The debate about the best way to monetise titles has been one of the constants in the mobile apps industry for some time.

Paid downloads, subscription and ad-supported models all have their supporters, but it seems that the freemium model – where software is free to download and users pay for add-ons within the app – is winning out.

According to IHS Screen Digest, 96 percent of all smartphone apps downloaded in 2011 were free, and in-app payments will account for 64 percent (US$5.6 billion) of mobile app revenue by 2015.

Mobile social games platform company PapayaMobile is a firm believer in the freemium model and, with 64 million users in April 2012 compared to 15 million a year earlier, the formula appears to be working.

“There’s an economic storm and at the same time social games are growing while other things are declining. People’s desire to have something to entertain them is not abated at all,” Papaya’s Oscar Clark (pictured) told Mobile Apps Briefing

Freemium is king
Papaya focuses on free games that encourage users to pay for additional content. Paid or premium games haven’t been of particular interest to the company, according to Clark, because it has traditionally focused on Android Market (now Google Play) where free games perform better. 

He argues that once entertained by games, people begin to trust them and become open to spending money to make their experience even better.

In contrast, paid games rely on marketing to persuade people to part with their money before they have played them, meaning marketing efforts become more important than playing experience, Clark noted.

The likelihood of casual users parting with money to download a game they have no experience of is smaller than that of downloading for free, and the revenue opportunities for paid games are often restricted to the initial download – rather than supporting on-going purchases.

According to Clark, two-thirds of games on Google Play and Apple’s App Store now use the freemium model, compared to a third a year earlier. “That’s a massive shift. That kind of disruption is fascinating and we happen to be lucky to be in that space,” he said.

“Developers went to free very quickly and once you go to free you’re accepting that you’re not selling the game anymore, you’re selling elements around the experience of making it even better,” Clark continued.

He argues that previous freemium approaches have seen users paying to make their experience less frustrating, whereas the Papaya approach is to make a good game better. 

“If you love your audience, they’ll love you back. Get it right, then everyone’s going to have a better experience. But you’ve got to give them a reason to spend money. Don’t expect them to spend it because you’ve made the game so insufferable without – get them to spend money because it makes the game better for everybody.”

Making a social graph work
Papaya’s differentiator is combining freemium games with a social network for gamers. In essence, gamers using the company’s platform have their own private system where they can share game-related information with like-minded people. 

“We’re well-served with Facebook and Twitter and various other social services for generic ways of engaging and communicating with our friends and wider social groups, but I think the mindset of game play is very different and I don’t always want my mum, my dad, my daughter, my boss to know which games I’m playing. There are a lot of people out there that don’t like that model,” Clark explained.

As well as fairly standard social gaming features such as leaderboards, invites and challenges, Papaya has a free in-game message service – Pmail – which can be used by players to communicate with each other and to promote games. 

It also allows users to invite friends to participate in games, and see where friends are and what they’re doing when they aren’t playing. Momentum for games and features can be generated through this interaction.

Making games social also gives players the motivation to spend money on features to improve their games. “What we’re able to do is deliver a social graph experience, which lends itself to that style of game where the ability to show off to an audience of like-minded people is valuable,” Clark said.

Helping developers, not competing with them
Developers can opt to build their apps on the Papaya platform itself or use other tools – such as Unity or Marmalade – and integrate the social features using an SDK. Support for iOS joined Android in October, allowing developers to build games for both platforms using a single codebase. 

Clark said the company’s decision a year ago to end its own game development means partners using the platform don’t need to worry that in-house titles could get better exposure or that intellectual property could be interfered with.

“We might help studios to distribute their content, but we’re not getting involved in their publishing process. The IP ownership of that game is theirs. We just want to make it so we all get the benefit by getting the discovery, retention and monetisation, which is what the social model drives,” Clark said.

“If we focus on that then it’s clear we are working with our partners, not in competition with our partners. Game platforms that have spent time making their own content are always in competition to some extent,” he added.

Promoting intelligent monetisation
One of the main areas of focus when working with partners is to make sure they develop games that optimise their monetisation potential.

Clark explained that to be successful freemium games need to go beyond the stage where users are so familiar with the standard pattern of gameplay that they can enjoy them without fully engaging their brain – otherwise known as ‘grokking’.

“After a while the brain gets too good at doing some of those patterns unless you evolve the game. And one of the ways to evolve those games is giving people opportunities to buy things that extend the game,” Clark said.

Additional features and virtual goods also need careful consideration. For example the option to buy energy crystals for a game is initially appealing, but will become unsustainable as once the crystal runs out, because players will have to go through the process to buy another one.

However, if players have the option to buy a ‘well of crystals’, that cost more than a single crystal, but from which they can take 20 every day, players will choose to buy them too, providing a recurring revenue opportunity on top of one-off purchases.

“Games designers have to understand a little bit of economics here, a little bit of buyer behaviour there, a little bit of awareness, discovery, virality. It’s now intrinsically part of game design,” Clark said.

Tim Ferguson