Free Mobile Games Earn Most of the $10 Billion Spent on Apps in 2012

Mobile apps are on target to earn $10 billion this year, with games making up 80 percent of the pie.

free boxAccording to Flurry, which gives developers tools to track consumer behavior, the most prolific business model is the free-to-play scenario, where consumers download the game for free and then pay for virtual goods or currency inside the application.

It says the most successful companies that understand this include Electronics Arts, Zynga, Mobage and Supercell.

In the report, Flurry’s Senior Director of Business Development Dan Laughlin examines consumer behavior, retention and demographics for the top nine most popular gaming genres. For this analysis, Flurry looked at more than 300 million consumers using iOS and Android games over a 90-day period. It only studied free titles, and then lumped them into four main categories based on their earning characteristics.

“The free-to-play business model (a.k.a. freemium), where consumers download and play the ‘core loop’ of a game for free, but then pay for virtual goods and currency through micro-transactions, is the most prolific business model in the new era of digital distribution,” he concludes.

For developers, the more important thing to know is what kinds of games are better at retaining customers and monetizing over the long-term. Here are the four profiles that Flurry says exist in gaming:

  1. These games are used frequently for a long time, including slots, turn-based games that are passed between two people and simulation games. From a revenue perspective, the most successful companies maximize revenue through in-app purchases and by displaying ads to those who are not willing to pay.
  2. Strategy games are the only genre that are played intensely for a short period of time. Game life cycles are short, and Flurry says the game’s live services must be executed flawlessly. Companies that monetize well encourage players to spend money on continuing their progress through the game.
  3. The third profile is defined by infrequent game play for a short period of time, meaning that developers have fewer opportunities every week to monetize the user. The kind of gaming that falls into this bucket is defined as the “Card-Battle genre,” which is mostly popular in Asia, and has now started showing up in the U.S.
  4. The final category are games that are easy to pick up and play, and may be enjoyed for years, such as solitaire. However, according to Flurry, the evergreen titles “may lack the depth required to generate sizable in-app purchases.” Instead, it’s better to focus on advertising impressions. The games can also be good for keeping a strong core audience that can be used to promote more apps to.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik