Originally reported by Adzine

Sixteen and a half million Germans play online games, according to the Federal Association of Interactive Entertainment Software (BIU), so it's no surprise the industry's biggest trade fair, gamescom, is in Cologne this year. (It started on Wednesday and is continuing through the weekend.) After double-digit growth rates in recent years, rates continue to escalate for free online games, which have now become established, financially strong and hungry for new users. This growth as given rise to three new companies: NEODAU, Traffic Captain and HitFox.

The market is still highly dynamic, even if the initial social games euphoria has subsided somewhat. According to the Facebook, social games reach 235 million people every month. The number of Daily Active Users (DAU) has reached 167 million (Source: AppStats), of which 51 million are on the market leader Zynga, followed by King.com, with 10.6 million players. Wooga from Berlin is currently at 7.2 million DAU.

€ 2.50 Per Registered Player

The operators of browser- or client-games, such as Gameforge, InnoGames, Bigpoint, upjers, Travian or Frogster also managed an impressive sum for fresh players. The annual budgets for major publishers are moving in the millions, and following an upward trend. "In the free-to-play segment there have been extremely high growth rates over the past three to four years. At the same time the increase in prices for new users have now approximately doubled in Germany, Austria and Switzerland," said Stefan Hinz, Managing Director of gaming network NEODAU. Where a new user was previously 80 cents, today it can cost up to €2.50 to lure a player in desirable markets like Germany.

Performance Model Dominates

Acquisition is usually from a classic performance model, in which the price paid per new registration (CPA) is fixed, but the costs vary depending on the channel and country. Important channels to reach new players are performance, display advertising and affiliate links on content sites like Games.de, or Browsergames.de Gamona, forums and blogs -- followed then by media buying, social marketing on Facebook and search engine marketing (SEM). "We constantly test and optimise various advertising media on various channels, including display, search engines or mailings. Currently, display advertising for us on the most important, accounting for about 80% of sales," says Sven Hezel, Director of Network for Traffic Captain. The network was founded in May and is part of iVentureCapital, an investor from the games industry, whose portfolio now also markets Traffic Captain.

Increasing Demand for Gaming Agencies

Since online games have grown so rapidly in the past few years, there hasn’t been an infrastructure established behind it. Some of the online game operators are able to manage their advertising budgets, but the environment is changing rapidly. "Especially in Europe, the market is changing very much because corporations in China and Korea are pushing billions here. This creates an increased need for full-service agencies that can access the European market on all relevant channels and users, and who are familiar with the peculiarities of each market therein,"says Stefan Hinz. NEODAU was founded earlier this year as an offshoot of GAN (Game Ad Net). Currently, the network reaches 15 million unique users in the core European markets, North and South America.

Mobile Games Marketing: the Future Driving Force

The very large businesses all sense the future of ad networks lie in mobile; unlike in the online environment, where the end of the growth curve is not yet clear. Games played on smaller screens make it even more difficult for competitors to reach new users. As US App Network Fiksu reported, the cost to acquire a loyal iPhone or iPad App user — defined as someone who will open an app at least three times — jumped by 14.3% to $1.44 per loyal user in June 2012.

HitFox Game Ventures has now established a pure AppLift affiliate network for mobile games. Publishers are to benefit from the network affiliates’ game, give new players at a fixed price from 50 cents. For Applift-founder and CEO Taner Kaya, this closes a yawning gap in the market, "AppLift is the world's first affiliate network for mobile games, addressing an urgent need, as well as opening doors, for affiliates and publishers alike."

NEODAU and Traffic Captain want to score in the smartphone industry, "Mobile traffic is one of our core themes. The mobile market is currently very small, but will probably reach its full potential in only two or three years -- and we want to be there right from the start," explains Sven Hezel.