Everyone's a winner
March 2020
I regularly - monotonously -say that whilst there is nothing new under the sun, the digital world can show a different way of skinning the same cat.
For example, a shiny new San Franciscan start-up that publishes games for mobile phones is essentially the same business as Faber & Faber in 1920’s London encouraging and marketing T.S. Eliot. I’ll explain.
Mobile phone games are part of the latest internet gold rush. However, as we know, in gold rushes very few miners make any money, the winners are usually the people who sell the picks and shovels to the miners.
So it is in the mobile games gold rush. The ‘miners’ are those who create the games, the shovel-sellers are the publishers that turn them into cash and take a slice.
The ‘miners’ are the thousands of technical and creative geniuses worldwide producing new games (or ‘Apps’). Some work alone in their spare time, others work in companies dedicated to the industry. They make anything from simple word games to very complex action and adventure games with many characters and levels which successful players can achieve.
A game makes money three main ways. First, you may have to buy it, although most are given away. Second, some make small charges as you play the game; perhaps to get help or obtain more options. However, the main source of income is from targeted advertising placed on the game, which plugs away relentlessly whilst you play and can’t be switched off.
This is where the pick and shovel suppliers step in. These companies – the publishers - provide a bridge between game developers and advertisers. They advise both sides and take a slice of all the advertising revenue that flows through the system, just as advertising agencies have always done.
They are vital to the whole games business, as game developers don’t tend to know anyone who wants to pay to advertise on their game and couldn’t arrange it anyway; advertisers don’t know any game developers. Without the broker in the middle, it just wouldn’t happen.
A good example is a company like AppLovin (it really is called that) which was only founded in 2012, but already has revenues of $1 billion, made up of millions of slices of advertising costs. It sees over 350 million daily users of the games it publishes and knows a lot about each one of them: age, gender, playing ability and preferences, location and much, much more. This allows them to direct the adverts highly effectively, maximising the benefits to the advertiser.
Everybody wins, it seems: the developer receives part of what the advertiser pays and is happy; the advertiser receives highly targeted adverts and is happy; AppLovin sits in the middle raking in the cash and is very happy indeed.
This market is growing very fast. In 2019 the total spend on mobile advertising was about $190 billion; in 2015 it was only about $55 billion. It could easily reach $300billion by 2023.
When we think of publishers, us Oldie readers probably think perhaps of John Murray, in his nineteenth century Mayfair drawing room, inspiring the likes of Byron and being the centre of a literary circle. Astonishingly, AppLovin is doing almost exactly the same job; it encourages and develops people who create games, often taking a small financial risk; it holds conferences for them and acts as advisor. Then it arranges for the worthwhile games to be published and hopes to reel in the cash.
The only real difference is that AppLovin sells games and advertising, whereas Murray only sold books – but don’t tell me that Murray wouldn’t have sold targeted advertising in Byron’s books if he had been able to.
So you see, there really is nothing new under the sun.
A few links...
AppLovin
https://www.applovin.com/
Dip your toe into this mysterious world.
Mobile advertising statistics
https://www.statista.com/statistics/303817/mobile-internet-advertising-revenue-worldwide/
Faber & Faber – their history:
https://www.faber.co.uk/blog/about/
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