Elias Sandler, VP Product
Traditionally, mobile gaming advertisers have focused a large portion of their spend on countries dubbed “Tier 1.” These territories without a doubt bring users with the highest lifetime value (LTV) and average revenue per user (ARPU). But LTV is only half of the profitability equation. The main question that you need to be asking yourself is: Am I paying less than a user’s LTV to acquire that user?
If we think about this question, it shouldn’t really matter whether your LTV in countries like Indonesia or Thailand is only a fraction of your U.S. or Australian users. What should matter is that the price you are paying to acquire these users is less than their LTV.
Based on customer data across all gaming genres, cost per installs (CPI) in Tier 3 countries are a fraction of the CPI’s in Tier 1 countries, typically between 10-30%. Large, savvy advertisers have capitalized on this opportunity, targeting 30-50 different countries at one time and quickly expanding budgets, from a mere 1-3% of their overall budget in 2015 to 10-15% in Q1 2016. Early success has proven promising, and we expect to see even more budgets moving over to Tier 3 countries throughout 2016.
Another important factor to take into consideration is volume of players. As more and more social, multiplayer games flood the market, it is crucial to have a substantial and engaged player base in order to increase retention rates. A multiplayer game without players is doomed to fail. This is yet another opportunity to capitalize on Tier 3 territories. These countries represent a great source of affordable players with high levels of engagement.
This issue is key and should not be overlooked. A game with a high volume of players increases the “K” factor (virality) across all of your other channels. Pushing volumes from Tier 3 countries has proven to be incredibly effective. Although it may be difficult to measure, advertisers should do so while conducting tests in control versus experimental groups.
If you are interested in gradually expanding your reach to new territories, start by looking at Tier 3 countries, including Taiwan, Malaysia, Thailand, Poland, Slovakia, Czech Republic, Mexico, Turkey and Brazil. Over 12 of Kenshoo’s Gaming partners have seen positive returns by advertising globally across these and other Tier 3 countries.
Moving beyond the playbook and expanding your targeting to new territories is key to achieving success in this space. The potential is huge and the risk is low. It’s a win win!