Is my cross-promotion profitable? Evaluation of game-to-game cannibalization in free-to-play mobile games

Advertisements are a central source of revenue for free-to-play games. However, they could decrease in-app purchases (IAP) by reducing the quality of user experience or by causing early churn. We analyzed more than 50 million advertisements viewed in eight Gameloft games, and found that more than 139 thousand of them led to an install in another Gameloft game. Propensity score matching was used to account for selection bias in the decision to install the advertised game. This method allowed us to correct observational data to mimic a randomized experiment. Results reveal an overall 20.66% decrease in expected IAP revenues in the current game after the user installs the advertised game. This variation was found to be greater in higher revenue-generating games, but it did not appear to vary depending on the amount the user spent before seeing the advertisement. In the Gameloft context, the decrease in future expected IAP revenues in the current game was lower than the gains in the newly installed game, resulting in an overall 17.69% increase in future expected revenues. The results of this paper suggest companies should carefully select which game is promoted, in order to fully benefit from cross-promotion.