Year: 2025
Type: article
Abstract: In-app purchases (IAPs) have become the primary revenue stream in the mobile gaming industry, with complex valuation waterfalls determining how revenue flows through platform fees, publisher shares, developer royalties, and marketing costs. Accurate modelling of these waterfalls is essential for financial planning, investor reporting, and M&A negotiations. This research article introduces a structured framework for analysing IAP valuation waterfalls, focusing on gross-to-net revenue flows, platform commissions, bundling, and discounts. Traditional valuation models often fail to capture key dynamics like lifetime value (LTV), churn, and monetization cycles. To address this, we propose an enhanced approach that integrates user behavior analytics, cohort analysis, and probabilistic forecasting. The paper examines stakeholder incentives developers, publishers, platforms, and investors and uses real-world examples to show how different pricing models (e.g., loot boxes, subscriptions) impact waterfall efficiency. Comparative insights from markets like the U.S., China, and South Korea underscore the global relevance of this method. A practical guide and spreadsheet template support implementation, making the framework useful for CFOs and strategic planners.
Authors: Ennov – Software Solutions for Life Sciences, USA, Anjali Kale
Language: English
Topic: Digital Games and Media
Subfield: Sociology and Political Science
Field: Social Sciences
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4414374804
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