We have included effective strategies to promote the revitalization and rapid growth of the mobile game market in current economic crisis.
Is there a 'softness' period looming over the industry? And, if there is, what should you do when planning your strategy for the coming year?
The mobile game market is currently experiencing a multi-quarter period of "softness," as some refer to it. This softness argument is primarily based on a comparison of year-over-year growth rates from the same period in 2021, which shows a 10%-15% decrease in market revenue, according to several market research firms.
This decline is emphasized by several earnings reports from large game companies, some of which report the same type of decline in mobile game revenues.
However, this is somewhat erratic, as some game companies continue to report growth. For example, according to the most recent Playtika earnings report, the Casual game portfolio is growing, while their leading social casino title is losing revenue.
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So, what exactly is going on?
Firstly, a sizable portion of that 10%-15% decrease can be attributed to the difficult comparison to 2021. That was a period of unusually strong performance for mobile games, fueled by COVID-induced tail winds in the game market. If we smooth the growth from the previous several years in the mobile game market (while excluding the COVID anomaly), we can see that the market is still growing in the long run.
Secondly, consider the role that inflation plays. When the cost of living rises, households have less money to spend on average, which may lead to more people spending slightly less on entertainment.
Finally, the fear of a looming recession may cause people to spend less on entertainment (and other discretionary items) and save more in preparation for a difficult period ahead. This recession has not yet occurred, as GDP figures in the United States continue to show annual growth and unemployment remains at record lows.
When considering these factors, it's easy to see why some predict a difficult period for mobile games.
However, all of these factors are transient in nature.
Entering 2023, when the comparison period changes to 2022 and then analyzing the year-over-year growth data, the conclusions obtained will change again.
It is an oversimplified view to only analyze the year-over-year growth data, and more attention should be paid to the long-term trend, and it is not appropriate to determine the long-term prospect of the market from the annual growth rate of one year.
Inflation rates will also fall, hovering around the mostly acceptable level of 2% per year, as a result of the Fed raising interest rates and supply-side pressures.
And if a recession occurs as a result of rising interest rates, higher unemployment, and other factors, it will pass. It is a normal part of the world's historical economic cycle.
So, what can you do if you're in charge of publishing and scaling mobile games in the next 6-12 months, when you're likely to see lower LTVs and leadership pressure to be more conservative with your UA budgets?
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With such diversity in mobile gaming apps, developers need to find ways to stay competitive and remain profitable. Many choose to use a ‘hybrid monetization approach’ which refers to integrating ads into their games as opposed to just solely relying on revenue from in-app purchases (IAP).
In general, user acquisition teams try to spend their UA budgets as long as their campaigns meet specific ROAS thresholds. When consumers spend less on in-app purchases, the IAP-based ROAS will almost certainly fall, making it difficult to spend budgets profitably.
If the R side of the ROAS equation, 'revenues,' was higher, UA teams would have a better chance of driving DAU and MAU growth.
If consumers are less willing to pay for in-game IAP but still want to play games, what other ways do you have for them to "pay" for your game experience (whether it's game progress, more game content, or more play time)?
Rewarded advertisements were a perfect fit for this era. Consumers may be more likely to act on rewarded ads as "free" alternatives to buying more in-game stuff if you manage the player experience holistically and don't harm retention (driving uninstalls by making the experience too littered with intrusive ads). A compromise must be struck.
So, by supplementing lost IAP revenues with rewarded ads and earning eCPMs on that inventory and generating ad revenues, you can make it much easier for your UA team to deploy their budget because you will improve ROAS.
This route, I believe, will become increasingly popular in the coming years.
"Never let a good crisis go to waste," someone wise once said.
As the competition for inventory decreases, there may be more opportunities in the marketplace to acquire new users for much more attractive CPIs at a time when many UA budgets are being managed more carefully.
Based on the fact that acquisition costs were extremely low, some game companies implemented a strategy around March-April 2020, when COVID hit. It enabled these firms to acquire tens of millions of new players at a much lower cost.
As previously stated, the underlying causes of this brief hiccup will pass. On the other side of this journey, you'll almost certainly still have titles to grow and scale, so consider whether it'll be easier to do so if you took advantage of lower CPIs to expose your title to a large audience during this period.
Yes, it's possible that it will take longer to recoup your investment, and you may have to accept that these players will not have great LTV curves for some time. However, their LTV curves will improve over time, and even if they churn and uninstall the game, it may be easier to re-engage them after the recession and encourage a re-download (as long as the game is fun, they had a positive experience, and you have more game content to update them with, such as a "there's something new here" line of messaging.)
This strategy, implemented by some companies in the early days of COVID, resulted in many billions of dollars in revenue generated in the two years that followed.
This, of course, necessitates alignment and long-term thinking on the part of everyone on your team, including leadership, but it has enormous potential.
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