Mobile game developers have increasingly pivoted to pay-to-play and freemium models rather than paid games. This allows them to monetize through in-app purchases and maximize revenue from free-downloading players. While players can still enjoy many games for free, those wanting to progress faster or unlock more content have to pay up.
The Mobile Gaming Market
The mobile gaming industry has absolutely exploded over the last decade. There are now over 3 billion mobile gamers worldwide according to market research firm NewZoo. That‘s a staggering number, nearly 40% of the global population! This fast growth and massive market has led to some fundamental shifts in how mobile games make money.
|Global mobile gaming revenue
|Mobile gaming‘s share of all gaming revenue
|Projected market size by 2025
The Rise of Freemium and F2P Games
Back in the early days of the App Store, most mobile games were paid downloads. But it didn‘t take long for freemium and free-to-play pricing models to take over. In freemium games, you can download and play for free, while paying for extra features and upgrades via in-app purchases (IAPs). Free-to-play is similar but generally depends more on IAPs to advance in the game.
According to analysts at Deconstructor of Fun, a staggering 98% of all mobile game revenue now comes from freemium and free-to-play titles. The advantages of this approach for developers are obvious – by removing the download paywall, they can reach a much wider audience of players. Profitability hinges on converting a small slice of those users into paying customers.
The Financial Incentives of Pay-to-Win
Many mobile developers have gone a step further by implementing "pay-to-win" game mechanics. Unlike cosmetic IAPs, pay-to-win allows players to directly buy power, upgrades and other advantages with real money.
While controversial in many gaming circles, the financial incentives are undeniable:
- In 2020, pay-to-win mobile games generated 75% more revenue per download than non pay-to-win games.
- Half of all mobile game revenue now comes from just 0.19% of players, according to Swrve – the biggest "whales" that spend the most.
- The top 10 grossing mobile games make an average of $5.4 million daily from the App Store, according to SensorTower data.
With so much revenue concentrated among paying players, pay-to-win game design tactics maximize how much those whales spend.
Psychological Triggers and Spending Habits
Given that such a small fraction of mobile gamers drive the bulk of IAP revenue, game developers use various tricks to trigger spending habits. Here are some of the psychological factors at play:
In-game rewards and progression act as positive reinforcement and are carefully scheduled to condition habits. Players feel compelled to keep playing in anticipation of the next dopamine hit.
Sunk Cost Fallacy
The more time and energy already invested in a game, the more likely a player is to spend to avoid that being "wasted." This is known as the sunk cost fallacy in psychology.
Seeing your friends‘ progress and status items achieved through IAPs generates pressure to keep up and gain social proof through your own purchases.
Limited-time offers, seasonal battle passes and fear of missing out work together to instill urgency around real-money transactions. No player wants to be left behind by an opportunity.
The human tendency to overvalue things already in our possession explains why players spend continuously to improve assets they already "own" in-game, like skins or characters.
Of course, not all players are equally susceptible to such triggers and tactics. But the small percentage who are generate outsized revenue for any hit freemium title.
Finding Quality Games with No Pay-to-Win
While the freemium model dominates, you can still find enjoyable mobile games free of pay-to-win IAPs. Here are some of the top picks across various genres to check out:
- Alto‘s Odyssey
- Sky: Children of the Light
- Jetpack Joyride
- Two Dots
- Fruit Ninja
- Plants vs. Zombies
- Candy Crush Soda Saga
- Asphalt 9 Legends
- Mario Kart Tour
- Horizon Chase
- Pocket Rally Lite
- NBA 2K20
- EA Sports UFC
- Tony Hawk‘s Skate Jam
The key is browsing app store charts, reading reviews, ignoring ads and giving preference to premium game editions. With some discernment, you can avoid the pitfalls of pay-to-win.
Sustainable Monetization Without Pay-to-Win
For developers trying to succeed ethically and sustainably, plenty of smart monetization strategies exist outside of pay-to-win:
Sell cosmetic skins, outfits, accessories and other items that don‘t affect gameplay balance. Fans happily pay for visual customization and showing off rare collectibles.
Craftsman Group Partnerships
Co-branding deals with movies, celebrities, brands and non-profits can offer alternative revenue streams outside of IAPs. Sponsorships also improve discovery and retention.
Video Ads and Rewarded Ads
Offer players the option to watch short video ads in exchange for virtual currency, power-ups or other rewards. This value exchange funds development and operations.
Recurring subscriptions for premium features or content are a stable source of income. Loyal fans may subscribe simply to support developers of games they love.
Encourage social sharing and referrals by rewarding players with friend invites, social posts and other organic promotion of your game. This builds the community.
As you can see, sustainable game economics are possible without frustrating or manipulating players. The most ethical and successful developers tend to focus on delivering real value first. Do that, and the monetization will follow.
The Bottom Line
The freemium and free-to-play model has opened mobile gaming to a massive mainstream audience that now tops 3 billion players. But the use of predatory pay-to-win mechanics and psychological manipulation remain drawbacks of this shift. For mobile developers, IAPs offer a proven path to higher revenues when compared to paid games. Yet quality ad-free games can still be found by discerning players. With awareness of the underlying factors at play, mobile gamers can make informed choices and stick to titles aligning with their preferences and ethics.