How Games May Get Pushed Out of the CPI Market
As mentioned in my previous post about how Pay-Per-Installs are about to get Crazy. When better payment systems start to show up on mobile, retail apps, LTVs for apps are going to skyrocket, and e-commerce/retail apps will have a big margin to spend on acquiring mobile users.
What’s Coming.
This is all going to go come from innovation on the payments space. I’m expecting Apple to do it in an incredibly powerful way. By making the checkout process on mobile seamless (including billing/shipping info), users are going to spend a lot more on mobile.
The CPI space is just getting started. Banks are starting to put attention towards it. Hotels.com, Expedia, Walgreens and others are slowly flooding the market. Right now the value for brands apps is minimal outside of a select few (Hotels.com, Uber, Gilt, Amazon, etc.). As long as there’s a long checkout process with tons of inputs, there’s a lot of friction in buying. As payment sources become easier on mobile, shopping on mobile becomes a much bigger thing, and people will begin to spend more and more in apps. For ex., you can receive a push notification of your favorite brand having a sale, add your items to your cart and checkout with a couple clicks.
The LTV of retail apps can climb to $50+. Making it a non-issue to spend $10-20 on a CPI basis. Right now with CPIs where they are now, games are profitable from an LTV arbitrage standpoint. But if retail apps can spend $10-20 on CPI and flood the market with them, then games have to increase LTV significantly for it to be profitable in the long term.
The Future of Games
With games, we’ve seen an increase over the last year alone. Just a year and a half ago, it was big news when CSR Racing from NaturalMotion was earning $12 million a month. Nowadays, Supercell makes $81 million a month off 2 titles, and GungHo Online makes $140 million a month. With more and more people becoming comfortable with spending on IAP, that number will go up further as developers continue to optimize game mechanics. Social integrations like in Candy Crush Saga will be even more apparent to drive more virility out of each user. Question is, will LTV increase enough to compete with the brands in a year or two.
I think organic successes and viral successes are done. Everything to get in the charts now is pure user acquisiton, and if your game’s profitable enough to do that, you win. If not, you’re dead. — Jakob Lykkegaard of Pocket PlayLab
The one silver lining is the fact that Chartboost, Playhaven and the likes are games only. The negative side of that is that there’s a supply ceiling on how many users they can hit and how many installs they can drive. Their SDKs are in most of the games out there, and as long as the juggernauts like King & Supercell aren’t putting advertising in their game, it’s going to be a tough road in the long run.
