This article was written by SuperScale chief operating officer Nikola Mitic.
The vast majority of mobile gaming’s history has been characterised by exponential growth. We enjoyed the ‘anything goes’ era of early mobile gaming, then the era of hypercasual dominance through cheap and hyper-targeted UA.
Now, the odds feel stacked against us. It’s like someone turned up the difficulty setting from ‘Intermediate’ to ‘Expert’, or frankly cranked it all the way up to ‘Hellish’.
This isn’t melodrama: the unofficial slogan of the recent Pocket Gamer Connects in London seemed to be “survive to ‘25”. The golden age of mobile games, at least from a business perspective, is clearly over for good. We’re now in what I like to call the ‘grind’ or ‘squeeze’ phase where it’s much more difficult – but still possible to win.
We’re all well aware of the detail of how privacy-first marketing has disrupted a business model that was rampantly successful. Yet discussion of mobile’s recent period of relative malaise often includes vague mentions of the “macroeconomy”.
What does this broad term really mean for mobile game makers in 2024?
Economy 101
The macroeconomy simply means the whole economy; all the industries, consumers, businesses and decision-makers within it. Over the past few years a number of ‘black swan’ events – almost unpredictable and severe economic threats – have drastically upset the wider economy.
Factors like the Covid-19 pandemic or war in Ukraine impact the world’s economy in real-time. But, why does this matter for mobile games? Because this is not something our industry is shielded from. As part of the entertainment industry, we’re in fact acutely vulnerable to it.
We naturally examine the mobile games industry as its own closed ecosystem, studying and integrating the factors within our narrow scope to do business and develop games as effectively as possible.
Yet the macro, wider, economy looms over all industries. It has a tangible impact on consumers’ livelihoods, spending power and leisure time, which of course are all vital to the success of mobile gaming, particularly as more casual games rely more heavily on IAPs.
At the same time, as consumers re-evaluate whether they can really afford those extra gems or that cool skin, we’re feeling the squeeze ourselves.
UA costs are significantly higher, margins are significantly lower, and investment in the games industry from VCs and strategic investors is down.
Nikola Mitic
UA costs are significantly higher, margins are significantly lower, and investment in the games industry from VCs and strategic investors is down. While we’re certainly at the mercy of many factors outside our control, it’s also true that overhiring during the pandemic and overpriced acquisitions mean we’ve also contributed to the situation.
Will 2024 be different?
Significant layoffs and cost-saving measures, including a slowdown in new game launches, will go some way to balancing the books in the short-term. But it also represents a significant skill drain, with talented developers leaving companies and, in some cases, the entire industry.
Smaller development teams are now unable to take on the task of building bigger and better games. This second wave of layoffs may be followed by a third as companies identify the efficiencies they actually need to make, as opposed to snap layoffs.
It feels like a platitude given the extent of the layoffs, but we will hopefully see some of these developers set up independent studios to work on new, creative concepts.
The economic outlook for the rest of the year is uncertain, meaning we’ll likely be competing for lower overall consumer wallets and shrinking revenue.
Access to capital will continue to be challenging, with still-high interest rates and VC funding taking time to flow back into gaming. The impact of rapid advances in AI for marketing, in-game assets and even programming is yet to be really measured in any meaningful way.
For the time being at least, we can’t rely on the good old days of the hit-factory approach where new and ever more lucrative releases repeatedly found success each quarter. We’ve seen companies like Playtika slow or halt overall development of new titles to instead focus on building upon the success of their existing portfolios.
The safest bet may be to lean on the success of known mobile gaming IPs by launching sister titles in emerging, less saturated genres and markets.
Nikola Mitic
And while we’ve seen other developers like Supercell operate on a fairly ruthless model of culling underperforming titles, it’s important to remember that these are singular developers that have been in business for decades, defining the industry and having immense expertise as a result.
Ways forward
With SuperScale’s recent survey of hundreds of mobile game developers showing that 78% prefer to work on new titles, and of course gamers’ enthusiasm for new releases, it’s an unfortunate reality that we’re unlikely to see a flood of new hits driving significant revenue in 2024.
There will of course be standout successes like Scopely’s Monopoly GO, where game-making expertise, abundant capital and great IPs fuse to create something amazing.
For those studios that can’t resist working on new games, the safest bet may be to lean on the success of known mobile gaming IPs by launching sister titles in emerging, less saturated genres and markets.
Yet the vast majority of companies will be forced to look inwards and even backwards to scale revenue from their active and legacy titles through smarter marketing and live ops.
Like platform holders’ privacy changes, the macroeconomy is out of our control as game developers. While playing on Expert, we ultimately need to focus on small, meaningful changes to the things we can control.
