2022 we'll see better creatives as game marketers explore and grow in their understanding of player motivations for example they can leverage creative to connect with new diverse audiences

in the metaverse the opportunities get even more exciting by 2025 we can expect people to have highly personal engagement with brands and publishers in virtual reality environments that incorporate gaming entertainment commerce and social experiences ben chen of tap joy asks us to consider this immersive ad experience instead of test driving a corvette or any other cool sports car you're putting on an oculus quest headset to drive and then you can download an nft after as a reward imagine that great so now that we've discussed trends and predictions let's look at recommendations for how you can get there as a gaming business how should you prepare for the future what are the priorities to focus on now for success ahead

of the interviews for this app monetization industry outlook we asked 18 thought leaders outside of facebook to share their recommendations on what all app publishers and developers should focus on before the end of this year 2021 and their top two recommendations are number one shift from waterfall to outbidding and number two diversify your revenue streams with a hybrid approach using both in-app ads and in-app purchases others suggested optimizing non-personalized ads and refining your rewarded video ad strategy i want to give you time to really take in these final few slides so as i mentioned i'm going to click on each and i'm going to pause for a second before speaking to the content to give you a chance to absorb the key things so as you plan for 2022 we suggest

focusing on these three areas efficiency engagement and ad strategy as this is one of the most important slides to help you understand some of the key levers you have in your control and to help you take action let's go deeper under optimize efficiency first test your sk ad network implementations then stop managing a complex waterfall and move to bidding remove as much friction as possible for players as they move along the app install journey and build partnerships so your players can have the same experiences across platforms in the second area of recommendations build engagement with players we suggest you build trust with players by focusing on quality invest in data capabilities to help you understand your player journey across the app economy include social features to help reach your audience beyond your game create for a diverse audience

and always prioritize the player experience and in the third area of recommendation refine your ad strategy bring together monetization acquisition and development plans build non-personalized ad experiences leverage format innovations diversify your monetization more and measure everything you can a b test optimize and iterate so to frame these ideas as tangible solutions here are some of the ways facebook is helping gaming businesses build monetize and grow in a sustainable way that offers value for players publishers and advertisers let's look first at facebook solution to build build instant games that are playable on any device and you want to be building cloud games on facebook's cloud infrastructure next let's talk about how to grow your game you want to be using automated app

ads to improve user acquisition and drive results for your app install ads with cloud playables you can reach more qualified new players with a try before you install experience which you can easily create from your native game versus rebuilding the ad using html5 and finally monetize your game within app ads on facebook audience network which provides high value ad formats like rewarded video and global facebook demand so to wrap up and share with you some very tangible and concrete next steps here are some key actions you can take to act on these recommendations number one go to facebook for developers for a resource hub on adapting to ios 14.5 number two to adopt bidding visit the audience network website for a comprehensive get started with bidding resource number three to raise your monetization game visit audience networks supercharge your game hub and number four

to find resources to build and market your instant cloud games go to facebook gaming site for marketers also if you'd like to hear more insights and foresights and recommendations from the 25 industry leaders we spoke of earlier you can download a full version of facebook audience networks monetization industry outlook at fb dot me forward slash am i oh repeat that that's fb dot me forward slash am i terrific and with that thanks very much for your attention i'll turn it back over to oscar for any questions that i might be able to respond to apparently i'm muted so so many things we could talk about i would love to spend the next hour just talking about all the aspects of the the journey of hybrid monetization all that kind of stuff however i want to focus on a few things so first thing what benefits developers to build instant games would you say

in addition to mobile that's great when oscar thanks so much yeah so we spoke a little bit about this before but to go deeper there are fundamentally two areas here the first is a developer can increase the reach of existing games by building an instant game version which allow new players to test out a new game with the possibility of then downloading the app version and the second and we have to admit that not every game launch is going to be a massive success for a developer for whatever reason that may be so developers can build instant game prototypes test the game and iterate or even decide to sunset an instant game before building out a full-fledged version thus saving key resource and time and development yeah i i could talk about this area for ages we've really taken to heart even with living games it's what we focus on we've really taken to heart what i think the hyper casual kind of model of games and the instant games model has really focused on this innovation that's taking a game as a

hypothesis and driving forward an experience that players care about and that sort of immediacy of access that kind of lack of kind of um layering that players have to then take on makes things a lot easier to manage and to engage with talk of engagement though um let's uh you know i i yeah i wrote a book on the topic so i would think this but you know the whole idea of games and service for me is that it's about understanding and really engaging with a community and so um obviously i have lots of views on social engagement monetization what for you is the kind of role of social engagement in games and in particular how do you think that helps with monetization yeah i spent a lot of time thinking about this oscar and i too like you i you know it's the community side of the uh of the the involvement with games both in the playing myself right through competition or or collaboration or even watching a favorite gamer play and i you know i think that that experience in

and of itself makes for a far richer gaming experience and thus a former a far richer social gaming experience so when you think about if player time or watch time increases and the quality of the monetization opportunities within the game is strong then additional revenue through number of ads and or higher ecpms can really be a key driver of monetization and that's that's really what we're seeing right now it's the as you mentioned uh early on it's very much around the creating the positive user experience the positive game experience that's going to keep the stickiness uh of someone staying within the the game itself yeah and uh for me and one of the things i think's really been interesting in this in this space in general is that we've learned so much since um i remember when christian secretary came out of the facebook meeting when they first talked about social games you know this is like he was so excited he ended up creating play fish and various other things came out about now super mega evil look up and all that kind of stuff

but i really struck me at the time you just was talking about the importance of social there and as somebody who's run these big community experiences what's really key to me is how we've learned through all of the era you know since that time how we've learned how it's not just about kind of the data parts it's not just about kind of the experience parts of not even just about the communication part it's about the social bonding and by building these experiences where everything is close by everything is connected we have so much more potential of being successful and the real thing for me is it's the network effect that we're trying to generate here it's the creation of this network engagement and i think the streamlining the shortening the distance between the finding the game playing the game and sharing your experience whether that's as a content creator or as a player with other people that shortening that experience that to me is where the innovation really needs to come however i'm going to can ask you another question um the growth of mobile ad revenue

related you know is is the growth of mobile cloud revenue is that related to the changing nature of demographics i'm thinking particularly in light of the nature of the last 18 months how that has changed so now we've gone from games being a thing that people think other people do to being the thing that we all accept that we are now gamers um i mean arguably the demographic is now almost almost evenly split not quite but almost even so is that a major driver to add revenue or do you think there's other characteristics there yeah that's terrific and you know listen two words that you used in in your your commentary before were the learning and the innovation and so you know i think that's where we are right now so i think the innovation across the space is part of the driver i think the learning is also part of the driver both of those increasing ad revenue but i'd say there's a compound effect happening in terms of growth of

mobile ad revenue so you you called out one of them um so one is the over the course of these last 18 months or so we've seen them a broadening of the demographics of gamers right so we've seen including more female gamers and we've seen gamers across a broader age group but in parallel we're also seeing a significant uplift in quality engagement in games through hybrid iap and iaa models so it's a non-cannibalization of this hybrid approach is also one of the key drivers and then the second one and you know i think you and i probably fall into this uh category but it's the the quality and the relevance of the ads being shown within in games is just being a key lever to driving stronger ecpms for those of us who already gamers right so the importance of providing this great gamer experience by showing ads that are that are going to be relevant to the players even more important so the tldr on that is it's i think it's a compound effect it is those of us who are already gamers

in in the the original demographic but certainly the growth of the uh the quality of ads and the additional demographics that have expanded over these past 18 months when we've been in either locked down uh just um on that thought i would always have my second vaccine jab uh i was chatting away to the nurse and the and the assistant that she had in the room he was a gamer he knew all about esports she said oh i'm not a game writer and i said show me your phone and of course she had candy crush on it she had words with friends she had about half a dozen games on that phone but she still didn't realize that she was a gamer and i think this is the thing i think the other one that's interesting in this one is the the fact that if you look at the over 50s around 20 of over 50s play games now we are no longer in this minority we're no longer where i started out as the spotty kid in the attic with the ultraviolet light on their own playing actually i was playing d and d as much

as i was playing on computer games as well so we all know what that's like but the other thing i think is really fascinating i think you know a lot of the stuff you talking about is again i'm just going to go back to this instant nature this flow this ability to connect the dots between who we are what we love and how we share it and i think games is this amazing principle where it's a verb not a noun we do in games and i think you know the very nature that we do in games really profoundly affects what we think about monetization and that to me is a trick that i think that we still get to get across i'm lucky that i've obviously been around a long time i was about this at unity as far in the very very earliest days i'm now running living games seeing how you can rethink reframe ads as part of a form of exchange a form of exchange where you can actually put focus on the value to a player create great experiences and whether you're using that exchange through ads or through money through long-term engagement through

battle passes through season whatever it might be by focusing on the value to the player and the best possible experience the player part that's got to be the social factor as well on that note i think we're about out of time i have one more request for you apparently um there's a number of people asking if you can share the email you had at the end of the slide great being here thanks again for allowing me and wishing everyone in the audience a terrific rest of the afternoon with pgc great thanks michael that was fantastic thank you so much my pleasure thank you very much what a way to kick off for the afternoon so uh obviously you know you can probably guess that i'm completely obsessed with social elements in games i think we completely underestimate the value of it and i think you only have to look at the effects the influences and social actually i should i'm not allowed to call them influence anymore i get told off content creators what content creators do is an incredibly important factor in

every aspect of what we're doing again and that to me is a tip of an iceberg of social layering and really thinking about the player experience in every aspect from the personal enjoyment and the shared experience that's really kind of key to understanding the flow of monetization because without understanding that we won't understand where the value is and value is what it's all about