Freemium is the future of mobile gaming

Even if you're unfamiliar with Russian games publisher ZeptoLab, you've almost certainly heard of, if not played, its flagship puzzler Cut the Rope, starring little monster Om Nom. And if you haven't, where have you been? The franchise only has more than 300 million downloads and 60 million monthly active players.
The success story rings true with fellow European developer Rovio, which, of course, has experienced global success with the Angry Birds brand, but we're not here to talk about the temperamental avians.
ZeptoLab was founded by two brothers, and now has a 54 strong team, with a development office in Russia, a HQ in the UK, and a PR agency on each continent.
Just last week, ZeptoLab released the third edition of its Cut the Rope game, Cut the Rope: Time Travel, which bagged our App Of The Day spot. With the company's CEO Misha Lyalin on hand to unveil the new title, he discussed the games market with Mobile Entertainment, and what lies ahead for the rapidly growing company.
When quizzed on the adoption of the game, Lyalin explained: "Frankly, the number of downloads isn't the benchmark we're striving for – we could increase it tomorrow if we wanted to. We're more interested in how the franchise has grown organically, and how many people are returning to play daily and monthly."
Cut the Rope is available as a free-to-play option and also for a £0.62 fee, which begs the question, is freemium or paid more successful? "There wasn't a freemium model that worked when we launched, which forced us to enter as a paid option.

"Our business has changed since then and our revenues are based around free downloads, in-app purchases, in-app advertising and premium, which offers us mixed monetisation. For us, freemium with in-app purchases dominates, with advertising in second place."
And speaking of advertising, some of the branded creative in the Cut the Rope games include content from the likes of Deezer, Land Rover, Spec Savers, and Microsoft. Seemingly there's no shortage of clients, but Lyalin believes the ad space still needs to improve. "Advertising for mobile is still in a very early stage and the most popular form is CPI – we tend to feature ads promoting other apps and games, and they're our biggest customers.

"I think ads have to become more meaningful and the format has to change and go beyond banners for consumers to become interested. When that happens there's no doubt in my mind that large brands will be keen to join the market, and a lot of money will flow."

Discussing whether rich media could be a solution to changing up the formats, Lyalin declared "Rich media won't necessarily change anything, it's all about content, and advertising has to be in context. In the meantime, things like movie trailers are great because they're an entertaining form of advertising."

Beyond games and advertising, however, ZeptoLab also has a burgeoning merchandise arm forCut the Rope, but how important is that division? "The short answer is that it's doing really well. Actually, it's awesome. The long answer is that it's a good and necessary component for our business to grow, and it's a great way for us to market our brand and generate revenues."

That said, the CEO assures they're not solely concentrating on stuffed Om Noms. "Animation is also a big part of what we do, and that's because we're trying to tell a story behind Cut The Rope. The next step is to produce a lot more games, but we're also exploring the opportunities for other products. A huge number of people know Cut The Rope, but we want a huge number of people to know the game came from ZeptoLab. There are 10,000 ways to do that, and growing Cut The Rope is the number one way to begin.

"We've signed off a TV show with Sony Pictures. We've seen how it looks and we're pretty happy with it, but it's still yet to be finalised."

The games market is currently under scrutiny from the Office of Fair Trading, which has grown concerned that users of freemium games are being conned, and Lyalin offered his thoughts. "I think some companies can easily scam people into making payments when they blur the lines between being a game and a casino - it's just the nature of the business.

"Freemium is still in a developing stage, but the industry will soon reach a point where consumers will understand how in-app purchases really work, and when that happens, companies that scam people will disappear. It's just a matter of people being sensible and understanding the merits of the space.

"Cut The Rope is a great game, but while people will buy iPhones for £500, they will always weigh up the difference between a free app and a paid one. I think free will dominate in that respect, which means companies will be able to profit through advertising and IAPs. That means it doesn't matter who criticises the market, freemium gaming is the future and nothing will change that."

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