Executive Summary: This article uses mobile games as a market segmentation example. We analyze the top five paid and top five free games to understand their revenue models. The games analyzed include Magic Sort!, Rips by Triumph, Bus Rush Fever!, Block Blast!, Vita Mahjong, Plague Inc., Minecraft: Play With Friends!, Geometry Dash, Gambonanza, and Heads-Up!. This analysis resulted in a market segmentation with six categories: one-time app sales, freemium app sales, advertisements, in-app purchases, subscriptions, and razors/blades. The most important categories were freemium games and in-app purchases. Many games use several revenue models. We also discuss the pricing strategy of Geometry Dash, which is revealed by its place in the market segmentation example. Finally, we discuss how this market segmentation example also ties into customer segmentation for the mobile games market, which includes free consumers, pay once customers, moderately engaged customers, and whales.
Why Is Magic Sort! Worth Millions? Free-to-Play Dominates $140B Mobile Games Market
I’m always surprised that some things bring in so much money. Free mobile games, for example. According to GrandViewResearch, the $140 billion market for mobile games was dominated by free-to-play games. How is it possible that free-to-play games can make billions of dollars? It turns out, mobile gaming is an entertaining and instructive market segmentation example.
Now, it’s not shocking to me that something like Pokemon Go is drawing in hundreds of millions of dollars for Niantic each year: according to Vice, Pokemon is the highest grossing media franchise of all time. But I am surprised that the Turkish game developer of such relatively basic games as Magic Sort! and Car Match, which mostly revolve around sorting things by color (an activity I previously thought mostly popular with toddlers), received $30 million in funding in early 2025. These simple sorting-type games, along with other simple games like tower defense games and puzzle games, make a lot of money despite being so casual.
Today’s question: what makes Magic Sort! worth millions? To find out, we’ll do a segmentation of the mobile games market by revenue model, looking at both paid and free games to understand how they compare. We’ll focus on revenue as the first step to profitability, and find out that the interaction between ads and freemium purchases is one core dynamic that sheds light on the market value of these simple games.
Market Segmentation Example:
How Do Revenue Models for Mobile Gaming Work?
One way to segment the mobile games market is by revenue models of the games. This market segmentation example is important when you are looking to get into a new market or expand your offerings in a given market, as it can help you to find the revenue model that makes the most sense for your business.
Comprehensively segmenting the mobile games market in a rigorous manner is beyond the scope of this article: even academic studies of mobile game revenue models focus on specific genres or subsegments. However, we can look at the top five paid and top five free games on the iPhone App Store to understand the revenue models of some of the most successful mobile games. We’ll use suggestions for business/revenue model categories from a recent study of business models.
| Mobile Games | ||||
|---|---|---|---|---|
| Paid or Free and Title | Brief description | What can you purchase? | Ads? | Revenue Model(s) |
| FREEMagic Sort! | Puzzle game, sorting colors | Ad-free game for $4.99, powerups etc. for $0.99 – $99.99 | Yes | Freemium purchasing/app sale, advertisements, in-app purchases |
| FREE Rips by Triumph | Open packs of trading cards digitally | Packs of cards for $1 – $1000 | No | Iin-app purchases |
| FREEBus Rush Fever! | Sort out a traffic jam to load people onto busses | Ad free game for $7.99, powerups etc. for $1.99 to $99.99 | Yes | Freemium purchasing/app sale, advertisements, in-app purchases |
| FREEBlock Blast! | Tetris-like puzzle game | Nothing | Yes | Advertisements |
| FREEVita Mahjong | Tile matching puzzle game | Ad-free game for $5.99 | Yes | Freemium purchasing/app sale, advertisements |
| PAID Plague Inc. | Help a disease kill all of humanity | Base game sells for $0.99, offers in-app purchases (expansion packs) | No | Purchasing/app sale, in-app purchases |
| PAID Minecraft: Play With Friends! | A building/survival game famous on PC comes to IOS | App sells for $6.99, possible to buy a Realms subscription (create private servers to play with friends) for $3.99/$7.99, one-time in-app purchases of skins, etc. | No | Purchasing/app sale, in-app purchases, subscription |
| PAID Geometry Dash | Musical platformer – move a character through obstacles to music | App sells for $3.99, Lite Version is free with ads | Yes- in Lite | Freemium purchasing/app sale, purchasing/app sale, advertisements |
| PAID Gambonanza | Roguelike Chess Game – change the rules over time | App sells for $5.99 | No | Purchasing/app sale |
| PAID Heads-Up! | Phone-facilitated charades game | Base game costs $1.99, Offers In-App Purchases (expansion packs) | No | Purchasing/app sale, in-app purchases, razors/blades |
Market Segmentation Example:
The Top 10 Games Use 5 Revenue Models
When we look at the top five paid and top five free mobile games on the App store, we can see at least five or six revenue models. Many apps use multiple revenue streams/revenue models.
- One-Time App Sales: Out of the 10 apps we looked at, five offered a one-time app sale. This is a fairly straightforward revenue model: revenue scales with the number of purchases.
- Freemium App Sales: “Freemium” app sales are a twist on regular app sales. Four of the apps we looked at had a Freemium component. This is a technique of offering a free service/app which does not have all the features of the paid app as a sort of advertisement for the paid app. In the case of mobile games, it is usually the case that the paid version is simply the same app with the ads removed, and this is true of all the Freemium apps listed above except Geometry Dash, which is a special case to be discussed below.
- Advertisements: Four of the 10 apps we looked at gained money from advertisements. These were usually interstitial ads, shown at a natural pause in the game, such as when a user wins or loses a level. Most of the apps that used advertisements as a source of revenue also used them as an enticement to the user to purchase a paid model without ads, which suggests that a user who pays the one-time price of an app is worth more than a user who simply watches ads. However, Block Blast! uses advertisements as its only source of revenue.
- In-App Purchases: Six out of the 10 apps used in-app purchases as a revenue model. In-app purchases give the user a better experience in some way. Technically, the purchase of a premium ad-free version in a free app is also an in-app purchase, but it’s not really the same category. Examples of in-app purchases are skins, extra levels, and power-ups. Paid apps tended to offer in-app purchases that permanently created a new kind of game play, like expansion packs. Free apps tended to offer in-app purchases that were designed to occur repeatedly for consumable items like power-ups. While below I focus on the advertisements/freemium app dynamic as one way mobile ads make money, these repeated in-app purchases can make up the majority of ad revenue.
- Subscriptions: Only Minecraft sold a subscription, and this makes a lot of sense. Minecraft is the most premium app on this list of 10: according to Guinness World Records, it is the best-selling video game of all time. Minecraft is played on many platforms including PC, Xbox, and Nintendo Switch. With that kind of IP, Minecraft can justify a $6.99 per month subscription price for its private multiplayer mode even as a mobile game. This revenue model suits Minecraft but it might not fly for a less premium app.
- Razors/blades: the “razors/blades” revenue model is defined by a low-cost basic product (the razor) which is subsidized by other products that it is used with, and which are sold at a significant markup to subsidize the first product (the blades). Heads Up! was the only app that used this revenue model: the expansion packs are useful to keep the game interesting, but they can be relatively expensive (for example, the Video Games bundle sells for $9.99, which is about five times the price of the base app). It’s not clear how effective this revenue model would be for an app with an unknown creator: Heads Up! is based on a segment of the Ellen DeGeneres show. DeGeneres invented the game and was already quite well-known at the time, which likely contributed to the app’s success. An app with a less well-known creator might instead have used the Freemium model.
Market Segmentation Example:
Mobile Games Revenue Model Chart
Here’s how the top 10 games are segmented by revenue model:
| Mobile Games Segmented by Revenue Model | ||||||
|---|---|---|---|---|---|---|
| One-time app sales | Freemium app sales | Advertisements | In-app purchases | Subscriptions | Razors/ blades | |
| The app itself can only be downloaded if the user pays. | A free app allows users to pay for additional premium features, like ad removal. | Apps show advertisements either interrupting the gameplay, or on the screen (such as banner ads). | Users pay for some additional feature of an app, without leaving the app interface. | Users pay on a regular schedule to maintain access to the app or to a feature thereof. | A low-cost product (razor) is subsidized by other products (blades) | |
| FREE Magic Sort! | X | X | X | |||
| FREE Rips by Triumph | X | |||||
| FREE Bus Rush Fever! | X | X | X | |||
| FREE Block Blast! | X | |||||
| FREE Vita Mahjong | X | X | ||||
| PAID Plague Inc. | X | X | ||||
| PAID Minecraft: Play With Friends! | X | X | X | |||
| PAID Geometry Dash | X | X | X | |||
| PAID Gambonanza | X | |||||
| PAID Heads-Up! | X | X | X | |||
A Core Dynamic for Basic Games:
Combining Freemium and Advertisements
After doing our market segmentation, we can return to our initial question: how do basic phone games manage to make money? There are two keys, and for today’s article we’ll focus on the second. The first key is to bring in the “whales,” who make repeated in-app purchases. These are the people spending $99.99 on Magic Sort!.
The other key, which we can see in all of the Freemium games, is to offer a free version of the game with a lot of ads, and then allow players to pay to remove ads. Most free games introduce ads only after you have played several levels, providing free powerups during the first levels. For example, Vita Mahjong only shows ads after about 10 levels. Each level takes two to three minutes to play, so the user gets half-an-hour of ad-free gameplay. That 30 minutes only appears to be ad-free, however: in effect the entire experience is a 30-minute advertisement for the paid version of the game, as Groeschel and Schaefer point out. These relatively simple Freemium games make money by sneakily advertising themselves. After 30 minutes of fun, users are willing to pay $5 to continue ad-free.
Analysis of the paid games actually suggests something important about the free games: hiding the price of the ad-free app may mean developers can charge more. We can see this by comparing Geometry Dash with the other Freemium games. Geometry Dash, instead of offering only one game that can be downloaded, offers a version with ads (Geometry Dash Lite) and a separate app which can be downloaded at a cost (Geometry Dash). The price of Geometry Dash ($3.99) is less than the price of any of the other ad-free versions of the free games, which cost between $4.99-$7.99. The $4.99+ price is hidden, whereas the $3.99 is advertised upfront. This suggests that consumers will pay more when the price is only advertised after they have the opportunity to enjoy the experience. More evidence for this claim is the fact that Geometry Dash is a much more complicated game, with more features, as compared to the other Freemium games. In other words, because Geometry Dash puts its price upfront, it is forced to charge less for what most would call a much better product. This shows how market segmentation and pricing strategy can sometimes shed light on each other.
Is Geometry Dash leaving money on the table by not following the playbook of other Freemium games? Possibly, but because it offers a high-quality paid version which stands on its own, Geometry Dash is also sold on Steam, meaning that this different revenue model gives Geometry Dash easier access to more channels. Furthermore, Geometry Dash was developed by a single individual (Robert Topala) who may be unwilling to use some of the more aggressive money-making tactics of the free games we have looked at. Should Topala ever wish to come out with another game, he might expect some customer loyalty: fans of Geometry Dash appear to know who Topala is and display interest in him, which cannot be said of the other Freemium game developers.
Mobile Games Customer Segmentation
These different revenue models also suggest a customer segmentation for the mobile games industry, with different customers reached by different revenue models:
| Segment | Description | Monetization Approach |
| Free Consumers | People who will not pay for casual games | Advertisements only |
| Pay Once Customers | People willing to pay for an ad-free game but not for in-game currency or other powerups | Advertisements -> Freemium Loop OR App Sales |
| Moderately Engaged | These customers might, after purchasing the app, buy other items occasionally | Advertisements -> Freemium Loop OR App Sales, In-App Purchases |
| Whales | Customers willing to spend on in-app purchases frequently | In-App Purchases Dominate |
So, by segmenting the market by revenue model, we can also get an idea of how the games in the market are segmenting their customers.
The Mobile Games Market is a Complex Environment
By segmenting the mobile games market by revenue model, we have been able to gain insight into how very simple apps can earn a lot of money. However, this article has only scratched the surface of the fascinating and valuable world of mobile games. Stay tuned for another article on this topic soon! In the meantime, check out our resources page for more articles, or subscribe to our newsletter, your go-to source for the ever-evolving world of market strategy.
