How Video Advertising Affects Payments & LTV: An Experiment by Webgames
Advertising can be a compelling solution for supplementary monetization. If your game already features in-app purchases, you can keep the balance by building ads in carefully. For a better idea of how to do so, let’s check out this experiment performed by Webgames and Appodeal, which was focused on growing LTV with in-game video advertising.
Ghost Town Adventures was released for App Store and Google Play in Fall 2015 and had more than 3M downloads the following year. The game monetizes via the free-to-play model, meaning that users play for free and only pay if they want more in-game items and artifacts. This fits well with the dynamics of the game, but it leaves one problem: you can’t make everyone pay. To monetize the maximum amount of users, Webgames decided to build in video advertising.
Webgames analyzed how to include video advertising and hypothesized that wrong timing could “spoil” users and “eat” those who already pay. Therefore, 3 hypotheses were to be proven:
- Video ads (especially rewarded video ads) demotivate users and decrease the number of paying users if shown too early.
- Users will leave the game promptly after watching an ad.
- Ads must be shown only to those users who don’t pay and aren’t likely to do so but are interested in continuing to play.
Testing the hypotheses took 2 weeks. The experiment was done on 10,000 new randomly picked users put into one of two groups:
- In Group A, ads were shown to all users after the completion of a checkpoint at the end of the first session.
- In Group B, ads were shown only to non-paying users and only after it was clear that the user is unlikely to pay. The benchmark was the completion of one-third of the game’s plot without paying.
The rewarded video ads were built through Appodeal. The format works well for adventure games as it looks natural in a gameplay and is helpful for users. In Ghost Town Adventures, the ad was delivered by a fairy with presents who appeared for a short moment and rewarded the user with a video. After watching it, the user got in-game currency (crystals) for free.
The fairy was the only source of advertising in the game, working according to the following plan:
- Appears every 30 minutes
- Tells the stories of other ‘lands’
- Suggests to watch 4 stories (ads) and get a prize for each.
The fairy appears only in the sky above the city (the map), where a user, moving through the game’s 21 chapters (houses) must always get back to. Launching the game also brings users directly to the map.
The results were evaluated by the following parameters
- Percentage of paying users in the focus group
- Ads shown
- Average number of sessions and average session length
The results turned out to be completely the opposite of what the team initially predicted.
- Group A, where ads were shown for everyone, had the most ads viewed: 34,000 vs. 2, 000 in Group B. Ad revenue for Group A was, therefore, higher.
- Furthermore, Group A had a higher percentage of transactions per user, and 25% higher LTV than Group B.
- The total number of paying users in Group B was slightly higher, mainly for minor purchases.
- Retention and crystals’ spending in both groups was only slightly higher in Group A.
On the whole, the first strategy was much more profitable both for the company and users, regarding the higher LTV and ad revenue in Group A.
The experiment proved all the initial assumptions wrong.
- Advertising actually boosted in-app purchases revenue. This may have happened because rewarded videos show the advantages of in-game currency and don’t annoy users. To paying users, in turn, rewarded videos remind them how helpful crystals are, encouraging them to buy more.
- Well-built ads at Ghost Town Adventures increased loyal users and improved in-game metrics: LTV, the average bill, impressions.
- Video ads bring money by themselves.
Video ads are now shown to every user, regardless of whether they have made a purchase or not. Webgames still performs the experiment from time to time, and the results continue to prove the chosen strategy.
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