By Dave Rohrl
When I lived in San Francisco in the 1980s – long before the dawn of the internet – there was a local Irish bar in my neighborhood called Pat O’Shea’s with a sign outside that said “We Cheat Tourists and Drunks.” We all got a laugh out of it (and as far as I know, they were actually pretty honest), but I guess you had to ask yourself: “if I were going to cheat somebody, would I pick tourists and drunks, and if so why?”
The correct answer, from a purely amoral perspective, is that you should absolutely cheat tourists and drunks and be honest with the locals. Why? This bar was far from any of San Francisco’s tourist attractions, deep in a residential neighborhood in the quiet northwest section of the city. The likelihood of any tourists dropping in was low, and the likelihood of any given tourist visiting twice was vanishingly small. This was in the days before Yelp and Google Reviews, so that tourist’s ability to warn anybody else about their mistreatment was very limited. Since you were only ever going to see that tourist once, and they would be pocketing their story about the evil San Francisco barkeeps, you might as well ring up their bill as high as you can during their one and only visit. Likewise, a drunk – even a regular who has had a few too many – is unlikely to even notice that you added a few extra bucks to their tab, and really it only seems like fair recompense for having to listen to their drunken ramblings all night.
On the other hand, trying to cheat locals would have been a disaster. There were a ton of amazing local bars in the neighborhood – even multiple Irish bars. Locals who get cheated won’t come back, and you lose the chance at enjoying their repeat business. Not only that, but locals see each other in the local restaurants and shops, at their kids’ schools, at the local golf course and so on, and they love to talk about the local merchants. So cheating one local ensured that none of the locals would ever come and patronize your business.
In business, this is usually referred to as the difference between transactional and relational approaches. If you’re only ever going to do one deal with somebody, you might as well get everything you can out of that deal, especially if the other party isn’t in a strong position to damage your reputation among other potential customers. That’s a classic transactional approach – maximize the current transaction and don’t worry about anything else.
On the other hand, if you think you will see that same person many times, you want to treat them well in each transaction to ensure that not only is that same customer willing to come back to you, but over time they might persuade their friends to patronize your business. This approach builds trust and connection through each transaction. That’s why it’s called a relational approach – it is geared toward building a strong long-term relationship between the business and the customer.
It has recently been my privilege to work with a number of studios in emerging markets that are building ad-supported games that are trying to learn to shift more of their revenue stream to IAP. And one of my early learnings is that making that shift involves a serious change of mindset from transactional to relational.
In many ad-supported games, the underlying assumption about users is that they will come into the game, stay for a few days, and then move on to something else, having forgotten about or become disenchanted with the game. And, to be honest, this assumption is usually pretty well-founded. In many ad supported games – especially hyper-casual games – the game has a fun, easy core mechanic that is cheap to advertise for and not much else going for it. That means as soon as a user starts to feel bored with the core mechanic, they will bounce out of the game, typically leading to very low D7+ retention levels.
In that context, it makes a ton of sense for the developer to think hard about how to extract money from a player in the first few days of playing the game. This typically means a set of extremely aggressive ad insertions in early levels, often leading to situations where the player is spending more time watching ads than they are playing the game. Of course, this can quickly lead to a retention death spiral, where decreasing retention leads to increasingly aggressive ad monetization, which leads to worse retention, which leads to reduced spend per install, which leads to worse quality traffic, which leads to worse retention, which leads to… Well, you get the picture.
On the other hand, most developers from more established territories focus on building high retention games that are focused on in-app purchase revenue (or other forms of real money transaction). They have an entirely different mindset about how to interact with their customers. In general, these more IAP focused games have a strong focus on retaining customers for the long term and monetizing them gradually through a series of transactions strung out over a long period of time. For these games, strong D30 retention is often the minimum requirement to think about being able to amortize a user, and many of these companies will focus on D360, D720, or beyond for retention targets.
When building this sort of game, it is mission critical to have a relational approach to your players, especially when it comes to monetization. Every time a player spends money in your game, they have to feel like they got a great deal that led to a great experience. That transaction builds trust and enhances your relationship with the player, and makes it far more likely that they will spend money with you again in the future. Of course, you should take the same approach to the time the player spends in your game, it should be as delightful as possible.
Taking this approach relieves the pressure on early monetization, leaning into the assumption that if you can keep a player engaged you can eventually find a way to monetize them. (And honestly, it’s almost always easier to move monetization metrics than it is to move retention metrics.) Of course, we still recommend trying to entice players into an early purchase, but this is much less about extracting cash and much more about user acquisition strategy – trying to understand which of your campaigns are most likely to bring in actual payers so you can fine tune your spending. I would far rather retain 10 non-paying players than force 1 potential payer out with an overly aggressive early monetization push.
This strategy also recognizes the fact that once you’ve churned a player, you will likely never monetize them again. This means that delighting your player – especially in their early days in the game – is far more important than squeezing money out of them as they decide whether they want to make your game into a hobby rather than just a quick fling. Your design should focus on retention first, not only building a great core mechanic but also having a clear vision for why players will still be playing (and paying) 30, 90, and 360 days (and beyond) after they start.
So, believe it or not, aggressive early monetization can be a viable strategy in a mobile game – but only if you have high confidence that the users you are bringing in are low value and unlikely to retain in your game (and unlikely to spend if they do so). These players are the equivalent of the unwanted tourists and drunks visiting my old neighborhood’s Irish bar – unlikely to be seen again, and unlikely to tell any of their friends about the bad experience. On the other hand, applying this same heavy-handed approach to players that might be future payers – the equivalent of the locals that made up the vast bulk of the bar’s business – only makes those potential patrons flee the game but also tell all their friends what a miserable experience they had. So cheat the tourists and drunks if you must, but make very, very sure you know who they are first.
About the Author
Dave Rohrl, Founder and Chairman
Dave Rohrl is Mobile Game Doctor’s Founder and Chairman, and provides strategic business and creative guidance to the company and assists on key accounts. Dave’s 28-year career in game design, production, and studio leadership included stops at Pogo, PopCap (where he was immortalized as Crazy Dave in Plants vs. Zombies), Zynga, and Playdom. Dave founded Mobile Game Doctor in 2014 to help struggling free-to-play developers solve hard creative, process, and business problems, and served as the company’s CEO until early 2021.
