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Why Do Free Games Have So Many Ads?

Hey friend! As a fellow gaming enthusiast, I‘m sure you‘ve noticed the sheer amount of ads popping up inside free games lately. I used to find these ads annoying too – until I realized why they‘re so prevalent. After digging into the data as an avid gamer myself, I better understand the reasons behind in-game ads and want to share what I‘ve learned!

The main reason comes down to basic economics: ads allow developers to offer games for free while covering their costs to stay in business. Without ads, the free-to-play games we love wouldn‘t be sustainable for most studios.

But beyond keeping games free, in-game ads have evolved to deliver meaningful value to players, advertisers, and developers when implemented thoughtfully. Let‘s explore why ads became the dominant model in free gaming and how we can improve the experience.

Ads Subsidize Development Costs

First, it helps to grasp the underlying costs involved in developing mobile and online games nowadays:

  • Average development budget for a mobile game is $384,000 according to a 2021 study.
  • AAA console/PC games often cost tens of millions in development expenses.
  • Top games can take years to develop, requiring big upfront investments.
  • Post-launch costs continue for server capacity, customer support, and updating new content.

Games have become hugely expensive to create, especially with modern graphics, sounds, online infrastructure, evolving platforms, etc.

Most studios couldn‘t sustain producing free games without ongoing revenue from sources like ads. Relying solely on in-app purchases from a tiny fraction of players simply isn‘t viable.

The Cost Per Install

Not only are development costs high, but user acquisition costs are rising too. Getting noticed among 3 million+ apps requires big marketing budgets:

  • Average cost per install of a mobile game is now $6.40 according to AppsFlyer data.
  • User acquisition costs can exceed development costs for top publishers.
  • Scaling to millions of free downloads multiplies an already expensive CPI.

For a free game to turn a profit, their average revenue per user needs to exceed the average cost paid to acquire each user. Without in-game ads, the math rarely works out.

This is why in-game ads have become the dominant monetization model – they subsidize the costs of both development and distribution by generating direct revenue from players.

Engagement Drives Ad Revenue

The more players an ad reaches, the more money it generates for developers. This incentivizes maximizing engagement:

  • Lengthy progression loops keep you playing longer.
  • Frequent notifications re-engage you with the game.
  • Appointment mechanics make you return at certain times.
  • Daily challenges and rewards foster habiting playing.

While sometimes criticized as "hooks", these engagement-driven mechanics often enhance gameplay variety. And they pay for live operations that make our favorite games feel dynamic and ever-evolving.

The longer you play, the more ads you see – allowing sustained content updates. It‘s an implicit value exchange.

In-Game Ads Outperform Other Media

Beyond funding free games, in-game ads also deliver great results for advertisers compared to other formats:

  • Up to 5x higher ad engagement vs. social media ads according to eMarketer.
  • 83% higher unaided brand awareness per Kantar research.
  • 2x higher unaided ad recall than streaming video ads.

The interactive context of games keeps your attention focused, avoiding the banner blindness of web ads. This leads to better impressions.

Higher engagement and recall makes in-game ads more than just a means to monetize players – they are a legitimately effective awareness channel.

Players Understand The Value Exchange

I used to find in-game ads annoying too. But considering the development costs subsidized and the ongoing content funded, I‘ve come to accept them as a reasonable tradeoff. Most players actually don‘t mind relevant, unobtrusive ads:

  • 70%+ of mobile gamers tolerate ads in free games per Tapjoy.
  • 61% prefer ads over paid games according to Comscore.
  • Good targeting and pacing keeps sentiment positive.

Players understand and accept ads as the "price" for otherwise free entertainment. The hours ofjoy justify the seconds of ads.

But poor implementation and excessive disruption can still understandably frustrate audiences. There are right and wrong ways to integrate ads…

Rewarded Ads – The Right Way

The most player-friendly ad approach is rewarded video ads. These let you optionally view ads in exchange for incentives:

  • Watch a 30-second ad to earn virtual currency.
  • View an ad after failing a level to gain an extra life.
  • See an ad to unlock premium gear and upgrades.

Rewarded ads make sense to users. We view ads voluntarily when the value exchange is clear. This results in higher engagement, improving targeting and impact for advertisers as well.

When executed right, rewarded ads feel like bonuses rather than interruptions. They enhance the experience.

Removal Of Friction – The Wrong Way

On the other hand, some games go overboard removing all friction and challenge to keep you playing longer:

  • Excessive grinding incentivizes buying time savers.
  • Overly difficult gates cause frustration (and spending).
  • Energy meters restrict play unless you wait…or pay to refill.

Monetization models that hold your enjoyment hostage feel manipulative. Challenge and depth should drive engagement – not annoyance.

Thankfully, poor design tends to harm retention. Most developers recognize this and avoid overly aggressive tactics.

Criticisms Of In-Game Ads

While generally accepted, in-game ads aren‘t without criticisms:

  • Interruptions – Poorly timed/placed ads disrupt gameplay flow.
  • Over-dependence – Some titles feel designed around ads over fun.
  • Data privacy – Ad targeting can feel invasive without transparency.
  • Demographic disputes – Concerns around ads in kids games.

These are all valid critiques. But by respecting player experience and being transparent with targeting, most complaints can be avoided.

Why Ad Blocking Causes Concerns

Ad blocking also impacts the viability of free gaming:

  • Lost ad revenue cripples development budgets.
  • Lower ROI de-incentivizes ad spending in games.
  • Forced reliance on in-app purchases instead.
  • Reduced resources for live operations and updates.

Preventing ads cuts off the primary funding source developers need to support their games. Without alternatives like subscriptions, free titles lose their economic model.

While annoying at times, tolerating non-intrusive in-game ads helps sustain the thriving free games we love. The value exchange goes both ways.

The Future Of In-Game Ads

Like it or not, in-game ads are crucial to keeping free-to-play gaming profitable. But new solutions can improve the experience:

  • Better ad targeting with privacy protections.
  • More native ad formats that mirror gameplay.
  • Voluntary opt-in models like rewarded ads.
  • Subscriptions that remove ads for paying players.

Ideally ads will evolve from disruptive baggage into an accepted part of free gaming – as long as developers continue respecting player experience first.

So next time an ad pops up, consider the value being exchanged. With care and moderation, ads allow developers to keep delighting us with incredible free games!