Most mobile games are free to play. And more than 100 million people in the United States already do. But it’s just a small percentage of players willing to make in-app purchases that enable the top games to generate more than $1 million a day. That’s the business model. And it’s working. The market for gaming apps, estimated at $17 billion worldwide last year, is expected to continue to grow rapidly and within a few years overtake established console gaming systems such as Xbox and PlayStation. Market research firm Newzoo thinks that could happen as early as this year.
Now, with their Super Bowl ads, these mobile gaming companies are heralding their arrival to a wider audience.
“It’s an indicator of just how big the business has become,” said Doug Creutz, senior media and gaming analyst with research firm Cowen and Company. “These are massively profitable companies.”
Liam Neeson starred in the ad for Clash of Clans, a game made by the small Helsinki, Finland-based developer Supercell. The game is the top-grossing Apple app at $1.6 million a day, according to Think Gaming.
Right behind it in the rankings is Game of War: Fire Age. The game earns at least $1.1 million each day for Machine Zone, a tiny Palo Alto, Calif., company that last year attracted funding that gave it a nearly $3 billion valuation. That’s what Kate Upton was urging people to play.
These companies – and others, such as the developer behind the hugely successful Candy Crush games– are not just spending on Super Bowl ads. Their marketing campaigns are spread far and wide.
“If you watch ESPN these days, it’s hard to not see an ad for Clash of Clans,” Creutz said.
Creutz estimated that only about 3 percent of mobile game users ever make in-app purchases, giving them better access or game shortcuts. But that small group spends on average $15 – $20 a month. That quickly adds up as the number of players grows.
The third Super Bowl ad – and at 15 seconds, the shortest — was for Heroes Charge, the first mobile game developed by uCool, which is headquartered in Boston. It is aspiring for Clash of Clans-like success.
The rise of gaming apps has been so fast that many viewers reacted with surprise to the ads during the Super Bowl, where a 30-second spot cost $4.5 million. Twitter lit up with people curious to know how this was possible. “Never imagined that Clash of Clans had the budget to hire Liam Neeson,” wrote one user. “Seriously, what is Game of War’s ad budget?” wondered Mike Pacchione in Portland.
Tuong Nguyen, a consumer technology analyst with research firm Gartner, was surprised, too. But, he said, it shows how mobile gaming has matured.
“It’s representative of what their market is now – a very mass market,” Nguyen said.
He’s witnessed the gaming evolution with his mom. She never understood how her son could spend hours playing his Nintendo. But now she plays games, too – only it’s on her IPad.