iPhone game marketing costs keep rising to "insane" levels

At a panel at VentureBeat's GamesBeat 2012 moderated by GamesIndustry International's Steve Peterson, iOS developers shared their woes in marketing their games in a crowded app store. User acquisition costs are rising to the point that many free-to-play titles will spend more on marketing than they'll make in lifetime revenue. The panel was attended by SkyVu Entertainment founder Ben Vu, Machine Zone chief executive officer Gabe Leydon, mobile consultant A.J. Yeakel, and W3i cofounder Rob Weber.

Vu explained that cross-promoting other developers' games via services like Chartboost was his primary method of reaching users, but the rising costs are a big problem.

"This mismatch is insane," Vu said. "You have to pay attention to this, down to the hour or the minute."

Leydon cited costs as high as $7 for acquiring users, up from 50 cents a year ago. He sees a number of "billionaries" coming into the market with large brands to sell, with Asian mobile developers close behind. Weber backed up Leydon's claims, explaining that it's difficult to find the top-end of user acquisition costs.

"The pressure on prices will shoot upward and not slow down until more ad inventory comes online," Leydon said. "There's billionaires in the market who want to win. They are willing to spend $7 a download. This is going to be a long, tough fight."

"You can't predict how the bigger companies will spend," said Weber. "But it's about finding the right volume and the right level of profitability for a game and doing it on a large scale. It's a huge, full-time job."

Great content pushes games through word-of-mouth, but social networks like Twitter and Facebook also helps keep acquisition costs lower according to Leydon. Vu said he was also looking to improve the branding on his Battle Bears game by licensing the IP for a possible toyline and television show.

"We are working on the core product and the core brand and making it freakin' awesome," Vu said.

While Apple App Store is the most lucrative mobile market, that is beginning to come with its own set of issues, many of which don't exist on the Android-based Google Play Store and Amazon AppStore. Microsoft will also be entering the race with its Windows Store this morning. Unfortunately, on the Apple App Store itself, there seems to be no cure-all in sight.

"That's just more things to worry about," Vu said. "I'm pulling my hair out."