How Hyper Casual Apps Are Changing the Way Games Monetize
In the early days of mobile gaming, a common notion was that gamers spent hours focused intensely on one or two video games, building their way through complex game flows and strategies to reach the ultimate achievements.
As such, most game developers invested much of their resources into building the most engaging content. Under this approach, they focused on monetizing highly engaged users spending money in-app rather than generating revenue by users viewing and engaging with ads.
Generally, since the number of relevant gamers was much lower than it is today, the average revenue per user (ARPU) had to be high enough to justify the investment. The reality was that, while some experienced massive success, most developers failed to generate sufficient revenue.
‘Keep it simple’, with ads
Given that only a fraction of users ended up making an in-app purchase, in-app advertising (IAA) — rewarded video, in particular — was introduced into games and became a significant revenue stream. Ad revenue monetization proved itself as a legitimate business model in the game economy.
On top of that, more and more developers began changing their perception about their games’ content: why invest so many resources into building a technically robust game whose chances of success in such a competitive landscape were not great, to say the least? Instead, they could spend a mere few weeks, or even days, on creating, testing, and launching one game after another, while relying solely on ads to drive revenue instead of developing complex in-game mechanics that support IAPs.
For more trends about Hyper Casual games, see our complete State of Mobile Gaming 2019 report
Indeed, Hyper Casual games emerged and took the ecosystem by storm. These simple, lightweight games are relevant for the masses, as users could quickly start and stop a session at any time; no strings attached, and no money spent. They attracted both gamers from other genres and users that weren’t exposed to games at all. The top charts speak for themselves:
The Hyper Casual impact on mobile gaming
The rise of Hyper Casual and ad monetization as a massive money generator has led to three interesting trends in the gaming ecosystem:
Studios are diversifying their portfolio: As the Hyper Casual genre continues to grow, gaming studios, most of which have focused on a single genre to date, are now looking to get a piece of the advertising pie. They have started to diversify their portfolio with Hyper Casual games, either by allocating developers in-house (for example, Playtika launched an in-house ‘gaming lab’, TabTale become ‘CrazyLabs’), or by acquiring existing Studios (Ubisoft and Green Panda, Zynga and Gram Games, AppLovin launching LionStudios – Hyper Casual publishing house to name a few examples).
Besides enhancing revenue, blending Hyper Casual games into a Mid and Hardcore game portfolio has many advantages. For one, it increases cash flow, thereby making it easier to allocate resources to develop their other core games. Additionally, marketers can use the massive Hyper Casual user bases to cross-promote other in-house titles, exposing new audiences to their content while decreasing UA spend.
Mid and Hardcore games are integrating more ads: Since only a handful of players actually make in-app purchases in games, the opportunity to generate revenue from all users is highly attractive, even for game genres that have been hesitant to fully integrate ads within their game flow.
Indeed, in the past 12 months, we can see an increasingly larger share of revenue generated from ads among Midcore (+32%) and Hardcore (+35%) games. The biggest challenge for these games is to drive this incremental revenue without harming their paying user base.
Despite the rise of IAA, it is important to stress that IAP is still responsible for the majority of revenue in gaming, and is crucial to its success. Having said that, the shift towards mixed monetization models is a healthy one; not to mention the fact that the increase in ad revenue has enabled more and more games to reach many new players, which led to improved performance. The relationship between these models is interesting and complex, but that’s a topic for another blog post.
Ad monetization tech solutions emerging: The massive increase in the number of Hyper Casual users introduced developers to new user behaviors, mostly resulting in short term LTV, low retention rates, and relatively quick ROAS. This reality forced developers to find technological solutions for making monetization decisions in real-time, with the understanding that every minute counts, starting with the very first engagement.
Third-party providers also had to align quickly and build sophisticated solutions to meet demand as developers voiced their pain points. Advanced ad-based solutions entered the market such as ad attribution and holistic LTV combining IAA and IAP, proficient waterfall management, user-level ad revenue, advanced automation, AI-based install predictions, and other custom features. As a result, integrating ads and earning incremental revenue has become easier.
Check out this quick video for more information on ad monetization using rewarded videos:
The future of gaming categorization
As developers from different genres increase their share of ads in their revenue mix, the line that defines each category becomes blurred, making the current app store categorization increasingly inaccurate. Take Hyper Casual: the term and genre surfaced as early as 2016 (including this one by Johannes Heinze from March 2017). Fast forward 3 years and the hottest genre in gaming with such a significant impact on monetization as we see it today, has yet to become an official category in the app stores…
Instead of the current app store categorization, it is likely that gaming apps will be divided by the game loop itself, comparing similar features, game mechanics and monetization methods, while moving away from high-level categories such as Puzzle or Strategy. Games will then be defined on a case-by-case basis, creating more granular categories such as ‘Hidden Object’ and ‘Tower Defense’. With the rise of IAA and blended revenue streams, it is only logical that monetization becomes a major factor in game categorization.
As a developer, you’ll have a far more granular view of your competitors, relevant audiences to target, and the benchmarks you should pursue to guide your UA and re-engagement efforts. Additionally, it can help you make key decisions about the right monetization mix and overall strategy, and even inform feature development.
Companies introducing this new form of categorization are already out there, while savvy ad networks have also begun to incorporate it into their standard operations — a move that is likely to prove itself as a significant boost to their user acquisition offering.
As the mobile gaming industry evolves, developers continuously seek new ways to grow their business. And while one can be a pioneer in a given field, its success will be copied and further spread by others. As a result, companies who will broadly challenge the standard app store categorization first, will put themselves in a better position to become market leaders.
To conclude, the rise of Hyper Casual games has changed the perception of many mobile gaming developers, opening up new methods to acquire users and drive incremental revenue. It has also significantly increased the number of both players and apps, taking mobile gaming to new heights as the driving force in the success of the app economy.
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