Cashing in on the Smartphone Gaming Boom

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Cashing in on the Smartphone Gaming BoomA consumer research study by Elastic Path Software Inc.

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Cashing in on the Smartphone Gaming BoomA consumer research study by Elastic Path Software Inc. 2

“Set to reach $1.5 billion in just a few years, mobile gaming has hit the mainstream. To cash in on the smartphone gaming boom, traditional gaming companies must be pro-active in adapting to this emerging platform or watch newer or more nimble market entrants like Rovio and Glu Mobile crowd them out.”

Survey Background

This 2012 online study polled 503 US adults over the age of 18 who play games on their smartphones at least a few times a month. The survey was developed to examine consumer attitudes and behaviors towards mobile gaming.

Executive Summary

The widespread adoption of iOS and Android devices has led to massive changes in the retail portable game category. According to Mintel’s, “The US Mobile Gaming Market - May 2011”, U.S. mobile phone and tablet gaming sales hit $898 million in 2010, doubling 2005 figures.

With smartphone and tablet sales on the rise, games being the leading category in the App Store and Android Market, and cloud gaming poised to take off, the future of mobile gaming looks very rosy indeed. Both Mintel and eMarketer are forecasting revenues to top $1.5 billion by 2014-15.

The study found that better handsets with improved gameplay capabilities are leading to more frequent mobile gaming. Further, smartphone gamers no longer just play on the go; a large chunk of smartphone game time is spent at home, suggesting that mobile has now become a viable alternative or complement to traditional console and PC gaming.

To profit from the mobile gaming boom, Elastic Path offers a number of recommendations aimed at app stores and game publishers. These include broadening portfolios to appeal to diverse audiences, improving title discovery, integrating robust social features, continuing to innovate with freemium games, and working with advertisers to promote products in-game.


Key Findings:

Over half of smartphone gamers play daily.

Of the gamers surveyed, 60% play mobile phone games daily, 26% play weekly, and 14% play monthly [Figure 1]. While mobile gamers come from diverse backgrounds, daily gamers are slightly more likely to be younger, male, and university-educated than those who play less often.

In order to compare the behavior of frequent gamers with more casual users, those who play daily will be classified as avid smartphone gamers for the duration of this report. The remaining gamers who play a few times a week or month will be called casual smartphone gamers.

25%

26%

35%Several times

per day

Once or twice per day

A few times per week

A few times a month

14%

[Figure 1]

[Figure 1 – Tables 4]

On average, how frequently do you play games on your smartphone?

Base: 503 smartphone gamers

Casual smartphone gamersAvid smartphone gamers


Avid gamers frequently access other digital content on their phones.

Avid gamers are more likely than casual players to access other forms of digital content on their mobile phones and much more often. While only 15% of casual gamers listen to music on their phones multiple times a day, 39% of avid gamers do so [Figure 2]. In addition, 26% of avid gamers watch mobile video several times each day, almost triple the rate of casual gamers (9%).

Avid gamers are also nearly twice as likely as casual gamers to access social networking sites like Facebook on their smartphones multiple times a day (58% vs. 32%), and tend to surf the web, text, and call more frequently too.

[Figure 2 – Table 2-3,5-8]

Base: 503 smartphone gamers

0% 100%

[Figure 2]

Percentages who do the following activities on their smartphone several times a day.

20% 40% 60% 80%

Send and receive texts79%

58%

Make and receive calls65%

80%

Access social networking sites(e.g., Facebook, Bebo, Myspace) 32%

58%

Surf the web35%

64%

Listen to music15%

39%

Watch TV / video9%

26%



Google Android is the most popular smartphone platform amongst mobile gamers.

Amongst all mobile gamers, Android is the leading platform with 42% of avid gamers and 49% of casual gamers [Figure 3]. Fewer gamers in general own Apple iPhones; however a disproportionate percentage of iOS users are avid gamers (41%).

It’s difficult to say for certain whether iPhones attract more frequent gamers or create them. As yet, the number and quality of mobile games available for Android don’t come close to those available on iOS. Android phones’ varying screen sizes and processor speeds, combined with a chaotic Android market, have made some game developers slow to commit to the platform.

Overall, our survey numbers closely resemble the percentages for Android and iOS platform market share. According to comScore’s December 2011 press release, Android is gaining ground in the smartphone market. Of the 84.5 million U.S. smartphone owners, almost 47% have Android phones and nearly 28.7% have iPhones. RIM is a distant third at 16.6%.[Figure 3 – Table 1]

Base: 503 US adult smartphone gamers

0% 100%

[Figure 3]

What type of smartphone do you primarily use?

20% 40% 60% 80%

Android smartphone(e.g., Thunderbolt, Droid, EVO, Samsung Galaxy) 49%

42%

Apple iPhone27%

41%

BlackBerry smartphone / PDA15%

12%

Other smartphone9%

5%



A fifth of avid gamers have six or more paid games installed.

Free-to-play mobile games have witnessed some serious growth over the last couple of years. According to mobile analytics company Flurry, freemium games with in-app purchase options represented 39% of Apple App Store games revenue January, 2011 and that number had risen to 65% by June, 2011.

With an ante of effectively zero, there is no downside to trying an unlimited number of ad-supported and freemium games. Almost a third of avid gamers (31%) claim to have 6 to 10 free games currently installed on their smartphones [Figure 4a]. Another quarter (25%) has 11 or more. Even one in three casual gamers (35%) has 6 plus free games installed.

When it comes to paid games, it’s no surprise that avid gamers are heavier consumers. A fifth (20%) have 6 or more paid games currently installed, compared to just 6% of casual players [Figure 4b].

[Figure 4b – Table 10]


0% 100%

[Figure 4a]

Approximately how many free games do you currently have installed on your smartphone?

20% 40% 60% 80%

21+11%

7%

6-1024%

31%

1-560%

41%

06%

3%

11-2014%

4%




Base: 503 US adult smartphone gamers [Figure 4b]

Approximately how many paid games do you currently have installed on your smartphone?

0% 100%20% 40% 60% 80%

6-104%

12%

1-529%

34%

066%

45%

11-203%

1%

21+5%

1%



Many mobile gamers play at home while multi-tasking.

With smartphones so easy to take on the go, consumers are playing mobile games anytime anywhere. Four in five gamers of both types said they play while waiting, with almost half gaming during their commute [Figure 5].

Mobile games aren’t just played in brief bursts while on the go, however; a large chunk of mobile game time is spent at home. Avid gamers are much more likely to indulge in mobile games in the living room or bedroom; 44% play while watching TV and 43% play in bed, compared to 26% and 25% respectively of casual players.

For many then, mobile is clearly a viable alternative or complement to traditional console and PC gaming. The fact that people are gaming on their smartphones at home, often sitting next to their TV, proves that mobile is capable of getting and maintaining their interest.

[Figure 5 – Table 13]


0% 100%

[Figure 5]

When do you typically play smartphone games?

20% 40% 60% 80%

When I am in bed43%

25%

When I am watching TV26%

44%

When I am in meetings at work3%

6%

When I am eating7%

15%

When I am in class1%

4%

Other3%

3%

85%

80%When I am waiting for someoneor something

47%When I am traveling or commuting(e.g., on the bus, in the car) 52%



Half of avid smartphone gamers played more in 2011 over 2010.

Mobile gaming is emerging as a popular form of everyday entertainment for an increasing number of consumers. One third of casual gamers (32%) claimed they played more in 2011 than in 2010, with 51% playing about the same amount of time, and just 17% playing less [Figure 6]. Amongst avid gamers, over half (53%) claimed to be playing more on their handsets in 2011 than 2010, with 38% playing about the same amount, and only 9% playing less.


0% 100%

[Figure 6]

20% 40% 60% 80%

Avid smartphone gamers


Casual smartphone gamers

Compared to 2010, did you spend more or less time playing games on your smartphone in 2011?

More time Less timeAbout the same amount of time

53% 9%38%

32% 17%51%


Better handsets are leading to more frequent mobile gameplay.

Of those who spent more time playing smartphone games in 2011, both avid and casual gamers said getting a new phone with improved gameplay capabilities was the number one reason for their increased gameplay. Casual players skewed heavily towards this reason (65%), citing the availability of more free games as a secondary factor (41%) [Figure 7]. Improved gameplay quality (35%), reasonable pricing (23%), and increased multiplayer opportunities (22%) were disproportionately bigger influencers for avid gamers.

As handsets have evolved to feature higher resolution displays and faster processors, game developers are bringing out titles that rival home console offerings, such as Infinity Blade 2, but at a fraction of the price. There is evidence to suggest that these advanced games and console clones are attracting core gamers—a group accustomed to paying $60 a title for games with high production values and multiplayer options—to mobile gaming. According to NPD Group, established console owners are spending more time playing mobile games than the general population.[Figure 7 – Table 15]

Base: 229 US adult smartphone gamers who increased their gameplay in 2011

0% 100%

[Figure 7]

What has influenced the increase in your smartphone game play?

20% 40% 60% 80%

More game titles available29%

14%

Quality of gameplay andgraphics have improved 22%

35%

Reasonably priced smartphone games23%

More time available(e.g., longer commute etc.) 17%

23%

Friends to play with / against online10%

22%

Other3%

3%


65%

49%New phone with more memory/bettergameplay capabilities

34%More free games or free trials available

41%

11%


Smartphone gaming spend is increasing at a fast clip.

Mobile gaming spend is growing from year to year, with avid gamers leading the way. While 54% of avid players bought smartphone games or add-on content in 2010 [Figure 8a], 66% did so in 2011 [Figure 8b]. And across the board, gamers spent more last year, although only a small minority shelled out over $50. Free-to-play titles have expanded the choices available and increased competition for consumers’ time.

[Figure 8a – Table 16]


0% 100%

[Figure 8a]

Approximately how much did you spend on mobile games and game content in 2010?

20% 40% 60% 80%

$26-508%

3%

More than $501%

6%

$1-1020%

24%

$11-2510%

13%

Nothing – I did not purchase anymobile games or game content

Not sure2%

3%


65%

46%




0% 100%

[Figure 8b]

Approximately how much did you spend on mobile games and game content in 2011?

20% 40% 60% 80%

$26-5012%

4%

More than $508%

$1-1023%

30%

$11-258%

14%

Nothing – I did not purchase anymobile games or game content

Not sure2%

3%


59%

34%

3%


Gamers are keen to recommend titles and play with friends.

Of those surveyed, 78% of avid players and 50% of casual gamers recommended a mobile game in 2011 [Figure 9]. Over half of daily gamers (57%), along with a quarter of casual players (25%), invited a friend to play or accepted an invitation to play. Adding social features that let players recommend titles, and easily find/invite their friends, can help app stores build audiences and engagement.

Many gamers exhibit signs of brand loyalty; 65% of avid gamers and 38% of casual gamers downloaded two or more games from the same brand or publisher last year. Underscoring this finding, Distimo’s 2011 report, “Mobile Gaming Trends: Popularity, Pricing and Monetization”, noted that just ten game publishers accounted for more than half of all downloads of the top 300 iPhone paid games in June, 2011.

Gamers show willingness to pay once they have started engaging with a game. Half of avid gamers (51%) and 27% of casual gamers said they had upgraded a free game trial to a paid version in 2011. A third of heavier gamers (34%) and 12% of casual gamers said they had paid for additional content for an originally free game last year as well.[Figure 9 – Table 18]


0% 100%

[Figure 9]

Percentages who did the following activities in 2011.

20% 40% 60% 80%

Upgraded a free game trial or free gameapp on your smartphone to a paid version

Invited a friend to play a smartphone game or accepted an invitation from a friend to play a smartphone game

Clicked on a link within a smartphone game to download a different mobile game

Clicked on an ad within a smartphone game

Tweeted or shared high smartphone game scores on Facebook

Purchased any content for a smartphone game that you originally obtained for free

(e.g., power-ups, new levels/modes, etc.)


Bought and gave a smartphone game app to someone

Recommended a smartphone game to someone

51%

27%

25%

57%

21%

44%

15%

33%

12%

34%

43%

18%

27%

10%

50%

78%

38%

65%Downloaded more than one smartphone gameby the same brand or publisher


Browsing beats search in game discovery.

When looking for a new game in an app store or website, avid gamers are most likely to browse bestsellers, new releases and featured games (47%), while casual gamers browse game genres (33%) [Figure 10]. Search is less commonly used as a starting point by frequent gamers; only 24% begin at the search box versus 30% of casual gamers. Mobile game designers should take notice and seek visible app store distribution to reach the most engaged users.



0% 100%

[Figure 10]

How do you most often find new smartphone games you want to download in an app store or website?

20% 40% 60% 80%

33%

28%

30%

24%

Other5%

2%

Browse most popular or featured smartphone games and new releases

47%

32%


Browse categories (e.g., racing, arcade)

Search for specific titles I heard about from friends (e.g., magazines, blogs, etc.)


In-game content is growing mobile gaming revenues.

When it comes to purchasing add-on content like extra levels for games, it’s not surprising that avid gamers lead the way; 51% have bought in-game content in comparison to just 29% of casual gamers [Figure 11]. Access to new levels and features and performance enhancement are the most common reasons cited for buying add-ons.

The freemium model can be extremely lucrative. The amount spent on in-game content for freemium titles is relatively large when compared to the $0.99 to $4.99 sale price of a typical paid mobile game. Freemium games remove the barrier to engagement but can earn greater revenue from a steady stream of in-app purchases after the user is hooked. Mobile analytics firm Flurry found in 2011 that the average transaction inside a free-to-play game is $14. Although this figure seems high, over 5% of all purchases are for amounts larger than $50, rivaling the amount paid for console and PC games.


Which of the following, if any, describes why you have purchased in-game content (e.g., virtual currency, weapons, additional levels, etc.) for your smartphone?


0% 100%

[Figure 11]

20% 40% 60% 80%

To access new features or levels36%

19%

To personalize or decorate mycharacter / persona 12%

21%

Other1%

0%

I have never purchased any in-game content for my smartphone 71%

49%

To improve my performance or speed up my progress through the game

30%

13%



Gamers show interest in non-credit card payment methods.

Most game purchases are billed through a pre-registered account like iTunes, which is set up one time to allow application store purchases. Fast and easy, payment through a pre-registered account appeals to the majority of frequent players (84%) [Figure 12]. Casual gamers show slightly more interest in PayPal; three quarters of these respondents (77%) find this payment method at least somewhat appealing.

Operator billing also holds promise; 68% of avid gamers and 61% of casual gamers would be willing to have their game purchases added to their carrier bill at the end of the month. Many are also willing to buy game content with virtual currencies like Facebook credits. Underlining the critical importance of this trend, according to Distimo, 35% of the 300 most popular iPhone games use some kind of virtual currency for monetization purposes.


Base: 300 US adult smartphone gamers who paid formobile games or in-game content in 2010 and/or 2011

0% 100%

[Figure 12]

Percentages who find the following ways to pay for smartphone games and in-game content at least somewhat appealing

20% 40% 60% 80%

Using my phone number to pay and the charge will appear on my mobile phone bill

68%

61%

Pre-registered account (e.g., iTunes) 68%

84%

Facebook Credits or other virtual currency45%

56%

PayPal77%

75%

Credit or debit card entry72%

63%



Key Takeaways

With US mobile gaming revenues forecasted to top $1.5 billion by 2014-15, we offer a number of tips to platforms and publishers to profit from the boom:

App stores and mobile gaming sites

1. iOS attracts a disproportionate number of avid gamers who not only spend more on mobile games but also are heavier consumers of other smartphone content. While Google is taking steps to raise the standard of apps on the Android platform through a new training portal and design site aimed at helping app developers learn best practices, it needs to push harder to build a better catalog and attract avid gamers.

2. With gamers showing serious interest in non-credit card payment, gaming marketplaces should consider accepting alternative forms of payment like PayPal to capture those who don’t own credit cards or want better control over their spending.

3. Mobile gamers may routinely switch between searching and browsing for game titles, so app stores must support both behaviors by providing filters, sorting, and advanced search. Help gamers find appropriate titles by offering recommendations based on past purchases or reviews.

4. Make it easy for gamers to see what others are playing, suggest specific games, and invite friends to play by presenting friend recommendations or allowing them to import their contacts. Present a clear sign-up process to new players.

5. App store owners and marketplaces can differentiate themselves by offering low-cost subscriptions focused around different mobile gaming genres or bundles of complementary apps hand-picked by gaming aficionados. To present curated recommendations to specific audience segments, mobile gaming sites may want to leverage an app distribution network like Appstores.com

6. Almost a third of avid gamers bought and gave a smartphone game app in 2011, yet gifting is not always well-supported on game marketplaces. As mobile gaming gets steadily more popular, make gift options obvious to casual or non-gamers, and aim for a fool-proof buying process.


Game publishers and developers

Mobile gaming has opened an immense market that is not confined to a single demographic. This is a tremendous opportunity for game developers to broaden their portfolios to include games that appeal to diverse audiences, including non-English language and local content apps.

1. With much mobile game content consumed in the living room, gaming companies should continue to release marquee titles onto mobile platforms to engage existing gamers. At a later time, these players can then be migrated up to console titles with higher average revenue per user (ARPU), or to “all-access” plans that allow gamers to play a single title—or complementary aspects of it—seamlessly across all their platforms and devices.

2. When avid gamers are looking for a new game to play, they turn to featured apps first and search second. Mobile game designers should take notice and seek visible app store distribution to reach the most engaged users, while raising awareness through a strong social media presence.

3. Many mobile gamers enjoy recommending titles and connecting with friends to play games. New gaming franchises should integrate robust social features such as leaderboards and multi-player mode to build and maintain a fan base.

4. With mobile in-game purchases expected to grow to $4.8 billion by 2016 according to Juniper Research, game publishers should continue to innovate in the freemium space to find “whales” willing to pay for in-game content. Offering some kind of virtual currency can facilitate in-app purchases; according to Distimo, 35% of the 300 most popular iPhone games use some kind of virtual currency for monetization purposes. For paid games, if no trial version is available, a trade-in program may entice even casual gamers to open their wallets.

5. Mobile gamers show signs of brand loyalty. To raise awareness of lesser-known titles, publishers with multiple games should look for opportunities to cross-promote them, both in-game and out. Similar to non-mobile marquee titles such as Gears of War 3, commercially successful mobile games or franchises should be supported by a branded website that showcases all related apps, news, and associated merchandise.

6. With almost half of avid smartphone gamers showing interest in buying directly from in-game ads, advertisers should work with game designers to pitch their products inside well-known games.

About Elastic Path

Elastic Path is the leader in digital commerce technology and expertise for enterprises selling digital goods and services. Major global brands such as Google, Time Inc, and Virgin Media rely on Elastic Path to monetize digital relationships with their customers in ways that are frictionless, social, and everywhere.

Web www.elasticpath.com | Blog www.getelastic.com | Twitter www.twitter.com/elasticpath

Methodology

From January 5 to January 7, 2012 Elastic Path Software hired Vision Critical, an interactive research solutions company, to conduct an online survey among a sample of 503 US adults over the age of 18 who play games on their smartphones at least a few times a month. The full dataset has been statistically weighted to ensure a representative sample. The margin of error is ±4.4%, 19 times out of 20. Discrepancies in or between totals are due to rounding.

© Copyright 2012, Elastic Path Software Inc. All rights reserved. Elastic Path™ and the Elastic Path logo are trademarks or registered trademarks of Elastic Path Software Inc. All

other trademarks are the property of their respective owners.

Cashing in on the Smartphone Gaming Boom

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