The numbers reveal a quiet revolution. Advertising revenue, which once commanded nearly 70% of India’s gaming income, has plummeted to around 40%—whilst in-app purchases have surged from negligible contributions to 38% of total revenue and are projected to capture 55% by 2030. This dramatic inversion isn’t merely statistical noise; it represents a fundamental transformation in how India’s gaming platforms generate revenue and engage users.
As the country’s digital gaming sector matures, platforms face a critical strategic choice: continue relying on advertising-driven models that prioritise scale and free access, or embrace transaction-driven approaches that monetise engaged users willing to pay for premium experiences. The implications extend far beyond revenue streams, influencing user experience design, content quality, technological investment, and long-term sustainability. With India’s average revenue per user still languishing at $3.03 compared to $215 in mature markets, yet with average revenue per paying user growing 5.5-fold from $3.5 in 2020 to $27 in 2024, the economics of these competing models tell a compelling story about where India’s gaming industry is headed.
The Advertising Model: Scale Without Substance
Advertising-driven gaming platforms have long dominated India’s digital landscape, capitalising on the country’s exceptionally low data costs and extraordinary mobile penetration to attract massive user bases. These platforms generate revenue primarily through in-game advertisements, sponsorships, and brand integrations, typically offering free-to-play experiences designed to maximise user engagement and impression volumes.
The model’s appeal lies in its accessibility—players encounter virtually no barriers to entry, enabling platforms to rapidly accumulate millions of users whose collective attention becomes the monetisable asset. This approach proved particularly effective in India’s price-sensitive market, where consumer willingness to pay for digital content historically lagged behind more developed economies. However, this model confronts significant structural challenges that threaten its long-term viability. The decline in advertising’s revenue contribution from nearly 70% to around 40% reflects not merely market maturation but fundamental shifts in user preferences. Gamers increasingly favour paid experiences over ad-supported ones, viewing intrusive advertisements as friction that degrades gameplay quality and immersion.
Moreover, advertising-driven platforms struggle with substantially lower average revenue per user, with India’s ARPU standing at merely $3.03 compared to $215 in more mature markets. This stark discrepancy highlights the limitations of relying exclusively on advertising for sustainable growth, particularly as user acquisition costs rise and competition for attention intensifies. The model essentially trades depth for breadth—attracting vast audiences that generate modest per-user value rather than cultivating smaller cohorts of highly engaged, high-value players.
The Transaction Revolution: Converting Engagement Into Revenue
Transaction-driven platforms, which monetise through in-app purchases, subscriptions, and digital collectibles, are rapidly gaining ascendancy in India’s evolving gaming landscape. Industry reports project that in-app purchases will overtake advertising as the primary monetisation stream by 2030. Reflecting a more mature and monetisation-ready gamer base emerging across the country.
The transformation is quantitatively striking: average revenue per paying user has grown 5.5-fold from $3.5 in 2020 to $27 in 2024, demonstrating that whilst the paying user base remains a minority of total players, those willing to spend are spending substantially more. This trend mirrors patterns observed in other markets where gaming ecosystems matured from casual, ad-supported entertainment into sophisticated commercial platforms supporting premium content. Transaction-driven platforms benefit from higher ARPU and more predictable revenue streams, enabling them to invest substantially in superior user experiences, content creation, and technological innovation. Unlike advertising models where revenue fluctuates with impression volumes and market rates, transaction-based revenue provides greater visibility and stability, facilitating long-term planning and sustained quality improvements.
However, these platforms confront distinct challenges in user acquisition and retention. They must convince players to pay for premium experiences in a market traditionally accustomed to free content—a psychological barrier requiring sophisticated marketing, compelling value propositions, and carefully calibrated pricing strategies. User acquisition costs typically run higher for transaction-driven platforms, as converting free users into paying customers demands more intensive engagement and persuasion than simply accumulating passive audiences for advertisers.
The Economics of Engagement: Metrics That Matter
When comparing the unit economics of advertising-driven and transaction-driven platforms, several critical metrics illuminate the strategic trade-offs inherent in each approach. User acquisition cost represents a fundamental differentiator: advertising-driven platforms often achieve lower UAC by leveraging free-to-play models that eliminate payment friction, whilst transaction-driven platforms face elevated acquisition costs as they must invest in marketing and user education to drive paid conversions.
Retention and engagement patterns diverge substantially between models. Transaction-driven platforms tend to exhibit higher user retention and engagement, as paying users demonstrate greater commitment to platforms where they’ve invested financially. This creates a virtuous cycle—engaged users spend more, justifying continued platform investment in content quality, which further enhances engagement. Conversely, advertising-driven platforms may struggle with retention, as users encounter fewer switching costs when exploring free alternatives. The monetisation landscape is evolving rapidly, with industry experts noting that advertisements, which once comprised nearly 70% of revenues, will decline to 40% as pay-to-play experiences and digital collectibles gain popularity. This shift reflects changing consumer behaviour as India’s gaming audience matures and develops greater willingness to pay for quality experiences.
The future of India’s gaming industry will likely witness a hybrid approach combining the strengths of both models rather than wholesale replacement of one by the other. Advertising-driven platforms may integrate transaction elements to boost revenue and reduce advertising dependence, whilst transaction-driven platforms might selectively adopt advertising to enhance user acquisition and provide monetisation options for non-paying users. This convergence recognises that successful platforms must balance accessibility with monetisation, scale with engagement, and immediate revenue with long-term sustainability. As India’s gaming market continues maturing, with ARPPU rising and consumer sophistication increasing, the platforms that navigate this transition most adeptly—capturing paying users whilst maintaining broad reach—will emerge as the sector’s dominant forces in an increasingly competitive and commercially sophisticated landscape.