Software and Computer Engineering

The Reason the Mobile Game You Always See In Ads Sucks: Economics

Making any product is a business, which means that for it to exist it has to either be profitable now or be able to turn profit in the future.

If a business is in the incubation or growth stage, it can justify burning cash for attaining greater reach. After the growth slows down, the way to turn profit is to extract more value from each customer.

The reason that there will be only ads for gambling or addictive mobile games is very simple: They're the only kind of games that the average value extracted from each possible customer justifies is greater than the cost of acquisition of each new customer.

Let me unpack this a bit:

When a business runs an ads campaign, there are a two key metrics: 1) the total budget spent on ads and 2) the number of new customers driven by the campaign. By dividing those two numbers, you get the average cost of “acquiring” a new customer.

While the cost of acquiring a new customer (as calculated above) is smaller than the average revenue generated by customer, running more ads is an easy way to outright increase revenue: the business is paying less to get that new customer than the customer is likely to spend on the platform, thus turning a greater profit.

Finally, going back to why the ads for mobile games must all be gambling and addictive games: Those are the the only kind of games that will extract enough money from the average customer to justify running the ads to acquire them.

Note that up to this paragraph, the words “fun” and “enjoyment” weren't mentioned: For this class of businesses, these are only relevant factors up to the point they keep customer (they've acquired through ads) engaged and re-engaging over time with their product.

I don't think preying on people vulnerable to gambling and addiction is a laudable aspect of how the technology sector works today. The goal here is to unveil the mechanism than fuels an industry that moves billions [1] of revenue every year, in no small part thanks to ads served on phones and computers.

[1]: “Online gambling industry market size worldwide 2022 | Statista”