Presented by FastSpring
The Apple vs. Epic ruling has made waves in the game industry. Right now, developers in the U.S. are no longer prevented from connecting directly with users, and can embed direct payment links into mobile games — without being hit by commissions for off-app purchases. In the latest edition of GB Spotlight, GamesBeat’s Mike Minotti welcomed Harri Vainio, director, strategic design at Reaktor and Chip Thurston, head of gaming at FastSpring, to discuss the decision and dive into strategies to scale direct to consumer (D2C) — which will change how players think about game purchases.
“If you look at any top game out there, they generally will have a web store,” Thurston said. “Monopoly Go has a web store. Pokemon Go. Marvel Snap. Fortnite. All of these major games across any genre are now migrating players over and driving that direct to consumer revenue.”
Why direct to consumer matters
Apple’s emphasis on privacy has struck a blow to mobile game user acquisition on its platform, which caused some major issues for publishers, with significantly less data to draw on.
“We have less means of optimization,” Thurston said. “We can’t be as precise in targeting potential whales, potential VIPs for our games, as we were several years ago. When it comes to direct to consumer, you have the data. You have the direct control of the data, the direct relationship with your players.”
D2C is also the way publishers can provide better experiences with personalized, targeted offerings, which is hard to do on the major platforms. Learning, iterating and optimization comes from teaching your players that you not only get a better experience that’s closer to the game, but also significantly better value and better features. (And for that, it’s important that the web shop is not a mirror image of the stuff that you sell in the app stores.)
“It’s teaching players something new,” Vainio said. “There’s going to be an expectation that there’s a web shop where they can get better deals. But I think they’re also going to start to expect better experiences and more targeted offerings. Something that’s much more tied into the game process, the loop of the game or the storyline, that wakes up at the exact right time and offers you exactly what you need. You can’t do that in these generic stores.”
New and old monetization approaches
Technically, there’s a low barrier to entry into a direct to consumer strategy. It’s easy to find a solution provider that can help you set up a quick one-page web shop with player IDs, input fields, and items, with checkout and merchant of record responsibilities handled by your partner, Vanino said. The tough part is after launch — optimization, new features that drive player engagement like loyalty and rewards, and so on.
“Then you have to start figuring out how to run a web shop,” Vainio explained. “For most it comes as a surprise. Overnight you’re a global retailer on five continents. But I want to encourage companies to go for it. It’s not rocket science. If you start small and take it step by step, it’s a matter of weeks to get set up.”
There are turnkey solutions, like the Epic Game Store which offers a web shop platform. There are custom options as well, like FastSpring’s offerings, that allow developers to launch quickly and then evolve and grow their approach and their shop over time. That’s a much better strategy than throwing everything at the wall and making it stick, Thurston said.
“If we’ve learned something from the best retailers, the idea is that you develop a shop one feature at a time, then you look at the data and you almost immediately realize what the next feature is going to be,” he explained. “What’s great about the web shops now is that the business case is so phenomenal. You bypass the 30% commission. You can basically finance the development by itself through the revenue gains that you get from not paying the commission.”
Taking a hybrid approach to monetization
D2C in its current state is necessary to maximize profitability while driving as much revenue as possible through that direct channel. But that doesn’t mean developers don’t need Apple and Google anymore.
“Of course there’s the distribution — they still have all the stores for all the Apple and Google devices. You still need to have your game distributed there to reach the players that you want to reach,” Thurston said. “But also, from a monetization standpoint, they still play an important role with the convenience they offer, the trust that they have. There will still be a significant cohort that will just want to purchase through mobile. You don’t want to cut that off unnecessarily.”
Staying abreast of industry ramifications
It’s important to note that the current rulings are pretty contained: so far they only apply to iOS, not Google, and only in the United States. While expansion is on the horizon, in the present Apple’s response has still not solidified.
“Yes, they are obligated to allow steering based on these recent rulings, meaning that games can promote their web stores in the game, off-platform payments in the game, and they can directly navigate players to those,” Thurston said. “But Apple controls the ecosystem. There are still many levers they can pull beyond just this area of steering.”
That might include impacts on game visibility, wherein games that have more payments routed through the mobile platform have greater visibility than games that don’t, or it could manifest as an install-based fee, which the company has experimented with in Europe. At this point there’s no talk of lowering the 30% fee — but that’s not surprising.
In the meantime, momentum outside the U.S. is building, with the DMA in Europe, and the Smartphone Act in Japan, which can now point to the Apple ruling as a precedent in anti-monopoly lawsuits.
“That makes it even more critical for publishers to make sure they have not just a web store in place, but a global coverage, a global solution for a web store in place,” Thurston noted. “Of course nobody knows for sure. There’s going to be confusion for a while. But I think that this confusion promotes the idea of web shops. Players are going to be adapted to this new norm of web shops and better deals for them. We’re not going to put it back in a box and forget about web shops, whether or not the courts say anything. I think web shops are here to stay.”
The bigger point is that the decision could be overturned, Thurston added. What that uncertainty means is that publishers need to act with urgency to capitalize on the rulings that are in place now, and whatever rulings may come, so that you’re ready when something happens in Europe and other regions, and you make the most of the legislative window in the U.S.
“The publishers we’ve seen capitalize on this ruling are ones who already had a direct to consumer strategy in place,” he explained. “They had a web store. They had a proven merchant of record like FastSpring. They were able to say, Let’s go notify our players and drive more traffic into our store. We’ve seen publishers already more than double their revenue coming through direct to consumer channels. The companies that have migrated their players over to purchasing on the web store will be the ones who can continue to reap that benefit for the foreseeable future.”