Can ad-funded mobile games provide the mobile gaming industry with the revenues it’s seeking? Consumers have long been trained on the internet to want content for free, and subsidizing games with ads seems like a good way to give them what they want and still earn money. Or is it? At the Mobile Gaming Forum held in London Wednesday, a panel debated whether ad-funded mobile games could attract more consumers, and more importantly, drive up revenues. 

HandyGames CEO Christopher Kassulke Mobile reported that ad-supported games was bringing in a “nice revenue stream” for his mobile games company, and that he believed that revenues from ad-funded games would equal those they got from operators.  Advertising network Greystripe, which owns mobile games portal GameJump, as well as white labels it for customers, reported that when the portal launched a year ago it had fewer than a million downloads a month. By December 2007, it had racked up eight million downloads a month.

But while those figures may sound tantalizing, not everyone is ready to to make a run at them. Operators, for one, are wary, and so too are the top-tier games publishers. More after the jump…

Network operator Three UK, for example, said it had decided against an ad-funded games service for now after seeing the results of an ad-supported mobile games trial conducted by Three Israel eighteen months ago. While the games did generate revenue, they didn’t particularly drive usage, according to 3 UK’s Head of Games Xavier Louis.  Plus, operators point out that the quality of the ad-supported games weren’t quite up to scratch, noting that many of the games from top-tier publishers were conspicuously missing from “free” portals. Louis was wary of what type of experience this was giving the operator’s subscribers. As Orange UK’s head of games and film Neil Holroyd added, operators wanted to make sure they were protecting their subscribers from getting “damaged goods”.

The top publishers had their own doubts--though Eidos’s New Media and IT Director Simon Protheroe and Gameloft (EPA: GFT) UK MD Alex Tan said they were generally “supportive” of the idea. Protheroe said he was concerned that the model would create an expectation in the customer that games were free. Such an attitude could end up devaluing all mobile games, including the premium ones that people currently pay for. As Three UK’s Louis later added after the session, a cheapened view of games could end up cannibalizing the sale of paid for ones.

But Greystripe marketing manager Russ Heddleston argued that the industry should allow consumers to decide what was “quality”. He noted that the company had often been surprised by the games that had become most popular on GameJump and if they had been left to decide on what would appeal to consumers, they “would have missed out on a lot of great games”. Plus, one of their bestsellers ended up being a Tamagotchi-style virtual pet game that had a low production cost.

Tan added that many advertisers would naturally want to advertise in the best, branded games. But mobile games—for example, the mobile hit Deal or No Deal—based on television, film, or other game hits, come with licensing terms. How would the revenues from making such games ad-funded be split amongst the license source, the operator and the mobile game enabler? “Can we make serious money when license sources [already] take a hefty chunk of revenues?” asked Tan.

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