The coronavirus crisis has proven to be a bonanza for video game makers as regular consumers turn to digital distractions in greater numbers and for longer sessions than ever.
But while big industry groups like Nintendo, Activision Blizzard, and Take Two have seen share price increases of more than 25 percent since early March, a group of mobile gaming studios, many privately owned , have enjoyed the windfall. Along with the surge in spare time among a ready market of more than two billion smartphone owners, they have reaped the rewards of a drop in mobile advertising prices as other corporate sectors slashed their marketing budgets. .
“That gave a great opportunity for companies like ours,” said Alexis Bonte, the group’s chief operating officer at Stillfront, a Stockholm-based free-to-play group whose share price has more than doubled since mid-March. “We obtained a double effect: the increase in organic compounds [usage growth] but also the effect of more efficient marketing. . . It was huge. “
Revenue from mobile games, already reducing spending on PC and console titles, is now set to top $ 100 billion this year, according to data groups App Annie and IDC, more than triple the combined sum for the titles of Nintendo Switch, Xbox One and PlayStation 4. Companies like Fortnite Creator Epic Games, puzzle app specialist Playrix, and mobile game maker Playtika each spent more than $ 2 million a day on digital ads in late March, April, and May, game industry experts say. .
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“Every other developer sees it as unprecedented,” said Stephane Kurgan, former COO of King, creators of candy Crush Saga.
Kurgan, who recently joined tech investor Index Ventures, says large-scale gives mobile gaming companies more of a pandemic than console publishers, outside of bigger hits like Nintendo’s. Animal Crossing: New HorizonsActivision Blizzard’s Call of Duty: Modern Warfare, and take two Grand Theft Auto V.
“The vast majority of PC and console titles have not really benefited,” he said. “It is more the free-to-play mobile industry that has seen very important revenue spikes.”
US spending on console games, including physical discs and downloads from Xbox, PlayStation, and Nintendo digital stores, increased to $ 662 million in April, up 55% year-over-year according to NPD market researchers, and May sales increased 67% to $ 438 million.
But in Europe alone, spending on mobile games grew 12 percent from February to March to $ 740 million, according to Sensor Tower, setting a new monthly record for the region at a time of year typically characterized by a post-Christmas decline. .
Globally, daily “in-app” payments for mobile games (for extra lives, virtual items, and avatar outfits) have increased 24 percent since the pandemic began, according to game technology provider Unity. Meanwhile, smartphone users have installed 84 percent more applications than in the same period last year.
At the same time, Unity found that the average cost per install, the price game publishers must pay for ads that persuade new players to download their app, fell 33 percent “unprecedented” from March to April.
This created a land grab that fueled the rise of blocking games as much as bored iPhone violinists. As many other marketers pulled their money from online auctions that determine most ad prices, gaming companies reached out to take advantage of the drop costs of reaching millions of eyeballs on Facebook, Google. and other networks.
In recent years, free mobile game publishers have become one of the most savvy online marketers, fine-tuning a system that relies on constant testing and measurement. The goal is to ensure that the cost per install on each new player’s phone is exceeded by that player’s expected life value, generally generated through in-app purchases of additional lives, virtual items, and avatar outfits.
Tracking CPI and LTV has become an obsession for both game publishers and Roblox it’s for tweens.
“The entire mobile gaming industry has focused on those two key figures,” said Thor Fridriksson, CEO of Teatime Games, a Reykjavík-based startup that launched a new test application, Trivia Royale, in mid-June. “Basically it’s an arbitrage money machine. That’s the whole business right now. “
Boosting marketing budgets at a time of great global uncertainty was, however, a multi-billion dollar gamble.
“It was a very stressful period,” said an executive at one of the leading mobile game developers who wasted more than $ 2 million a day on ads at the peak of the pandemic. “You were spending a lot of money and you didn’t know if the world would end.”
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The bet seems to have paid off for the highest-grossing games, like PUBG Mobile, Roblox, Candy Crush Saga, Gardenscapes, Fortnite, and, in China, Tencent’s Kings honor—That they are all among the best Sensor Tower games by world revenue for March and April.
“If you look at the league tables, what’s striking today is that many of the top 10 games were there five years ago,” said Kurgan. “No one expected that.”
For years, investors viewed games as a success-driven business, where today Angry birds would be knocked off the charts in the morning Flappy Bird. The emergence of “live operations,” where games are constantly being improved with new levels, features, or seasonal events, has challenged that vision. It is now considered easier to sustain an existing success on mobile than to create another.
“Look at the best gaming studios: The number of them that actually produce a successful second, third or fourth title is extremely low,” said Paul Murphy, partner at venture firm Northzone and founder of mobile game developer Dots.
That is increasing the valuations of innovative IP studies that big publishers can strongly endorse. Multiples for a mobile developer have increased earnings before income, taxes, depreciation and amortization by five times to up to 10 times, or even more for a company that has come to define a particular niche.
The deal, meanwhile, has continued. This month, Zynga acquired Istanbul-based Peak, better known for the game. Toon Blast, for $ 1.8 billion.
“They are buying their way to growth, all the big mobile studios are doing it,” Murphy said. “It is cheaper to buy a company than to build something.”
While the science of using CPI and LTV metrics to milk venerable franchises like Candy crush It is well understood, no one knows what will happen now that the locks start to ease. Many in the industry see the characteristics of social networks as the key to retain players.
“Another thing he did well [during the pandemic] it’s all about building the community, “Bonte said.” We are not seeing those people leave. “
Tea time games Trivia Royale It is designed to encourage connection through a cartoon avatar, similar to Snap’s Bitmoji or Apple’s Animoji, which uses the smartphone’s front camera to mimic player reactions and expressions. Trivia Royale It rose to the top of the charts for the US iPhone app store last weekend, according to App Annie. But Fridriksson admits that launching his new game during the lockdown was more of a coincidence than a strategy.
“Use on mobile phones has increased dramatically in recent months, so it would be a good thing for our title,” he said. “But maybe people are also bored of playing all these games on their mobile device and want to go out in the sun.”
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