The App Store Effect: "Free" Games Pay! The ad-supported business model for PC video game distribution now provides 3-7x the revenue of the traditional try-buy model; publishers and consumers all reaping the benefits
NEW YORK, May 25, 2011 /PRNewswire/ -- Digital distribution of "free" games has emerged as a bright spot in an otherwise flat casual games download industry. iPhone, Android, and Facebook have introduced free casual game play to the wider mass-market, and now PC games have caught up with innovations in digital game monetization. Despite cutting edge distribution technology, many top PC game download companies are still using the old-fashioned "share-ware" monetization method. Known as the "try-buy" model, games are offered for a limited time for free to "hook" gamers prior to upgrading them to purchase. Though this business model has subsisted on the one to two percent of players that convert and purchase the full game, it is no longer the optimal model for publishers nor consumers.
Conversely, by providing users with unlimited, free game play and publishers with far greater revenue potential, the free or ad-supported business model represents the most promising growth opportunity for digital game downloads.
Today, newly released revenue calculations from Exent, owner of FreeRideGames.com - the only online destination offering full version casual downloadable games for free - proves that the ad-supported business model for PC game distribution provides three to seven times the revenue of the traditional try-buy model, per user per game. The enclosed chart demonstrates the inherent limitations of try-buy, whose one to two percent industry average conversion rate ceases to earn any additional revenue after purchase. The ad-supported model however continues to generate revenue for an average of 195 minutes of game play, per user, per game.
Exent's calculations demonstrate that while traditional purchase pricing was historically the strongest, it is no longer the case. Large distributors began to exert strong downward pressure on pricing in an attempt to grow their market share, and as a result, publisher's revenues have suffered. Average prices for new games fell from $20 in 2005 to an average price today of below $7.
Since only a small fraction of users actually choose to upgrade from the free trial to purchase, try-buy has been declining as a revenue engine for the casual games market. "Free" or ad-supported gaming, a business model perfected by Exent's GameFrame™ technology however, has been growing at a rapid pace. Exent's patented GameFrame technology allows monetization of full version games by running IAB standard ad units to the left and below the game while users are playing. GameFrame allows players to interact with the advertising, pause game play to encourage exploration, and ultimately provides marketers with increased brand awareness and significantly elevated click through rates.
"Technology has found many new ways to monetize games, and now the ad-supported game business is more valuable than ever," notes CJ Wolf, iWin Games VP of Publishing and Co-founder.
"Ad-supported games continue to be a success for the PC games industry because they enable users to play a huge variety of games for as long as they want while allowing developers to monetize every minute of game play," said Kobi Edelstein, vice president and general manager of Exent's Owned Services division.
Powered by its ad-supported business model, FreeRideGames.com has achieved increased profitability and growth year after year. Since its inception, FreeRide Games has grown to more than 500,000 players at a growth rate of 10 to 20 percent each quarter.
Exent is the leading global market solutions provider for monetization of PC and mobile video games. Exent delivers technologies and products for various markets, including video game publishers, broadband service providers, consumer portals, consumer electronic manufacturers, media companies, ad agencies, brand owners, retailers and others.