Game developers often wonder, “Should I rely on in-app purchases or in-app ads? Maybe I should try subscriptions?”
The answer to these questions can be a simple YES.
I’m talking about hybrid monetization. We bring you everything you need to know about this game monetization trend.
Learn how it works, how top games use it, and how your game can do the same.
Deconstructing Hybrid Monetization
The term hybrid stands for “something that is a mixture of two very different things” (Cambridge Dictionary).
In this case, the two very different things are in-app purchases and in-app ads. By definition, hybrid monetization is a strategy that combines IAPs and IAAs to maximize a game’s revenues.
A broader definition includes subscriptions as a part of the strategy, too. And this type of in-app purchase plays an important role in it.
First, let me explain all three parts of the strategy.
In-app purchases are the most popular monetization model and the pillar of the freemium game economy. According to Business of Apps, as many as 79% of gaming apps rely on in-app purchases.
They allow players to get something from the game with real money. Depending on the game type, that can be anything from extra lives, coins, weapons, unlocking levels, etc.
In-app ads are a great strategy to monetize non-spending players. While players enjoy a free gameplay experience, developers earn money from displaying ads.
There are five most common types of ads: rewarded video ads, interstitial ads, playable ads, banner ads, and offerwalls. One of them is an especially good fit for hybrid monetization – rewarded video ads.
Subscriptions are the up-and-coming monetization trend. They bring players additional in-game content and features for a set amount of time (e.g., 3 days, one week, one month).
Some common types of subscriptions are:
- Battle pass subscriptions
- VIP subscriptions
- Booster subscriptions
- “Remove ads” subscriptions
All of these subscriptions have one thing in common – they give players something premium and exclusive. They work best for engaged players that are looking for deep, rewarding in-game experiences.
Hybrid monetization is based on diversity. Different people have different preferences, and you should give them options.
Just like a candy shop that offers so many types of candies that everyone can find their favorite.
Mobile game monetization is not much different. Some players enjoy watching rewarded videos, others prefer making purchases, and there are those who are willing to purchase a subscription.
Hybrid Monetization Benefits
Monetize More Players
When you’re relying on one revenue stream, you’re probably leaving money on the table.
If using in-app purchases only, you’re not monetizing non-paying players. On the other hand, relying solely on in-game ads limits revenues to views and clicks. Monetizing with subscriptions only is quite rare and hardly a good choice.
Hybrid monetization helps you monetize more players. It expands the audience you will be able to monetize. This way, you don’t let a limited group of players decide your game’s fate.
Speaking of your game’s fate, don’t let myths determine it.
The thing is, developers are often concerned about ads cannibalizing IAPs.
This myth has to be debunked once and for all.
According to Facebook Audience Network, 86% of developers that included ads into their IAP models noticed no changes or got increased IAP numbers.
Rewarded Ads Boost Purchases
If a hybrid model includes rewarded video ads, that can boost your overall revenue. This ad format naturally fits in with in-app purchases and can even help increase them. According to ironSource, it can boost them up to 6x!
In fact, 4 in 5 developers believe that rewarded video ads work even better in a hybrid model than on their own (Walnut Unlimited).
Finally, 1 in 4 developers believes hybrid monetization is the best way to maximize ROI (Walnut Unlimited).
However, to achieve these boosts, it’s essential to strike a good balance between rewarded ads and in-app purchases, but more on that later in the article.
Boost Player Engagement and Retention
Did you know that a combination of ads and purchases can also improve game KPIs like user retention, session count, session length, and playtime?
Let’s say you have a game and you monetize it only with in-app purchases. Some players are willing to pay for certain boosts, while others are not.
Then you add ads to your game. More specifically, rewarded ads.
Now players have the chance to get certain advantages without paying for each one.
When players are able to progress more smoothly and get that sense of achievement, they’re more likely to have longer sessions and keep coming back to the game.
Create a Sustainable Business
Finally, diversifying revenue streams helps developers create a sustainable mobile gaming business.
Relying on just one monetization model is rarely a good idea because it can stop working for one reason or another. Utilizing multiple allows you to always have something to fall back on.
So if you’re in it for the long run, make sure to consider implementing a hybrid monetization strategy.
IAPs + IAA + Subscriptions: The Relationship
When combining three monetization models, one has to be in charge.
In most cases of hybrid monetization, in-app purchases are the main revenue source. The other two usually complement them.
Let’s say you have a match-3 game driven by in-app purchases.
Your best selling offer is “+5 extra moves”. You also offer purchases like “+5 lives” and boosters. How can you make hybrid monetization work for you?
When it comes to in-app ads, your choice should be rewarded video ads.
They work well because they are player-initiated and deliver in-game benefits. Or as players see them – free rewards, yay!
You should use rewarded video ads to give players a taste of in-app purchases. For example, you can offer them a “+1 life” in exchange for watching an ad. Rewards from ads should always be less valuable than your IAPs. However, they should be valuable enough to motivate players to watch them.
When it comes to subscription offers, they can be a valuable addition to your game as well. For our fictional match-3 game, a battle pass subscription would be a great fit.
This is because battle passes fit games from all sorts of genres – from casual to mid-core. They usually come in a free and a premium version. It is very important to make it attractive enough – the paid version should be one of the game’s most valuable offers.
On the other hand, games that monetize with in-app ads only rarely go hybrid.
If they do, they usually offer in-app purchases or subscriptions with a “remove ads” option.
Hybrid Monetization in Action
Games that use hybrid monetization can be found across the app stores’ top-grossing charts.
Here are two examples of popular games that use them and here’s what you can learn from them.
This casual game by Habby uses hybrid monetization, and it does it by the book.
This game’s IAP strategy focuses on its hard currency, gems. Players can use them for different purposes: revival, more energy, buying coins, etc. In the game’s store, they can find them in different packs, from $0.99 to $99.99.
Besides them, players can purchase coins, different daily packs, loot boxes, outfits, etc. And the longer they play the game, the more diverse the offer gets.
Even though it has much to offer, the game only uses occasional IAP pop-ups. This happens at times when players are not in gameplay, but are exploring and upgrading. These pop-ups have one common trait – they always bring more value than standard offers.
In Archero, there are six different rewarded video ad placements. Here’s what they can give players:
- The smallest pack of coins (in-game store)
- Opening a loot box (in-game store)
- More energy (in-game store)
- The smallest daily pack (in-game store)
- Extra spin on a lucky wheel (gameplay)
- Revive option (gameplay)
What’s so great about them? During gameplay, they only appear when players need assistance. The rest of the time, they know where to find them – in the in-game store.
As a result, they don’t come off as pushy and annoying. Instead, they feel helpful and optional.
Last but not least, the game also includes a battle pass subscription. This is something the developers added months after the game was launched. As it turns out, this was a great idea.
Right now, the game’s battle pass is Archero’s best-selling offer among iOS players in the U.S. (Sensor Tower, free data).
What makes it so great? For the most part, its value. Its paid version comes at $4.99, and it’s worth a whole lot more. According to Unity, as much as $150. Of course, there is also a free version.
Players can unlock the battle pass by reaching chapter 2, stage 26. This way, it gives engaged players even more content to engage with. Plus, more rewards.
A whole lot of different monetization features, right? Yet, somehow, the monetization strategy doesn’t feel aggressive at all. This is the result of using unobtrusive offers and the least intrusive ad format.
Call of Duty: Mobile
This first-person shooter also embraces hybrid monetization.
Here, the main revenue stream comes from in-app purchases. More precisely, the game’s premium currency – COD Points. With it, players can get anything they want from the store.
The game’s store is rich and diverse. It brings a whole array of different IAP offers for different players. This includes weapons, loot boxes, bundles, XP cards, cosmetic items, and soft currency.
As soon as players start playing the game, they are introduced to the game’s battle pass.
There is a free option, as well as two premium options at approximately $6 and $12. Both of them bring extra content, weapons, and cosmetics.
It’s a pretty rare practice to present the battle pass this early in the game. However, there are certain benefits to it. Players get used to the pass’ benefits right from the start. As they progress, there is more and more chance they will want to go premium.
Now let’s go over the options for non-spenders.
In Call of Duty: Mobile, players can choose to engage with ads. Of course, I’m talking about rewarded video ads.
Players can find them as a small “watch” icon on the home screen with a sign “free”.
It leads them to a lucky board. There, players can watch ads that bring them coupons. With these coupons, they can draw from the board. This way, they can try out their luck and win different items.
What’s so good about them? First, the fact that they are completely unobtrusive. Second, they feature the ever-exciting game of luck.
Even though the game uses so many monetization strategies, it still doesn’t feel like pay-to-play. This is because these purchases/rewards are not major progression boosters.
Nevertheless, players still want them. Some want cosmetic items, some want to play the battle pass, and others want minor perks. Luckily, the game has something for everyone.
Hybrid Monetization: Best Practices
The key to making a great hybrid monetization strategy is balance.
However, this is easier said than done. Let’s go over some key practices that can help you achieve this balance.
Prioritize User Experience
First of all, you need to understand how your players behave in the game. Which players are your whales? Which ones are probably never going to make an in-app purchase?
Separating these players is called segmentation.
Once you segment your players, you can optimize your monetization strategy. You can give different players offers and ads tailored to them.
For example, you’ve identified players that are least likely to make in-app purchases. You can decide that only these players will get to see in-app ads. This way, you prioritize the user experience of paying players.
Players that purchase a subscription are extremely valuable for your game. With this purchase, they’ve committed to the game. They will probably play the game until their subscription runs out.
Make sure these players don’t get a lot of IAP pop-ups and ad displays. If they do want to make a purchase or watch ads, they know where to find them.
Track the Right Metrics
When it comes to hybrid monetization, there are two most important metrics for you to track – ARPU and churn rate.
Both of them give you a good idea of how players perceive your monetization strategy.
Let’s say you’ve added ads to your existing IAP + subscriptions model.
Once you do this, don’t make additional changes to the game. This is the only way to get a real understanding of how ads affect your revenues.
Churn rate tells you whether ads are hurting the user experience and retention. On the other hand, ARPU tells you how they are affecting your revenues.
These two metrics can help you plan ad frequency, ad placements, and who the target players for your ads will be.
Use Rewarded Video Ads, but Wisely
We’ve already mentioned that rewarded video ads are the best IAA choice for hybrid monetization.
To get the best out of them, think about the best placements. This will depend on your game and its genre.
There are some types of rewarded video placements that can be applied to numerous games:
- Out of lives ads
- Booster ads
- Daily reward multiplier
Obviously, “out of lives” ads are an option for games that are based on lives. They appear at the moment when the player can wait for new lives or make a purchase.
Booster ads offer players something to help them progress. For example, you can give them the option to earn a booster right before a difficult level.
Finally, almost every game offers some kind of daily reward. Why not give players the option to double it? This placement has the potential to monetize active players on a daily basis.
Keep Everything Moderate
Since you have three different monetization models in place, none of them should come off as too aggressive.
Yes, you can still have IAP pop-ups, but occasionally. Keep in mind that not every offer is worth enough to come as a pop-up. Don’t deliver pop-ups upon every game launch and in every session.
Can you introduce your battle pass offer as a pop-up? Of course. In fact, you should do it. From time to time, you can even remind players what they would have gotten if they had bought the paid version.
When it comes to rewarded video ads, they don’t have to be buried somewhere hard to find. You can put them in front of players, especially when they need assistance. However, don’t display the option constantly (e.g., after every level). It is enough to create awareness, and the players that want to watch them will go and find them.
Wrapping up on Hybrid Monetization
Hopefully, this article sheds some light on hybrid monetization and why so many games use it.
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