One of Japan’s most respected gaming developers, GungHo Online Entertainment has focused on delivering a great player experience since publishing its first original title in 2002. Puzzle and Dragons, one of the company’s most enduring games for smartphones, has relied solely on in-app purchases for monetization since it was released in 2012. The company was monitoring trends around in-app ads, but was hesitant to try them out because of concerns about how ads could impact player experience and their brand, which were top priorities.
Daisei Takenaka, Studio Manager of Puzzle and Dragons, had noticed an industry shift over time in market trends where in-app ads were an endemic part of the design and player experience. He had a hunch that with the right rewarded ad design and placements, Puzzle and Dragons players would be engaged by the ad experience and find value in the incentive offerings.
Finding a reliable solution to test in-app rewarded ads
Daisei turned to Google AdMob and its 200-plus trusted demand sources to provide a high-quality ad experience for their players. The team at GungHo was familiar with Google products and had confidence this was the right partner for the IAP and IAA hybrid monetization experiments. “The fact that Google proposed it to us was especially important,” said Daisei. “If we were going to work on this project, we wanted to work with a reliable partner.”
GungHo prioritizes user engagement and takes care to ensure that any changes continue to keep gamers playing and returning frequently. “The most important point is that we want our users to continue playing for a long time,” said Daisei. “Naturally, profitability is extremely important as a business, but the user retention rate, DAU, and MAU are the most important factors.”
A new monetization strategy could have an impact on engagement metrics, however Daisei was confident the studio could develop an in-app rewarded ad integration that felt native to the game design and incentives that would be well received by its player community.
Starting small before scaling test strategy
GungHo's approach to testing in-app rewarded ads was to start small and optimize their strategy before running experiments in Japan, their largest Puzzle and Dragons market. In October 2020, it began its tests of IAP and IAA hybrid monetization in their North America app version, which had a smaller DAU player base.
"Integrating AdMob was seamless and straightforward, and it was easy to understand how ad performance impacted our business results," said Daisei.
The experiment was conducted with 100% of the game’s users. To ensure that the game experience was as seamless as possible, players had to progress through a number of levels before being served a rewarded ad. Players could engage with the ads in exchange for rewards that enhanced their progression, such as more stamina or additional monster box space.
To understand the impact of rewarded ads on users, GungHo compared the new engagement metrics to past data insights from the North American market and analyzed differences between gamers who interacted with ads and those who did not. GungHo also kept an eye out for player feedback and comments about the ads, especially among longtime users.
300% increase in ad revenue in the app’s largest market
GungHo had planned to run the test for at least a month, but within a week Daisei had enough initial data to convince company leaders that a hybrid monetization model could work in Puzzle and Dragons. In February 2021, they fully integrated AdMob bidding and mediation into the Japanese version of the game, which had the highest DAU player base. The team set a high revenue target for the larger market, and experimented with optimizing the in-app locations of the rewarded ads.
The company experimented with gacha — players receive a randomly selected in-game item in exchange for watching an ad — which Daisei said gave users time to get used to the concept of rewarded ads.
“We started hearing from users that it would be nice if they could get gacha from rewarded ads, which matched the direction of the expansion we had in mind,” said Daisei. “With the adoption of the gacha, customers are now using it even more.”
It wasn't long before user feedback came pouring in. An overwhelming number of gamers loved the new ad experience, with many referring to the update as "delightful." What’s more, the team noticed that the users who watched the ads were more likely to engage with the game over the long-term, leading to a positive impact on retention. The result was a 300% lift in ad revenue in the Puzzle and Dragons Japanese app version from their earlier experiments.
Daisei said GungHo is considering expanding the IAP and IAA hybrid monetization model to upcoming releases. “When I think about Puzzle and Dragons and future titles, I’m glad that we were able to gain a new way to engage with users,” said Daisei.
