Want to Be a World-Class Marketer? Learn from Gaming Companies.

When people consider the world’s most successful online marketers, they often think of companies like Netflix, Amazon—eCommerce giants who used affordable pricing and smart marketing tactics to build themselves into globally famous brands.

But while what these companies have done is certainly very impressive, those looking for a glimpse into the future of online advertising would do well to take a look at an under-the-radar group: mobile game developers.

What are the game developers doing right?

While these firms might not yet be household names capable of stealing entire days from people as they binge-watch House of Cards or Transparent, companies like King Digital (“Candy Crush”) and Supercell (“Clash of Clans”) are some of the smartest out there when it comes to using their data to get the absolute most from their marketing dollars.

In a sense, these companies need to be nearly perfect at executing their mobile marketing strategy, just to survive. After all, they don’t have a chance to put their products in physical stores for people to see themselves, and some customers won’t take the time to compare product reviews before downloading a game.

As a result, one of the only ways to spread the word about their games—and to get a coveted high-profile spot in the Apple or Google Play store—is through mobile app install ads. And given that these companies often have limited marketing budgets to start, the only way to succeed is by being extraordinarily efficient.

To do this, game developers rely heavily on one metric that many other marketers have yet to fully exploit: user lifetime value, or LTV.

What’s LTV?

For those unfamiliar, LTV is the amount of money a company can expect to make from roping in a single customer. For instance, I downloaded Candy Crush in late 2013, and I have since paid King Digital $22.81 for extra lives and other power-ups while killing time on my subway commute. Since Candy Crush does not make money from running ads, that $22.81, plus whatever money I spend on in-app purchases in the future, is my LTV for King.

While these in-app purchases tally up to more money than I frankly would have liked to admit publicly, I’m probably not as valuable to King as someone who is independently wealthy and can afford to sit around playing Candy Crush and buying extra lives all day long.

As King and other mobile gaming companies have figured out, it’s smartest for them to use data to predict which kinds of people will be most likely to be big spenders over the long run (i.e., men aged 18-35 with household incomes over $100,000″ or “married women who live in Oregon” etc.) and allocate greater portions of their marketing budgets to getting those people to download their apps.

Right now, other performance marketers aren’t thinking as much about LTV as developers, but they will likely need to start in the near future.

Marketing short-sightedness

Other eCommerce companies are mostly thinking about the money they earn from the initial purchase users make after they see an ad. This conversion-focused approach is flawed, though, because just as not all app downloaders are created equal, the same is true for eCommerce customers.

For instance, while two people might purchase a subscription to Amazon Prime for the same price, their lifetime values will be different if one of the customers is a shopaholic and the other plans only to pay a flat fee for the sole purpose of being able to watch original programming. As such, the company should be willing to spend top dollar to make sure the shopaholic’s future purchases are made via Amazon rather than one of its competitors.

While eCommerce companies might be able to skate by—for now—focused solely on how much they make from a single conversion, they will soon be forced to follow the gaming companies’ lead and heed the laws of lifetime value.

The future is closer than you think

With the major channels for customer acquisition consolidating around big, auction-based platforms like Facebook, Google, and YouTube, competition for ad impressions will only get more fierce, driving prices higher.

In the near future, marketers who only factor the initial sale into their calculations will be priced out by companies willing to pay higher prices because they understand that they’re investing in far more than a single purchase. And once those companies get pushed out of the big auction platforms, it will be very difficult for them to build the sort of scale necessary to be successful.

While “sophistication” is not the first word one thinks of when “Angry Birds” and its ilk come to mind, there is simply no denying that mobile gamers are well advanced in new customer acquisition.

Performance marketers of all stripes hoping to remain in business over the coming years will do well to study their tactics, or face the consequences. Unlike in video games, there are no extra lives in business.

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About the Author

Aaron Taube

Aaron Taube is a freelance writer and reporter based in New York City. Prior to striking out on his own, he worked as a staff writer at Business Insider, where he covered the digital advertising industry and workplace issues; he was also a researcher/reporter hybrid at Law360, a news service for corporate attorneys.

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