Hybrid Monetization Buzz Doesn’t Quit: Brat or Basic?
Contributor post by Tiffany Keller, the Product Director for GameForge AI, Host for Rise and Play Podcast, and board member for a network of gaming ecosystem startups with a decade of experience at top game publishers. Connect with me for any content collaborations!
“Hybrid Monetization… the word on everyone’s lips” may lead you to believe that monetizing off upwards of 15 rewarded video impressions a day (Unity Mobile Growth and Monetization Report) alongside IAP starter packs is sexier than it seems. The reality, however, is hybrid monetization is 2024’s table stakes for almost every genre. Hybrid monetization is basic, although it may be a welcome refuge after gaming’s brat summer fling with direct to consumer web stores. You may not need a crack webstore team or a hook to get players from app to web, but the reality is that accretive hybrid monetization through IAA (in app ads) and IAP (in app purchases) is still a true investment.
Let’s give the topic more than just lip service: Appsflyer’s State of App Monetization Report provides great average benchmarks split by genres. Aggregation can result in a lot of signal loss though, so we included direct response trends from over 120 gamemakers and ad tech professionals across the industry on how they’re overperforming every average cited in the Appsflyer report. Read more in the Gamesforum study: Hybrid Monetization 2024 Trends.
An extra billion dollars from ads - many hypothesize that’s the lower estimate for the sum Microsoft’s Activision Blizzard King has earned since 2018 when they integrated IAA into their largest games. This was new in 2018, so in 2024 don’t be one of the basic studios left behind!
Appsflyer State of Monetization Report
Headlines
BASIC: When hybrid monetization is a no brainer
Hybrid has supplanted IAA only monetization across platforms and genres as the go to market strategy to be beat, with D90 ARPUs anywhere from 15% to almost 2x those of IAA. While IAA D7 ROAS can be up to 40% higher than hybrid, most of these gains are lost by D30. This means hybrid is your best bet for lifting your IAA game performance, as long as your cash flow can manage the extra 2-3 weeks out of pocket
iOS hybrid midcore games are shining in 2024 with 25% higher D90 ARPUs and 4% faster D7 ROAS accretion. That’s right: hybrid monetization ≠ hybridcasual!
BRAT: When hybrid requires special attention or it will shortchange your goals
The casual genre is a mixed bag, as IAP earns about half the D7 ROAS of its hybrid counterparts, however casual D90 ARPUs are over 30% higher on iOS
It’s tricky to pick the right monolithic midcore monetization strategy across platforms, as iOS midcore hybrid outperforms IAP only, however, android midcore hybrid earns only half the D90 ARPU and earns over 20% less D7 ROAS than IAP only
For studios with constrained cash flow who are looking for a CPI payback period of 30 days or shorter, IAA still can’t be beat on simple hypercasual and midcore genres that don’t seek high LTV. If you are making a casual game and considering IAA or hybrid, then hybrid is the obvious choice as ARPU is 2x higher and ROAS accumulates at about the same rate as IAA.
Handling our Brat Summer cases doesn’t result in one model winning across platforms. How can disciplined gamemakers adapt hybrid monetization to get the best of both worlds?
We want the high D90 ARPUs of IAP only games, but the feasible payback periods of hybrid that include ROAS speeding ad monetization. Hybrid monetization is really a spectrum, where most games that include IAP will make 80% of their revenue from IAA or vice versa. The name of the hybrid game is slightly less ad friction than other games your audience plays. Your target audience dictates how much ad monetization you earn before cannibalizing IAP spend or lowering retention, judged against their available substitutes. These substitutes, or direct competitors, are what your game will be compared against in accordance with the economic principle of the Substitution Effect (more thoroughly explained here). As long as your rewarded ads are either more valuable to players or your ad friction is lower than available substitutes in that subgenre, then players have no advantage churning to another game.
This part of monetization design is equal parts art and science, as it requires juggling the value of fast ROAS and lower CPIs often at the expense of LTV. It’s important to remember that the Appsflyer report trends are an aggregate of averages however- the best gamemakers can generate results that are positive in every KPI. To get more context on how some in the industry are overperforming, we can reference the results of the Hybrid Monetization 2024 Trends Report I analysed in Q3’24, which lend qualitative insights into how gaming and ad tech professionals are continuing to hone their mix of IAP and IAA within their hybrid model.
Gamesforum Hybrid Monetization 2024 Trends
For gamemakers who already offer IAA and IAP in one game, many cited declining CPMs due to lower IDFA attribution, which pushes up the requisite impressions to convert potential players to install. If more impressions are needed to convert the same players and the mixed media model attributing that impression is further fragmented, then all the ad networks serving that impression will bid lower for it. This means the CPM for each impression earned in your game will likely have declined in value- pushing many primarily IAA revenue share games to turn towards low hanging fruit in IAP. When we look at which revenue stream increased share YoY, it’s important to try and remove bias from the skewness of the game’s current revenue split. For example, many hybrid games that make only 10% of their revenue from IAP, will find it easier to increase IAP share next year if they have already spent years refining their 90% share of ad revenue.
Once we filtered slices for both their predominant revenue driver and the respondent accountability for monetization mechanics (which filtered out most respondents resulting in a smaller sample for this graph only), we see the picture is less biased in favor of IAP growth. After controlling for dominant revenue share, we realize gamemakers are evenly split on whether IAP or IAA will continue to grow revenue share next year- despite 45% of respondents claiming IAP grew more than IAA this year. In other words- IAP is showing more strength deployed in IAA majority games than ever before, but it won’t be reversing the core drivers of anyone’s business. For the first time, hybrid games designed in an era where a 70/30 split is peak performance are dreaming of a 50/50 split… a cool 20% increase from their more nascent revenue stream that’s entirely accretive.
How will gamemakers inch closer to a true revenue model agnostic split in 2025?
When 72% of respondents plan to advance hybrid monetization, you know hybrid has gone mainstream. In fact, Appsflyer’s State of Gaming 2024 report showed that hybrid monetization games have increased 20% YoY. Today a majority of games in every single genre contain some form of ad monetization and close to 50% are advancing both monetization streams simultaneously. How are they avoiding that dreaded cannibalization and erosion of brand loyalty that keeps most Supercell and Dream Games projects in the dark on ads?
Biggest Challenges Ranked by Company Sector
Most games going for a true hybrid split greater than 80/20 use segmentation, which 45% of gamemakers surveyed are actioning next year. When gamemakers and game ad professionals shared their biggest challenges in achieving their top initiatives, understanding how to deploy their segmentation as a “hybrid gradient" was a top concern. Old school hybrid dictated only non-payers see ads, so making a payment moved players to IAP only segments. These hybrid games supported multiple monetization strategies, but were operated with discrete player audiences that never touched.
Today’s hybrid models can achieve 70/30 and 60/40 splits that allow payers to watch rewarded videos while serving personalized ad blocking IAP offers geared towards high ad volume watchers. Enterprising monetization managers are imploring ad industry professionals to catch up to the times: SSPs that simply calculate your ad KPIs and manage auctions may struggle to stay relevant if they don’t innovate. Managers want tools that do it all, like dynamically cap ad impressions based on a player's ad watching behavior mixed with signals of IAP purchase intent. To access valuable first party IAP data, ad tech platforms must create tools that ingest IAP signals to generate compelling returns. We see these challenges mirrored in the ad industry’s high scores for understanding cannibalization trade offs between IAP, IAA, and cross promotion.
Optimizing your hybrid experience based on platform CPIs, CVR, and CPMs earns that high midcore iOS hybrid ROAS and $9+ ARPU, while limiting android cannibalization to maintain quick ROAS paybacks. If this sounds complicated, that’s why planning against the confluence of all these KPIs working together is the top challenge cited by gamemakers. Increasing ROAS can’t always come at the expense of LTV if we want to grow overall revenue. 63% of studios are still banking on increasing IAP conversation- beyond pay for power progression by selling ad blocking IAPs.
Hybrid monetization can use ad friction to increase lifetime payers who may only purchase a single starter pack and monthly “no intrusive ads” subscriptions. Well tuned hybrid monetization that's either segmented across player prediction pipelines or skirts economic inflationary rewards doesn’t cannibalize- hybrid creates a flywheel. Certain player segments index on ads as their primary way to pay, while dolphin LTV is bolstered not just by starter packs and battlepasses but now ad blocking and skip IAPs. The friction of ads further underscores the value of IAPs that are well placed at pinch points, if gamemakers are willing to overhaul their shop page. For midcore games with a high reliance on whales, keeping currencies rewarded by ads separate from those purchased in the shop, or under a tight cap similar to battle pass rewards can prevent cannibalization. Given Appsflyer’s star example, iOS midcore players, earned 25% more ARPU on average than IAP only, we know disciplined gamemakers reap rewards. Studios mavericks, like the nearly 66% of Gamesforum’s IAP majority respondents, can extend their brat summer this winter into the next generation of hybrid monetization: the black box of webstores, flying by the seat of their pants to wayfind between disparate benchmarks advocating anywhere between a 5% to 40% transfer of bookings is attainable.
The future of hybrid isn’t limited to IAA and IAP- but first enterprising studios need to graduate from their brat era and share direct to consumer strategies to advance our understanding of the player monetization meta yet again. Maybe next summer…
