Gondola, a dynamic pricing technology company, has just announced its new plan to create waves (pun intended) in mobile monetization by persuading gaming companies to shift from Static to Dynamic pricing models. Gondola uses the example of airline companies to explain how Dynamic Pricing (DP) enables said companies to determine prices based on customer behavior and/or need rather than have a single price for everyone. The company wants to offer mobile gaming companies advanced algorithms that can make automatic real-time adjustments to games' IAP prices in order to customize players' user experience and, in turn, maximize profit.

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By leveraging historical user data and real-time analytics, Gondola promises to optimize the profitability of IAPs in mobile games by constantly adjusting item prices to match each individual user's gaming and spending habits. The company analyzes the relationship between pricing and user experience by focusing on Engagement, Retention, Conversion, and Monetization. Without going into too much detail, Gondola focuses on how players who find the game too hard or too easy might quickly lose interest, how players who get stuck on a level will "churn" (simply stop playing), the way players' different "conversion points" (the lowest IAP price point at which each individual player will push the buy button) aren't addressed by a fixed-price IAP, and on how players with a high-spending power simply can't find satisfaction in buying IAPs at low prices or don't get their money's worth.

Gondola hopes to solve all these issues created by Static Pricing models by tailoring a game's difficulty to suit the skill of the player through customizing the prices of virtual goods, by preventing churn through offering players who are stuck high-value items at very affordable prices, by increasing conversion through setting individual IAP prices for each player, and by monetizing whales (yes, they actually do use that term and do so repeatedly) properly with higher prices while maintaining low entry prices for casual players.

Gondola's argument for the value of DP models is quite intriguing. However, the airline industry example that it employs to argue for switching to DP actually brings to light the biggest issue of DP in mobile gaming: airline fares are the commercial world's equivalent of a premium game since a user pays a single up-front fee to enter the airplane cabin and then has the same experience as everyone else who's paid to enter that cabin (yes, you can argue that there are seats of different values on a plane, but that's like buying the collectors edition rather than the basic edition of a premium game). Mind you, Gondola isn't using the airline industry simply as an example, but, rather, draws a direct parallel between the two industries by claiming on its website that a "freemium game faces the same challenge" as an airline trying to fill every seat at the highest possible price.

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What Gondola fails to consider in the way it discusses DP models is how game IAPs alter the gaming experience both of the user buying them and every other user around him or her. It's not like DP models used by airline companies allow flyers to watch better in-flight movies at a higher volume just because they have more money than the person next to them because, let's face it, that would probably cause a small riot (there's a reason Business Class is separated from Economy by a curtain). IAPs in mobile games dictate user experience not just of the person purchasing them but also of all other users sharing that gaming experience.

I'm excited to see how companies are hoping to rethink mobile game monetization because more often than not game monetization tactics feel more like dealing with a blacksmith than a tailor. Yet, unlike many other experiences, most games are designed as a shared-experience environment, with many mobile games designed around chasing high-scores or, in general, competing with other players (yes, there are games that one could argue are not competitive in any way, but those games are often premium rather than freemium and Gondola's use of depictions of weapon IAPs and of players fighting other players in its presentation video tells me that it's not considering only non-competitive games). That competitiveness makes skill-based IAP adaptability tricky, if not downright unfair.

And let's not forget that us gamers are experts at manipulating game systems and design choices, and so it will only be a matter of time before players manipulate a game's DP model. After all, what's going to stop players from tricking DP algorithms by playing the game with the skill of a toddler on a sugar-high, making the game lower IAP prices, buying IAPs at dirt-cheap prices, and then turning and killing everyone around them? So, yes to better monetization for mobile gaming, but I'm just not convinced the model Gondola is proposing is a viable answer to the challenges faced by freemium games.

  • CrazedJava

    This is why the freemium bubble will eventually burst. We've already seen the implosion of older models take down large game studios. Most of those studios had adopted a policy of something other than "Hey, let's make a great product that people will pay for!"

    Market strategies, pricing strategies, demographic targeting are but some of the ways you can increase your profits, but when you put those before actually creating good products then at some point you'll be showing up to work with the doors locked and the lights turned off.

    Really, it's simple for me. Make a game I like and I will give you money for it..

    • http://toucharcade.com Eli Hodapp

      Do you think the millions of people keeping Clash of Clans, Candy Crush, and the other huge free to play games glued to the top of the top grossing charts don't like those games?

      • Ubisububi

        Correct. I don't think they like those games; I think they are addicted to those games. Not the same thing.

      • CrazedJava

        Well, let's be honest. Some are still playing just because they are addicted.

        Ignoring that for a moment though, those games have been hugely successful and have managed to get people hooked and in turn have generated a large amount of revenue without some real-time IAP model adjustment.

        What bugs me about these schemes, not just Gondola, is the overall attitude of "I think our customers should give us more money!" instead of "what value can we offer that our customers will decide to give us more money?"

      • http://toucharcade.com Eli Hodapp

        I admit Gondola seems a little weird, but it's always been strange to me to try to argue that people aren't enjoying playing Clash of Clans, Candy Crush, and similar. Something that's universally true amongst all the top free to play titles is that they're actually really fun games, and the reason people spend money on them is because the value proposition is immediately transparent. In the world of entertainment, people don't spend money on things they don't enjoy.

        The way they get people hooked is because there's always something to do in them through constant updates. I've been playing the original Candy Crush for years now, and I've never hit a point where I'm like "Welp, finally beat this game, I can move on to something else." But, if you've already decided you hate these games, there's not much point in talking about it.

        I talk to a LOT of mobile gamers, and once you get outside of the hyperbole of describing something as "addicting," you'll find games which people come back to because they enjoy them.

      • CrazedJava

        I think that's really beside the point. Whether people are having fun or are simply addicted doesn't change the underlying fact that people are still spending money on these games.

        Also, as much as I do see other commenters off-handedly point out addiction as though it is the sole cause, I've never gotten addicted to a game I didn't initially enjoy.

        Most IAP's have a decent stratified pricing model that allows gamers to decide for themselves how much of a value proposition they will get for their money. That's one of the reasons I don't complain about $99 IAP.

        Something like Gondola isn't going to take a game that doesn't have the appeal of something like Candy Crush and make it a blockbuster profit generator. On the flip-side, it may, possibly, increase the profits of a Candy Crush game but it's already so wildly popular that I don't think they need to engage a 3rd party to maximize their revenue.

      • curtisrshideler

        Unfortunately for me, many people seem to like those games. In fact, those kinds of games seem to appeal to some of us hardcore mobile gamers and a LOT of casual mobile gamers, unlike the Dragon Quest or Monster Hunter types of games. Those f2p companies make gaming a simple thing to step into for those who haven't given Star Wars KOTOR or Broken Sword a try. My f2p enjoyments are all based around decent made games built on a solid IP that don't have better, premium offerings. But as long as there are more casual gamers out there, then they'll continue to enjoy f2p. So, all I can do is pray that with this new method we don't see a further decline in premium games.

      • Baracus

        Not to mention that those companies are spending around 2 to 3 MILLION Dollars a day on User Acquisition (ads in other games) in order to stay at the top. That's a lot of mullah!!

      • Baracus

        For each game that is.... not combined 😮

  • Based Xatu

    Mobile gaming seems to be a woman's market. I remember the last article talking about free runners and other games like that, and how women contribute to most of the sales. I would just market f2p games that appeal to women.

    Problem is I have no idea why they like those games, I asked women I know why they play them and they couldn't answer lol.

    • Kenan2000

      Not all women are going to like these games,but human is a really interesting creature - men might like runners and candy puzzles while women might love shooters and rpgs,just cause majority of women play such shitty games does not mean that all do the same thing.

      • Goggles789

        TL;DR, Generalizations are bad.

      • Based Xatu

        Wasn't a generalization, I was just going off of information that was given. I'm not saying women dont play games like that-and there is nothing about them that makes them awful, it's a matter of perspective.

        What I am saying is that women hold the majority of purchases on apps and IAP, so it would be smart to market towards them instead of men.

  • nazim

    Good write up man. Especially your last paragraph where you gave a conclusion and an opinion.

  • http://adamsimmersive.com Adams Immersive

    I'm already experiencing some "churn" just reading about this venture. Yes... There it is again.

  • Goggles789

    You said DP 😀

    But in all seriousness, why the heck do we need a company that specializes in "dynamic pricing technology," as that of itself sounds pretty darned useless.

  • Dailon Huskey

    Greed, Greed, everywhere greed. it's okay to make money it is not okay to be greedy and also to play on people's addictions (see the South Park mobile gaming episode).
    Candy Crush, as referenced a lot here, is a terrible example of ios gaming sure point to its success that's fine but it is not a game it's a form of gambling set out to prey on those who have no self control. it's okay to pay IAP for a game nothing wrong with that but if you have ever spent more than 20 bucks on IAP you have a problem and need some help for real especially if you spent that on Candy Crush of all games.
    The whole stance of see it's top of the charts, look how much money it made is a jaded argument but it's a popular argument on TA and I will get ripped for saying what I am so be it.
    Give me a good game and I am spending whether it's IAP or premium and of course provided I have the money to begin with and not running up debt on a game but when i download a paywall laden gambling machine it gets deleted instantly.

  • V for Viennetta

    I'd no more put my faith in an economic model than an astrologer. All they're doing is looking at what's happened in the past, drawing

    • V for Viennetta

      Sorry, hit the post button by mistake!
      Economists don't see the full picture - they just apply their theories to extracts of historical data & 'hope' to be proved right in the future.

  • speetz

    I didn't read the entire article, but from the explanation it reminds me of a more intricate player based economy almost; like spiral Knights with monetization and spending habits etc figured in. Sounds interesting, and can't do much but benefit most of us besides those that spend hundreds on one f2p title per month.

    • C. Stubb

      That's what I thought at first as well (being a Spiral Knights player myself), but read the article; it's not like that at all. Instead of a real player-based economy system in-game, this system simply changes the prices of IAP for each individual customer based on their behavior. To relate it to Spiral Knights: instead of players buying and selling the premium Energy resource with their in-game currency to determine the market price, it would be like if there was a different real-money price for energy for each player based on their behavior. Confused? Just read the article and watch the video, really.

  • worldcitizen1919

    I think it's all about balance. Simply put, if they want a greater profit from greater market share, although they're making a fortune now, then they have to give good value for money to cast a wider net. I believe there's a huge market share outside the IAP spectrum that companies are ignoring. For instance, I spent over $200 on PS4 games recently but on iPad games a tenth of that. I would never have spent that amount on IAP. Those same games with IAP would see me spend nothing. I'm sure I'm not the only one in the gaming universe that has a generous wallet if the price and value is right. Let's take Real,Racing. I'd buy Grand Turismo for $80 on PlayStation and probably pay $20 for a complete IAP free Real Racing but I don't play RR3 anymore because it's stuffed with timers and I can't play it the way I want. So I'll pay good money for GT but I deleted RR3 long ago because the experience is obstructed by all sorts of paywalls. IAP gaming has driven me back to consoles where I get a fuller, richer experience without the garbage IAP.

    • Goggles789

      I still getting a fuller experience on my NES than some of the F2P offerings on the app store.

  • crapple2011

    I wonder if someone ever will wake up and see that the industry is trying to rob the consumer surplus, that has always been part of the economic equation, with their IAPs.

    My opinion is that restorable IAPs are fine, but non restorable IAPs (usually in game curreny) need to be banned (with the exception of time based subscriptions with a minimum length of a month).

    • Dailon Huskey

      Agreed! 100 percent smartest post I have read today!

    • CrazedJava

      I can't say the utter cynicism behind some IAP pricing doesn't put me off, but I do stop short of calling it robbery.

      I don't personally have a problem with F2P/IAP models if they have something in it for me. I've played a number of F2P games that didn't get a dime from me simply because they weren't very good. I've had the even rarer experience of a decent F2P game that I still spent no money on because they couldn't give me a decent value from their IAP model.

      The explosion of F2P is not going to be sustainable long-term, however. The market is already crowded and a number of games have already shutdown. Even if money is not an issue time often is, with players too invested in their favorite to spend much time, and thus no money, on a different game.

      • Dailon Huskey

        If it's a good game and it's free I always buy some IAP to support the developer did that w Terra Battle and will do the same with FF Record Keeper.

  • korkidog

    I like the model a few recent games such as Lettercraft have adopted. Download the game for free, play 5 or 6 levels of the game, then if you feel you like it and want to continue playing, pony up a buck. I really like the idea of try-ware over freeware with IAP.

    • CrazedJava

      Just in general I like games that have a clear entry point.

      For example, you can play Injustice for free and get access to everything whether you pay or not. It's a matter of if you have time or money. However, you can't buy your way to success even if you purchase energy to keep playing because you still have to level up the characters yourself.

      However, for $10 you can buy a starter pack that makes the beginning much less of a grind and lets you jump into building a strong deck quicker and with less hassle.

      I wish more games would do this. Don't dork me around, just tell me how much you want and if I like your game I just may pay real money for it.

  • Jake7905

    A "dynamic pricing technology company"? Why not just call it what it is? Immoral mathematics.

    • C. Stubb

      "Immoral"? It's economics. There is no need to sensationalize it.

      • Jake7905

        Really? I didn't think I did. "Dynamic pricing technology" sounds pretty Orwellian to me.

  • Juroku

    So if it lowers the cost of iap, could a person hold out on not paying for x amount of time until the price is practically nothing then have a higher advantage compared to people who buy Iap all the time (and higher iap cost)? I feel like this system could very easily be manipulated and exploited.

  • littleTrip

    The gaming industry is like any other industry, companies constantly try to increase their margin by adjusting their pricing strategy. Hard- core gamers like touch arcade readers, might be able to manipulate algorithms but you can be 100% sure that the majority of players won't, they won't even be aware of these calculations.
    And yes, price fluctuations will specifically target competitive advantages (i.e. weapon example) because so-called whales are usually 25-50 year-old men, and their gaming behavior is mostly motivated by competition.