Ad-subsidized mobile games are a sure-fire catalyst for an industry sorely in need of a kick in the pants.
Either that, or they’re the quickest way to sabotage the space in its infancy.
Hands-On Mobile last week became the first major mobile publisher to experiment with free games, releasing several titles through ad-supported game distributor Greystripe. The offerings are available through several channels including GameJump.com, Greystripe’s online storefront, and are “wrapped” in marketing messages that appear before and after each gaming session.
“Our advertisers get a full, dedicated screen” on which to advertise, Greystripe CEO Michael Chang explained earlier this year. “A menu comes up, and a user can click on the call to action or go into the game.”
Greystripe, which offers a staggering 800 titles, appears to have gained substantial traction since introducing its advertising technology about a year ago. The company in May pocketed $8.9 million in a funding round led by The Walt Disney Co.’s venture-capital arm, and last month Greystripe said it surpassed the 14 million-0download mark.
Threat to current model
But Greystripe-along with fellow ad-subsidized mobile game companies like Exit Games and Hovr Inc.-has drawn criticism from established publishers who claim offering free games undermines the market in a critical stage.
“We think it’s a bad thing for the industry,” Glu Mobile Inc. CEO Greg Ballard said of ad-subsidized games. “We think the current model, where people are actually paying dollars for games, works pretty well. . We don’t find ourselves in a situation where we are in search of an alternative mechanism to monetize games.”
Ballard echoed concerns from several other publishing executives. Namco Networks executive Scott Rubin lobbied against the trend at GDC Mobile in May, saying free games jeopardize an industry that has “done a great job of training consumers to pay a few dollars for a game.”
There’s no doubt that the addition of Hands-On Mobile’s titles adds luster to Greystripe’s portfolio, which has leaned on lesser-known publishers (including DS Effects and OrangePixel) and dubious offerings (such as “Porn Manager 2” and “Horse & Pony-My Stud Farm”). The deal with Hands-On includes high-profile titles such as “True Crime: Streets of LA” and “Call of Duty 2”- franchises that are already familiar to most mobile, PC and console gamers.
Old titles, new confusion
But while the free titles from Hands-On may sound familiar to many mobile consumers, they aren’t exactly today’s biggest hits, Ballard noted. Two of the mobile games were introduced during the 2006 holiday season, and none of the free games ranks among Hands-On’s current top 10 sellers.
“Consumers aren’t so sophisticated about this business yet,” Glu’s CEO opined. “When somebody talks about putting an older title on the market and making it available free, all the consumer knows is that it’s free. They’ll think, ‘Why should I buy something that costs money?'”
Indeed, while mobile gaming has yet to approach the hockeystick forecasts of several years ago, Glu and a handful of other major publishers have proven that a viable market exists for paid mobile games, Ballard said. And while some consumers surely find the cost of a mobile game exorbitant-a hot seller typically goes for as much as $6 per month, or $12 for a one-time charge-Ballard said Glu’s studies have shown that “price is never the principal barrier for games.” Instead, he contended, other barriers such as quality and discoverability have hindered the industry.
International appeal
That claim is countered by Greystripe’s success, however, especially in emerging markets where discretionary income is scarce. China, India and South Africa represent some of Greystripe’s most active markets, Chang said, while U.S. consumers account for only 10% to 20% of the company’s downloads.
The last year has been a tumultuous one for Hands-On, which several weeks ago saw the exit of CEO Jonathan Sacks and President John Rousseau. (The company is currently looking for a new CEO.) And while Hands-On consistently ranks among the top 10 mobile game publishers in the world, its market share may have slipped in recent months.
If the company can find a way to monetize games that have outlived their shelf life on carrier decks, however, other top publishers may follow suit. But some of them won’t be happy about it.
“I don’t want to be cynical about this,” said Ballard, who conceded Glu may consider offering free games at some point, “but everything I’ve seen in my career suggests that giving away something for free when people are willing to pay for it is a bad business decision. The business model is not broken; it’s generating substantial profits for a number of companies early in the business’ history.”
