Bridging the Gap: Games approaches to engagement & monetization

This is the part of our article and webinar series on optimizing your app for meaningful engagement and sustainable growth. Each part of this series is inspired by developer stories and subject matter experts. This article covers how game developers approach engagement and monetization, illustrated with Google Play data, and discusses how you can apply this knowledge to your app.

Learn more about the topic in our Bridging the Gap webinar.

Creating meaningful engagement is at the core of unlocking long term business success on Google Play. In this post, part of our sustainable growth series, I will examine how game developers approach engagement and monetization from the perspective of:

• Design: how games link engagement and monetization, using a common game genre as an example.
• The user funnel: exploring the correlations across engagement, retention, and monetization, using Google Play data for games and apps.

By the end of this post you will hopefully have a practical insight into how games build engagement to drive revenue. This knowledge is useful in identifying opportunities to bridge the gap and apply these learnings to your app.

Mobile monetization models interaction with engagement

We all know that, on mobile, there are four common ways to turn the value you are creating in your product into revenue. As a foundation for what I am going to cover, let’s briefly recap these options and how each interacts with a user’s engagement:

Paid or premium apps

For paid, also called premium, apps users pay once, upfront. Therefore, engagement isn’t tied to monetization, as the user pays before any engagement occurs. To drive revenue, the app’s value has to be clear to the user from the store listing page.

Subscription apps

In the subscription model, users pay once per period: weekly, monthly, quarterly, yearly, or seasonally. The key engagement actions are those that correlate with revenue actions. You can usually break subscription engagement actions into two user personas:

• Early or free users, where the key engagement actions correlate with subscriber conversion. These engagement actions usually demonstrate a user is getting value from the app. For example, in a video app, it may be the number of videos viewed. In a news or content app, it may be how many articles people view or the time people spend viewing articles.
• Subscribers, where you want the engagement actions to correlate with subscription renewal. These actions would show that the user is continuing to get value from the app. While these actions may exhibit similar metrics to those for early users, you would expect to see the metrics showing sustained or increased engagement during the user’s subscription duration.

In-app purchases and ads monetized apps

For in-app purchase (IAP) apps, users engage for free and have the option to pay incrementally in order to enhance their experience. While in ads monetized apps, users pay with their time and attention by viewing ads, which can be user or non-user initiated. For games and apps using these monetization models, certain engagement actions are designed to tie to monetization.

We are seeing more apps integrate both ads & IAP monetization models, while this has been the most popular monetization model for games for many years. Games design their titles to ensure that engagement actions are tied directly to monetization. For example, take mobile word games. These games are often ad monetized as the gameplay has natural breaks — you make a move and have to wait for your opponent to make a move before you can continue playing — that enables the developer to surface an ad to the player in a way that seems natural for the game and does not break the user’s engagement.

The remainder of the article will dive into how game developers tie engagement to monetization in their IAP games.

Aligning user motivation with game design and monetization

Now let’s explore how game developers approach the design of their titles and build monetization strategies to link directly with engagement.

Let’s start with a simple question. What are games? Games are an entertainment product. People play them to have fun or a break from their daily routine. When designing a game, developers start by thinking about why someone will enjoy their product or how it will provide value to their users. They then take that understanding, align it with the game and monetization design to figure out how to extract revenue from the value the game provides. Or, to put it another way, user motivation influences both game and monetization design. And, on top of that, the game and monetization design will influence each other.

In general, the same is true for apps. Maybe the value is entertainment, such as watching a show or a movie, maybe it’s a utilitarian use-case, such as booking a ride or even buying groceries. Regardless, you want to ensure that you’re providing some value to your user and you should always aim to design your app and monetization strategy to complement the user’s motivators.

Core loops

Good game design is built on the foundation of the core game loop. The core game loop is the set of actions that a player does over and over again. Game developers build these loops to emphasize the core action in order to satisfy the players’ motivations. To see how this works, let’s examine the game loop for the popular Match 3 games genre and determine what the user’s motivators are.

In Match 3 games, players swap items on a game board to create horizontal, diagonal, or vertical rows of 3 matching items, such as gems, candy, or food. Each game level challenges the player to achieve a variety of goals in a set number of moves or time. For this core game loop, a player would play a level and either win or lose. If the player achieves the goal they will proceed to the next level, otherwise the player has to use a life or wait until they have one to play again.

Match 3 games are basic puzzle games, however, what makes them so engaging are two primary motivators:

• Progression. There’s a map, nodes, or levels the player wants to progress towards completing.
• Social or competition. The comparison of scores or progress with others, where the player wants to outperform their peers.

Therefore, the main action users repeat is playing levels: if a user is not attempting levels they are not engaging in the game. But game developers also think through what actions are driving players to return to the game. Since a key motivator in a Match 3 game is progression, we know that a user’s engagement and retention are key to them unlocking new levels within the game. This is where developers of these games have to balance their game design, more specifically how difficult they make the game. The game has to be easy enough for users to progress, but not so easy that the game becomes boring and doesn’t monetize.

The final piece we want to understand is how this core loop is designed to monetize users. Similar to the correlation between monetization models and engagement, game developers want to understand what engagement actions will drive greater opportunities for monetization. And, as many games have an in-game economy or in-game assets, they can turn this question around to ask what the key engagement actions are that will deplete the users in-game balance to drive stronger purchase demand. In the Match 3 game genre, monetization happens typically at three points:

1. When a player loses a level and chooses to continue.
2. When a player uses a boost to help them during the level.
3. When a player buys lives to attempt the level again.

So, playing a level (the core engagement action) drives a monetization opportunity. However, losing a level creates an even greater monetization opportunity because it’s directly tied to the two main user motivators: progression and social competition.

As you can see, in this game genre engagement and monetization are fundamentally tied. This is only one game example, but it’s true for many games in the mobile space. The core game loop is not only designed to account for the players motivations, but it is also designed to link those motivators to monetization.

What can apps learn from games approaches to design?

The key lesson from games is that you should closely tie engagement and monetization. However, every app’s engagement, more specifically core engagement, will be different; even for apps in the same category. Therefore, it’s important to understand a few things to ensure you are designing your app and monetization model optimally:

• What is the main value your app provides and the core motivation of your users? Why are people using your app?
• What is your core loop and how does it map to the key engagement metrics?
• How do the key engagement actions relate to the monetization of your app?
• How can you maximize those engagement actions for your app’s users?

Let’s look at the core loop for a couple of app categories, to understand how the engagement use case varies.

Consider a dating app. The main motivator is to find love or at least a date. So, the actions a user might follow are to sign up, look at a profile, swipe or send a message, then look at another profile and the cycle repeats.

Now let’s consider health and fitness apps. For these apps, the user’s goal may be weight loss, muscle gain, or simply promoting overall health which takes time to accomplish. Take a calorie tracking app: the core loop might be to track meals — breakfast, lunch, and dinner — to see the calorie consumption for the day, at which point, hopefully, the user sees the value in the app. From there, the user continues the core loop and periodically reviews whether they have achieved their goals.

User lifecycle: Retention and monetization

Showing your app’s value early is key to long-term retention. Engagement on the first day is especially important. We can see this by looking at the data from the top games on Google Play. The chart below shows that the longer a new player engages on their first day, the more likely that they will be retained 7 days later.

The longer a user spends in a game on their first day, the more likely they are to return. However, not all games with similar characteristics have the same increase in retention rates. Retention rates are often driven by different engagement experiences, in particular by things such as onboarding or core loop design. The graph below shows two games in the same category. Both games have a positive correlation between day-one minutes played and retention, but we can see the slope of the correlation for each is different. Game 2 must be doing a better job with onboarding and engagement actions early, compared to game 1, driving a stronger retention correlation early.

Now, let’s look at how day-one minutes played influences monetization over the first week for the top games on Google Play. The chart below shows that the longer a user spends in a game on the first day, the more likely they are to convert and drive a stronger lifetime value (LTV) within their first week.

When we compare the two games, we see that how much a user engages on the first day impacts conversion and LTV. This difference often has to do with the monetization design (how deep is the spend potential) and the engagement action tie-ins (how closely are monetization and engagement actions tied together in the core loop).

How does first day engagement impact D7 retention in apps?

The performance of apps is similar to games. Below are two graphs for the top performing apps on Google Play. These graphs show the same positive correlation for both monetization and retention with longer day one engagement. As you can see, the first 20 minutes has a very steep slope relative to day 7 retention, meaning users are seeing value early on their first day driving them back to the title at a higher rate.

If we consider the app genre core loops we covered previously, we can see how their onboarding may affect retention:

• Dating apps: As dating apps have a relatively fast sign up process and enables users to get to the core action of matching with a potential partner quickly, we can expect an early steep retention curve for a user on their first day. Health and fitness apps: The onboarding is dependent on how much time the user spends in the app — it may take longer for a user to see the value. Therefore, the slope of the engagement curve might be relatively flat for users who engage for 10 minutes or less per day. But we can expect the engagement curve to become steeper after this point, as people capture the app’s value after they engage with the app for longer and are exposed to the results of doing so.

Let’s look at a Google Play app and how its data correlates. Blinkist is an education app that in 15 minutes offers users key insights from non-fiction books, as audio or text. Blinkist shows a strong positive correlation between people’s first day engagement and how likely they are to return to the app.

There is also a similar trend with W1 monetization in Blinkist to those seen in games. More engagement on the user’s first day drives stronger monetization in the following 7 days. In particular, Blinkist shows a strong uplift after about minute 5. Without giving away too much of Blinkist secret sauce, typically this change in curve occurs at a soft paywall, but it may be where the app’s value becomes clear to the user.

These examples show the need to focus on engagement on the first day to drive strong retention and monetization. However, we need to appreciate that the engagement use case will vary from app to app.

The importance of first day engagement is why many game developers spend cycles crafting the first time user experience (FTUE), and doing both qualitative consumer insights research to inform the design and quantitative testing during soft launch. So, when it comes to your design consider:

• The FTUE and onboarding experience. Understand how long it takes before users engage in actions that show them the value of your app.
• Your lobby or interface, make sure it is clear and understandable.
• Monetization design and pricing, as this can impact early LTV in apps and games.

How are you optimizing your users’ engagement?

I have covered the relationship between first day engagement and monetization and retention. Now, let’s look at the relationship between engagement and monetization and retention for the overall user base. My goal is to show you why optimizing your users’ engagement is crucial to future monetization and engagement.

I want to start by looking at the weekly engagement of all users.

To do this, take all user engagement over a 7-day period and break it into buckets that count the number of days each user was active, this will be plotted on the x-axis. We will compare this to:

• engagement in the following 7 days.
• monetization per user in the following 7 days.

This will show how engagement and monetization evolve for the least engaged users compared to the most engaged. This will help us understand how optimizing users’ engagement for the week (or your DAU / WAU ratio) can impact future monetization and engagement.

Let’s look at a plot for two games on Google Play.

In the graph on the left you can see the engagement relationship between 2 different games. For both games, it shows that a user who was active 5 of the last 7 days, averages 4 days of activity in the next 7 days.

In the graph on the right you can see the relationship between week 1 engagement and average spend per user in the following week. From this we can see that a user who signs in every day spends almost 2x more than users who signed in 6 out of 7 days. You can also see that the monetization performance varied significantly between the 2 games: we can conclude that game 1 is doing a better job showing value to its users, driving up the monetization of its more engaged users.

Overall, for games, users with higher engagement drive stronger monetization and engagement.

Let’s look at an app…

Duolingo is an app that offers users more than 35 languages to learn. The learning process is driven by lessons and practice, starting with the basics and getting more difficult as the user progresses. Duolingo’s key message is “learn new words daily.” Users’ completion of the daily lessons is tracked as a “daily streak,” to encourage users to return to lessons daily. And, should the user miss a day they can pay to repair their “streak”. We can see that Duolingo wants their users to be active on a daily basis because Duolingo believes that the best way to learn a language is through daily practice.

How does driving daily engagement impact engagement and revenue in Duolingo? Using the correlations across weeks we can see a similar trend for Duolingo as we have seen in games.

The engagement correlation shows that users who were active 6 out of the prior 7 days are likely to be active for about 4 days out of the next 7 days. While for spend there is an equally strong correlation with a steep engagement vs. spend correlation from users with 2 or more active days in the prior period.

How this ties into user motivations: why would someone use Duolingo? People use this app to learn a language and drive self improvement. Duolingo reinforces these motivations with progression and completion.

The data shows that if a user engages for less than 2 days, the spend correlation is lower. This is probably because these users are not seeing value, as they are not learning the language by engaging only once or twice a week. However, as engagement increases, there is a stronger, more positive correlation with monetization. This is likely because learners are making progress in the mastery of a new language by logging in regularly.

This shows us that sustained, optimized engagement has its benefits.

How does engagement correlate to monetization for apps?

Looking at the same plots for the top performing apps on Google Play we see the same positive correlation as games: stronger weekly engagement correlates to stronger future engagement and monetization.

You can also see the future monetization curve for top apps has a non-linear increase for more engaged users. What might be causing this? From the first-day engagement correlations, we’ve learned that monetization models can impact performance. Therefore, different or mixed business strategies for the top titles are driving stronger spend potential. We would expect a subscription only model may show a more linear, slowly rising slope, as it is based on a one-time purchase. Integrating IAP can drive (as we saw in games and Duolingo) an increase in spend potential for the more engaged users.

But, what if your app is not a daily or weekly destination for users, it might only be something they visit monthly.

To drive the point home, let’s look at MAU distribution broken out by the number of days users were active in a calendar month for the top grossing apps. The data is broken out for the top 50 apps and those ranked 51–150. You can see that the top 50 apps get more regular or higher engagement from a larger percentage of their monthly active users.

This shows that the top apps drive more sustainable engagement, with a significantly higher percentage of their users logging in 6+ days per month compared to those ranked 51–150. This illustrates how important sustained engagement is, regardless of whether your expected visit frequency is daily, weekly, or monthly.

Lessons learned

Hopefully, I have shown you that driving monetization is about optimizing user engagement. Both from from the user’s first visit to your app and continued engagement throughout their lifecycle.

Now that we have learned what we should focus on, how can you optimize your users’ engagement in order to maximize future monetization and engagement?

There are 3 core things you should do:

1. Understand your core engagement metric. Identify the engagement action in your app that correlates (or, ideally, predicts) LTV and spend. Consider how engagement is designed to tie to retention and conversion of your users.
2. Focus on user engagement on the first day. Higher retention and LTV is achieved from users who take a core action in their first day in the app. So, make sure you show people the value your app has to drive strong retention and LTV.
3. Optimize user engagement to maximize revenue. Strong, consistent user engagement over their lifecycle helps maximize monetization. Keep track of and optimize for continued engagement, as it is a predictor of future monetization and engagement.

Some things to consider if you’re trying to shift your retention and monetization curves:

• First time user experience and onboarding: Understand how long it takes before the user engages in actions that show them the potential value of your app.
• The frequency of your app’s use: how does it differ from your least to most engaged users?
• Your monetization design and pricing: make sure you’re thinking through your pay walls and pricing across your subscription SKUs.
• Is there an opportunity to layer other monetization models to enhance spend from your most engaged users?

I hope this article was useful in showing you how games are approaching engagement and monetization and it will help you figure out if there’s an opportunity to bridge the gap with your title.

What do you think?

Do you have thoughts on taking games approaches to monetization and engagement to apps? Let us know in the comments below or tweet using #AskPlayDev and we’ll reply from @GooglePlayDev, where we regularly share news and tips on how to be successful on Google Play.