Is it just a closed loop of game companies paying eachother or are they getting money from somewhere else?
In: Economics
Free mobile games make money primarily in three different ways:
(1) offering in-app purchases usually used by their ‘whales’ (i.e – 20% of their customers who spend a significant amount of money on the game and keep it alive for the rest of the non paying users).
Edit: Just wanted to clarify that the 20% isn’t supposed to be an exact figure, it’s a reference to the [Pareto principle](https://betterexplained.com/articles/understanding-the-pareto-principle-the-8020-rule/) also known as the law of the vital few. I’m aware that the actual amount of users who pay can be significantly fewer.
(2) Is by running ads, usually bought as a advertising package (meaning you don’t have to you choose a specific game to advertise on you can just specify which customers you aim to target and how much your company is willing to spend on it and it is accordingly shown to such users. Alternatively, if your game if quite similar to another one in the App Store, you can specifically target that app as you might find a lot of users with the same interest all conveniently in one place) and shown to you based on your past user data and preferences from the App Store. They always make sure to give you the option to remove ads with a small fee – which appeals to our human need to remove a ‘pain point’ (an inbuilt aspect in many free to play mobile games that slows down the player or tries to push them towards making paid purchases – these include things like in-game wait timers).
(3) That other major way they make money is buy selling your user data to other third parties (businesses) as user data is an extremely powerful tool for companies to have because it allows them to understand you and how to market and target you as a customer.
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