Where’s the Money In Casual Web Game Development?

[qi:115] For years, developing web-based casual games was little more than a hobby, a means of creative expression for game enthusiasts. Then advertising revenue started to reshape the casual gaming landscape — now, multimillion-dollar deals, flourishing startups like Mochi Media and Kongregate, and the attention of media giants Google, Yahoo and Microsoft are the name of the game. Sustaining the stream of quality games to play is now a business venture in itself, and with ad revenue streams at their disposal, developers stand to make a real profit off of their work. But just how much money can these new revenue streams bring to casual game developers’ pockets?

Ad revenue usually comprises only a small portion of a game developer’s revenue, acknowledges Ada Chen, product marketing manager of Mochi Media, but there’s a growing ubiquity to web-based games “that’s become extremely interesting to advertisers,” she tells me. Advertisements paired with web-based casual games have remarkably high engagement rates, according to Chen: In-game ads have a click rate of up to 5 percent, while most Internet banner ads have click rates of less than 1 percent. The unique advertising landscape already makes it possible for some games to quickly become profitable. As an example, she cites Bloons, created by NinjaKiwi, which she says rakes in $30,000 or more a month through various ad revenue streams.
Emily Greer, co-founder of Flash game portal Kongregate, remains skeptical as to just how significant advertising revenue could become — at least for the average developer. She points out that for the vast majority of web-based game developers, sponsorships alone comprise 50-70 percent of any income they earn; these days, a good game can net between $1,000 and $3,000 in sponsorships and a great game — something like Desktop Tower Defense — can take in as much as $20,000. By contrast, only one or two developers within the Kongregate community earn $1,000-$2,000 a month from ads; some five to 10 of them earn roughly $500 while between 40 and 50 take in a mere $100 each month. And that’s out of a community of about 2,500 developers. She does, however, admit that those numbers are on the rise.
Mochi Media was unable to divulge any hard statistics, but given the viral nature of their advertising — ads are embedded into the game and thus earn the developer revenue no matter where the game spreads — I’d expect even higher numbers. And Chen notes that advertising revenue actually comprises the bulk of the revenue that the top games earn.
But what does this mean in terms of profit? Most web-based games are still being made by enthusiasts; their investments aren’t money, but time. Mochi Media CEO Jameson Hsu tells me that most games, and some of the best ones out there, are made by a single hobbyist, working less than full-time over a course of about four months. So if you assume a base pay of about $80,000 a year, that would mean that for one of these average developers, it would “cost” about $3,000 to make a game. In other words, a few months of good ad revenue, sponsorships, and contests winnings could easily make an indie game profitable. Greer says that dozens have already quit their day jobs to pursue web game development as a full-time career. Mildly worrisome, however, is the fact that startups are being created with the sole purpose of churning out new web games as fast as possible — sometimes at the astonishing rate of a new game every week.
What if these new revenue streams, by making what many developers consider an art form actually profitable, usher in a flood of sub-par web games as businesses tried to milk this new cash cow? Here’s hoping that quality – not quantity – will remain the ultimate determining factor of a developer’s profit.