Advertising is prevalent in mobile games, but effective advertising is much rarer. At GamesBeat, a panel talked about creating mobile ads ‘that don’t suck,’ in an acknowledgment of the widespread nature of the problem. The panel was sponsored by NativeX, which bills itself as the leading native mobile ad platform that has driven more than 1 billion app downloads since its founding in 2000. A variety of industry execs contributed their views on mobile game ads and how to improve them, as well as the general state of the mobile game industry. While the mobile game sector is booming, there are clearly major issues facing mobile games around advertising, discovery, and profitability.

Michael Pilawski, VP of mobile product management for NativeX, said that “A good ad is a combination of three different things: Great creative, the right medium, and the right budget. A lot of companies focus on the budget that they want to spend, but they don’t really allocate enough of that budget to creative. Really good creative can not only get people curious about the game, but maybe even pre-qualify them so they don’t download the game and see that it isn’t the game they want to play.”

Pilawski urged more effort into the strategy behind the ads. “Think about the message you are trying to achieve,” Pilawski said. “Are you trying to get them curious Are you trying to get them to play the game the next minute Are you trying to develop some sort of connection to get them to download the game in the future ”

Companies also need to consider placement and budget. “Not every game experience can be delivered in the same medium,” Pilaswski noted. “You have to be really strategic about your choices. Do you want to spend your budget all in a week, or do you want to spend it over two months You need to test, and it’s not going to happen in a day. If you’re trying to do it in a day, you’re just going to waste a lot of money advertising and getting low-quality users.”

Once your ad is launched, you need to refine it and improve it. “When you start off, you’re not going to get the perfect creative on day one,” said Vatsal Bhardwaj of game publisher Storm8. “You need to have the right process to come up with the creative and the right format and figure out how to test it. You also need to figure out when to surface it — right in the middle of a PvP game is the wrong time and place.”

Of course, finding the right target for the ad is critical. “Another key factor in doing ads in a game is really getting to know your audience,” said David Kim, the CEO of Animoca. “Right now, especially in the mobile space, it’s really a big blob of not focused, not targeted ads that really doesn’t mean much to 95 percent of the users.”

Advertising is a question that needs to be considered as part of your overall game publishing strategy, though. “Discovery costs are much higher than they used to be,” said Trip Hawkins, founder of EA and Digital Chocolate and now CEO of If You Can. “You can’t really afford to do marketing in the first place until you’ve perfected the metrics around monetization and lifetime value. Until you know it’s high enough that the advertising investment can be recouped, all the advertising you do is going to keep losing money.”

“If you’re launching a game and you have no clue who your audience will be, you probably shouldn’t be launching a game or even making a game,” agreed Pilawski. “Having some audience in mind, you really want to start testing very early. You don’t need to test in the App Store. You can test with twenty friends. You want to test all of your elements, including your headline.”

The discussion turned to the major problem with mobile games — the annoying fact that only a few games at the top make money, and vast numbers of mobile games don’t. “The only companies who can really sustain ad campaigns beyond an initial launch to blast your way up the charts are the ones who have figured out that they are monetizing well enough to continue to do it,” said Hawkins. “Any game listed in the Top Ten under Free in the App Store or Google Play Store, then you know it’s supported by a virtual goods economy that’s doing really well. Those are the companies that have cracked the code on how to monetize well. Any company that’s got more than one game in the Top 100 is in fact doing it with a little bit of consistency.”

“There’s a real issue with scalability in these app stores,” Hawkins continued. “Unless you’re hearing about a game through a friend or through a marketing campaign, you’re trying to discover it through the store. Well, there’s about a million apps in the store, and about ten apps fill up the first page of Free and any other lists you look at. It’s very hard to get on the list, and it’s not ever going to have more than ten things that fit on that little screen. It’s a big, big bottleneck, and it’s completely tilted the scale. It’s a winner-take-all situation. If you have one of these games that monetizes well, that belongs in the Top Ten, that’s where all the revenue is. Those games are setting all kinds of records for revenue levels, and then there’s a million apps losing money. And if they’re losing money they shouldn’t be running ad campaigns at all.”

Hawkins’ lengthy experience in the game industry, from founding Electronic Arts, 3DO, and Digital Chocolate to his new startup If You CanThe, gave him a perspective into the overall industry challenge. “The real thing the industry has to figure out is that early experimentation around finding your audience and figuring out who your competition is,” Hawkins said. “If your only claim to fame is that your game is fun, there are another million games that make exactly the same claim. Therefore, you have a problem with switching costs. The moment that there’s a glitch, or a moment of boredom or whatever, customers are going to drop that game and switch to something else. You’re going to end up with spectacular churn. Even if you had good initial engagement, you’re going to lose customers faster and that’s going to hurt you on lifetime value as well.”

“The industry as a whole is clearly struggling to turn virtual goods economies into a science — right now it’s more of an art form,” noted Hawkins.