The Free-to-Play (F2P) mobile games market has always been dominated by a handful of juggernaut publishers generating the lion’s share of revenue. However, with the market beginning to reach maturity, this long-established status quo is now giving way to a model that promises sustainable success to more than just the big guys.
Driving this change is a fundamental shift in the factors that govern the success of an F2P game. Five or more years ago, having a successful game had as much to do with luck as anything else. This is why it used to be common to see games like Flappy Bird burst into the top 10 with only a fraction of the development costs and acquisition budgets of a Candy Crush Saga or Clash of Clans. Certain games, seemingly anointed by the gods of F2P, somehow caught the imagination of the media and players alike. Overnight, a handful of lucky developers had hit games on their hands.
The potential to make a huge return from a modest investment made the mobile games sector hugely attractive to investors. However, many smaller publishers and developers found that it was almost impossible to effectively balance the player experience with ads and in-app purchases (IAP), resulting in many games failing to turn a profit. This led to many investors getting their fingers burned and, as a result, investment in mobile games dried up and the big publishers consolidated their positions at the top end of the chart.
In parallel with this, the way that publishers and developers have been using data analytics within the game development and management process has become increasingly sophisticated. Analytics used to simply provide developers with a snapshot of how their games were performing. Today, developers rely on analytics to delicately balance player experience with ads and IAPs.
The ability to analyze and predict which players are likely to spend, or which players have the potential to churn, alongside increasingly advanced Lifetime Value (LTV) calculations have contributed to making game revenues much more predictable than they ever were in the days of Flappy Bird.
Growth off the chart
In recent years, there has been a notable shift towards mobile games achieving more predictable and sustainable revenues. As a result, more games are now successful. Especially those games outside of the top 100. This trend is evident in the following data from the deltaDNA platform. In the lefthand chart below, we can see how games today have a much tighter focus on player engagement. The first three-to-four months after launch is now typically spent focusing on ensuring the player experience delivers and the game balancing is right. Game-makers now only start to burn through the acquisition budget once they can see that their game is likely to be successful.
This is in stark contrast to two years ago, where we can see engagement tailing off significantly over this period. The righthand chart below shows that, in recent years, it’s the mid-range guys who have been making all the progress in terms of revenue. In fact, 31% of growth has come from games outside of the top 100 chart and over a very short period of time from 2016 to 2018.
The difference in install trends, demonstrated by the lefthand chart, also tells a heartening story. In 2016’s ‘boom and bust’ model, both organic and paid installs would peak in the first month after launch and then drop off dramatically. 2018’s model sees installs hit a sustainable level – only a little short of peak – after four months, setting games up for long-term success.
Investment returning to F2P mobile games
With revenues becoming much more predictable, significant investment money is now flowing back into mobile games. This has been helped by the fact that there are now solid genre bets out there like puzzle games and hyper-casual, better game designs that unlock player engagement, and better deployment of acquisition capital into long-sustaining games.
This has made investing in mobile games much less risky for investors, as investment decisions can be made based on whether a game showcases the right KPIs to deliver success, rather than leaving success in the hands of luck.
We’ve recently been working with a number of investors to enable them to effectively evaluate the success potential and investment readiness of a range of games.
Small-to-mid-size publishers are increasingly able to generate sustainable revenues, due to the combination of more reliable revenues and investors choosing to back games indicating good potential for success. This is great for the industry and players alike, who get the opportunity to experience a wider selection of well-designed and optimized mobile games.
A version of this story first appeared on www.thegamingeconomy.com