There is a widespread assumption in the business that when you are launching a new game, retention is the first and most important metric to test for. Basically to see if you have a profitable new game on your hands, retention is more important than monetization. Another assumption that goes hand in hand with that is that if a game retains well it will eventually monetize. Those assumptions are simply not true. When you’re assessing the business potential of a new game, you need to be testing monetization from the start – not after you’ve validated retention metrics. I’ve seen many game hit good retention metrics in soft launch struggle to get their LTV high enough to scale up UA. And I’m sure you have too. You can’t slap on monetization structures and features onto a core loop. You need to design your game with monetization in mind from the start. And when you are testing game performance and user behavior you need to be assessing the entire experience from the start.
If you’re working on a hyper-casual like game, or a traditional puzzle game, then you probably want to be focusing on retention above all else. That’s because there is a direct correlation between time played and monetization. A hypercasual game will mostly monetize via interstitials – so monetization is a direct function of engagement and retention. In the case of a puzzle game, the vast majority of spending will come from a specific gameplay moment (“out of moves”). In addition, players are spending to consume more gameplay. So in this case retention (or engagement) is the limiting factor for monetization. You can’t monetize unless you play and engage with the game’s core loop. And in particular, unless you reach a specific point in the gameplay loop (out of moves). So here it (kind of) makes sense to assume that is you retain well eventually your game will end up monetizing.
The thing is, there is another model of monetization in mobile games. Some games – like modcore or RPG games – sell game content, not game consumption. And the monetization moment is totally decoupled from gameplay. You can download an RPG game, and there is little to no cap on how much you can spend. You could spend an entire session just purchasing gacha tokens and maxing out your team without even launching a battle. Now to be clear. Your game needs to be fun and appealing – players are spending because they aspire to play your game. But the success of your game is much more dependent on monetization patterns than engagement and retention ones here.
In the case of games that monetize content acquisition (e.g. buying characters and items rather than energy and continues), there is a disconnect between playing the game and spending in the game. And in these games, retention is not the main road to success. This can be clearly illustrated with a simple graph. Take the imaginary midcore game below and its day 1 metrics
| Day | Retention | Conversion | ARPPU | LTV |
| 1 | 49% | 2% | $15.00 | $0.30 |
Now let’s imagine 3 different scenarios where you improve only one of the 3 metrics. Everything else about the game and performance remains as is.
- Retention 49% → 55%
- Conversion 2% → 2.5%
- arppu $15 → $18
You would see the differences below
The scenario where you increase d1 retention by 6pp is the one that sees the smallest increase in overall LTV (+13%). Whereas the scenario where conversion increases sees a 29% increase in overall LTV. And I think most of us would agree increasing day 1 conversion from 2% to 2.5% is a challenge – but much less than getting day 1 retention from 49% to 55%
We can even take that one step further. Imagine a scenario where you dramatically increase retention but conversion goes down vs. a situation where retention takes a massive hit but conversion goes up.
The importance of monetization – and in particular conversion – is much greater for the final LTV value than retention. So if your game is mostly IAP based, and the purchase moment is not tied to consuming game content (i.e. levels, like in a match-3 game) but to the acquisition of game items, then you should probably focus on testing monetization from the start in your soft launch process. If players stick around but they find little value in the content you’re selling or the overall monetization format/structure, you probably won’t be able to build a profitable business. Regardless of how strong your retention is.
Alexandre Macmillan 