2019 Predictions: #2 the Hyper-Casual Party, as We Know It, Will End
Happy to see you getting further into our yearly predictions. To make sure you don’t miss all the following posts, please do subscribe to the Deconstructor of Fun infrequent but powerful newsletter.
Before you jump in, let us sum up how we arrived to the predictions.
First we created a taxonomy together with Game Refinery dividing the games market into four different genres: Casual, Mid-Core, Casino and Sports. Then we further broke down the genres into categories based on games and then we further divided each category into a sub-category based.
As as example, Candy Crush Saga is in a) Casual Games genre > Puzzle Games category > Match & Blast sub-category
We pulled the data of top 500 games (excluding China, Japan and Korea) from Sensor Tower and aligned the data with the genres, categories and sub-categories.
Once we had a clear view of what happened, we got together and wrote our predictions.
Please, take the numbers presented with a giant grain of salt. They are there more to show trends and to give rough estimates.
First: A Sneak Peek into the Casual Market as a Whole
As you’ve noticed from the previous prediction post, we actively refer to the genres, categories and sub-categories. In this second post we discuss Arcade games, which we see as a category in casual games. To understand our taxonomy in details, please read this. To understand it at a glance, please look at the image below.
The Arcade Games Category
While the Arcade category only accounts for 5% of the total IAP revenue of all Casual games, it brought in well over half of all the downloads for the genre during 2018. In fact, 2018 was the year of growth for the category as the year-on-year downloads during 2018 went from 1.8b to whopping 3.5b. This hyper growth was mostly driven by one of the hottest trends of 2018 - Hyper-casual games.
The Hyper-casual Party is Over
When the sub-category known today as Hyper-casual first came to be known during the later half of 2017, things were peachy to say the least. Extremely low production values allowed the games to be made and shipped in a matter of few weeks while the incredible mass appeal and ultra aggressive ad monetisation made sure that the revenue per an often short-lived hit game was fat. And by fat we mean from $10m up to $100m that a hit Hyper-casual game could make in a relatively short amount of time.
Low entry barriers, low CPIs and ultra aggressive ads monetisation practices created a scenario where LTV beat CPI on its way to massive scale.
Last year myriads of publishers understandably jumped on the Hyper-casual bandwagon. During this growth spur, Hyper-casual pushed the envelope on many sections of the industry’s value chain - both the creative and operational sides. As a result one can argue that user acquisition and especially ad revenues reached new heights as the Hyper-casual games grew to become one of 2018’s defining trends. It experienced a greater than +200% Year-over-Year (YoY) downloads growth, and close to a +340% YoY IAP revenue growth.
But as with anything that can be built quickly to return massive profits even quicker, competition rushes in, product differentiation becomes more difficult and important simultaneously, retention for new games suffers, marketing techniques evolve, payback times increase and ROI decreases. In other words, the market starts to mature. Which is exactly what happened to Hyper-casual games.
While downloads are still growing, Quarter-over-Quarter (QoQ) downloads growth greatly slowed down over the year, as the release frequency of fresh Hyper-casual concepts dropped. QoQ IAP revenue growth followed downloads given the front-loaded monetising nature of the games. Simply put - the Hyper-casual market has matured at a rapid pace and both market entry and staying power is now harder.
Heavy market share fluctuations occurred for major Hyper-casual publishers. Both Voodoo and Ketchapp (Ubisoft) dominated the market at the start of 2018, but have gradually lost market share over the course of the year. This was primarily driven by a lower number of 2018 Hyper-casual launches compared to the year before - indicating that major publishers are experiencing pressure finding new and fresh titles that can replicate their past successes. Secondarily, new players entered the market. Applovin’ made a brilliant strategic move by honing its strengths in ad revenue optimisation and UA growth to open up their initially Hyper-casual focussed publishing arm -Lion Studios- and thereby took a good piece of the pie, finishing off 2018 with a close to 20% market share. More good news is expected for Lion, as they continue to build synergies between their Ads, UA and Publishing arms.
While most of Hyper-casual is ad monetised, there are two publishers who have been making great strides forward to generate strong IAP revenues as well. Focus on both ad and IAP monetisation has resulted in the emergence of hybrid monetisation models, so as to generate greater overall revenues from Hyper-casual titles.
Fun Games For Free boosted IAP revenues by +50% (+$5m) during Q3/Q4 2018 through its games “Color By Numbers” and “Paint by Numbers”. Surprisingly, it has been able to do this through a purely subscription based model. Playgendary, on the other hand, improved IAP revenues by +70% (+$5.5m) during Q3/Q4 2018 through its games “Kick the Buddy” and “Tomb of the Mask”. Both games have a hyper-casual core, but deeper IAP monetisation systems (including subscriptions), which gains significance due to the existence of a light meta game. It seems likely that this light meta-game design evolution will gain more traction in 2019, as it addresses the notoriously low mid-to-long term retention woes Hyper-casual has always faced.
Hear More: Everything you need to know about Ad Monetisation and how Hyper-casual has fuelled industry growth. DoF podcast with Ironsource - available on every podcasting platform you can think of.
Idle Games will make Strides in Gameplay Innovations
With a 6% downloads share, Idlers are the second lowest downloads generator in Arcade. Accounting for 20% of Arcade’s IAP revenues, it is tied with Hyper-casual and Platformers at second place. During 2018, the Idler market saw a modest growth to both downloads and IAP revenues. The download growth was mainly due to a new publisher entering the market - Merger Games, with their game “Merge Planes”. The game was able to amass a mammoth 50-55m downloads over Q3/Q4 2018 and continues to stay in the Top 50 free charts across platforms in the US. We believe this is mostly driven by a massive marketing budget, but cannot confirm at this point.
The Idler market has greatly matured over the years, but not without some market share movements due to new players entering the market. Merger Games made the biggest dent by eating away downloads market share from 2018’s Idler poster child - Kolibri Games (previously known as Fluffy Fairy Games). Further, in a portfolio diversification effort, Lion Studios also took a shot at the market with two new idle game launches in the year, “Cash Inc.” and “Hooked Inc.” - ending the year with a 10-15% downloads share. At the same time, Lion has been experiencing slower downloads growth rate in the genre over the year, indicating that it might make a move in 2019 to hold or grow its market share with new Idler launches. Futureplay, Zynga (Gram Games) and Idler veteran Kongregate all quietened down over the year due to ageing portfolios, while Game Hive sustains strong revenues with “Tap Titans 2”.
Kolibri continues to dominate the sub-genre with a 25% IAP revenue share driven by its smash hit “Idle Miner Tycoon”. Not to mention how Kolibri has inspired developers globally with their incredibly agile production processes and live-op techniques to grow a game’s users and revenues through small consistent improvements over rapid release cycles. While “Idle Miner Tycoon” continues to grow revenues over stable download volumes, Kolibri hasn’t been able to strike gold twice with their second title “Idle Factory Tycoon”, yet! With “Idle Miner Tycoon” entering its third year of existence and Kolibri experiencing its first QoQ revenue dip in Q4 2018, there is a good chance of 2019 bringing increased pressure on the team to either launch a third title or majorly turn around “Idle Factory Tycoon”. We shouldn’t forget how “Idle Miner Tycoon” also started small, and took little over a year to become the monster it is today but with a state of the art production methodology. Check out Kolibri’s GDC 2018 lecture for more details on their “state of the art production model”.
On the product side of things, Idler gameplay continued to mature in 2018 as a means to fuel product innovation and differentiation. One gameplay evolution example would be the introduction of saga maps, as seen in Game Circus’ “Taps to Riches” and “Tap Empire” by Flaregames and MeeWow Games, to provide a sense of continuous progression and move away from the traditional “prestiging” system.
“Trailer Park Boys: Greasy Money” by Eastside Games brought in a strong narrative element and has been consistently growing IAP revenues (+40% YoY) over declining downloads during the year - taking away second spot in terms of market share by IAP revenues. Merge mechanic idlers also gained ground, as is seen with “Merge Planes” and “Merge Gems”. Expect to see more sub-genre mechanic blending in 2019 that will keep things fresh in the sub-category!
Other Arcade - Social Casino Sneaks its way in
Accounting for 15% of total genre downloads and being the highest IAP revenue generator in the genre (30% share), the Other Arcade sub-genre has seen some very interesting movement during the course of 2018. Downloads vastly grew in Q2/Q3 2018 with Voodoo making a huge splash by launching 3 new IO games (Bumper.io, Hole.io, Paper.io 2) - which explains 80% of the downloads increase. Further, some publishers showcased great IAP revenue growth trajectories. The most notable of these being Moon Active’s “Coin Master”, which broke into the Top 50 Grossing games list. DoF deconstruct on this one coming soon!
Voodoo’s new game launches have brought it back in this sub-genre as a market leader with more than 50% downloads market share. Clearly, it has also contributed to massive market growth, while leaving other publishers like Playgendary and Lowtech Studios with minor market shares by the end of the year.
With regards to revenue, the chart below would look very different if Voodoo’s immense ad revenues were to be included. But more exciting trends are showcased in the IAP revenue growth stories of -
Moon Active (“Coin Master”) - at $7-7.5m per month during 2018 (annual revenues +250% YoY), and now in the Top 50 grossing games list
Jelly Button Games (“Pirate Kings”) - at $2-2.5m per month during Q4 2018 (annual revenues +375% YoY), and is poised to break into the Top 150 grossing games list
Playgendary (“Bowmasters”)- at $1-1.5m per month during Q4 2018 (annual revenues +300% YoY)
Playgendary has mostly grown “Bowmasters” revenues through performing great UA, accompanied by live-ops activities and ofcourse the engaging gameplay. But given the nature of the game, a healthy long-term retention curve is not expected and no UA works infinitely at scale. To keep company revenues going and not lose out on a well capitalised “Bowmasters” brand, it seems likely that Playgendary might release follow up games in 2019 that are more of the same, but different.
More interestingly, Moon Active and Jelly Button Games are slowly popularising a very new kind of game - if we were to name them, we’d probably call them “Social Casino Builders”. These are games that have a casino mechanic at their core (slots, roulette etc.), introduce progression through a base building meta and top it off with social mechanics, including light natured raiding of other player bases and stealing from them. The term “light natured” is key because raiding or stealing are just one touch actions resulting in immediate loot.
Though “Pirate Kings” was first to market (launching late 2014), it wasn’t very successful in scaling users or revenues during that time. “Coin Master” came next (launching mid 2016) and has been successfully growing ever since. Was “Pirate Kings” too early to the market? Or is “Coin Master” just a better product? Considering how similar the two products are, either “Pirate Kings” was ahead of its times or slots (“Coin Master”) is just more fun than roulette (“Pirate Kings”). At the same time, “Pirate Kings” seems to be bouncing back and is now experiencing steady growth in conjunction with “Coin Master”. Could this be the start of a Social Casino Builder emergence in 2019? Or would the Casino genre publishers take a page out of “Coin Master” and differentiate with unique metas? We’d expect both to play out in 2019 to make for a fun new Arcade sub-genre!
Platformers Remain Uneventful at Best
As the second largest sub-genre by downloads (20% ) and tied in second position by IAP revenues with Hyper-casual and Idlers (20%), Platformers did not see a very eventful year. With only one major new release in the year (“Will Hero” by ZPLAY) that caused one-fourth of the Q3 2018 downloads and revenue spike, this sub-genre has remained relatively dry.
Major publishers have maintained their market shares, with the biggest movements happening due to UA pushes. Though one game of noteworthy status is “Cookie Run: Oven Break” by South Korea based Devsisters. They have been able to consistently scale game IAP revenues over 2018 (annual revenues at $22m, +130% YoY) while having one of the lowest download volumes in the sub-genre (averaging 1.5m downloads/quarter) - making them by far the highest IAP revenue generator in Platformers for 2018. Apart from great live-ops and very deep meta systems, you might’ve already guessed by now - South Korean players drive around 70% of the game’s revenue.
With their wildly successful “Temple Run” franchise, it is definitely interesting to see Imangi Studios pretty much flatlining on IAP revenues. Further, they’ve not had a significant new game launch since “Temple Run 2” back in 2013. Some very strong indicators to Imangi probably looking to make a splash in 2019 with their not-so-platformer “Temple Run: Treasure Hunters”, which has been in soft-launch with Scopely for some time now.
Shoot ‘em Ups - Profitable Arcade games for a Compact Male Audience
The Shoot ‘em Up sub-genre is the smallest contributor to the Arcade category, accounting for 2-5% of downloads and 5-10% of IAP revenues over 2018. Revenues have steadily been growing over the year with a declining download volumes trend - speaking to successful live op activities being performed in the sub-category.
Onesoft is the clear market leader on both downloads (70-75% share) and revenues (50-55% share). Their portfolio focusses on Shoot ‘em Ups and their flagship title “Galaxy Attack: Alien Shooter” soared in 2018 (annual revenues at $11m, +500% YoY), and continues to grow. More growth imminent in 2019.
Further and interestingly enough, Mail.ru’s “Hawk: Freedom Squadron Shooter” is a revenue monster accounting for 25-30% of the total sub-genre IAP revenues while only accounting for 2% of the downloads share. It is one of the few Shoot ‘em Ups that has a fully tiered subscription offering. Combined with some fruitful live-ops activities, the game has been able to steadily grow revenues (annual revenues at $10m, +70% YoY) with a declining downloads trend. Rovio too took a stab at the Shoot ‘em Up sub-genre with “Angry Birds Transformers”, but did not reap any major rewards even after combining two very strong IPs.
One shoot ‘em up that definitely stood out in 2018 is Space Ape’s “Fastlane: Road to Revenge”, alone accounting for 10-15% downloads and IAP revenue share in the sub-category (annual revenues at $11m, +90% YoY). Though the game’s core is classic shoot ‘em up, Space Ape designed a sleek meta-game focused on upgrading various portions of your car that dramatically improved LTV. The company also came up with a unique launch marketing campaign around featuring a host of influencers as in-game characters in exchange for visibility on the influencer channels to fuel user growth.
The ads implementation is the true gem feature of Fastlane. With only one brilliantly designed ad placement in the entire game, the game was able to build a strong ads LTV and scale UA by looking for ad whales lookalikes - a significant feat in UA strategy innovation! Read all about it on their blog.
The publisher has reached a slow down period in its overall portfolio though, and it’ll be interesting to see how Space Ape plays that ball now that they are moving away from their recent success and venture out to mimic Supercell’s game development model. Having ultra-long production cycles and killing plenty of games in development each year may prove to be hard when your existing portfolio is not generating billions every year. While that may be a challenge, we truly wish Space Ape only the best and root for the company’s upcoming games.
Our 2019 Predictions for Arcade Games Category
Lion Studios will continue to grow market share, while Voodoo might consider expanding its portfolio into other sub-genres and genres to stay market relevant, following a slow down and saturation of hyper-casual games.
New publishers will continue to enter the market, while existing players will fight to stay relevant.
Hyper-casual will see the growth of hybrid monetisation models to support ad revenues, and gameplay evolution with light meta system additions to further boost LTVs.
With the introduction of user level ad revenue data and programmatic mediation, Hyper-casual will strengthen its skills in scaling UA through ad whale lookalikes - a trend that the complete industry will capitalise on.
Kolibri to further juice its current titles or possibly launch a third title, so as to not compromise its revenue reigning position. Without significant gameplay innovations, Kolibri will get passed by competitors.
Lion Studios will grow its idler portfolio through new titles or taking on older titles that could prove to be successful with scaling UA.
Idler gameplay will continue to evolve with more fresh designs and sub-genre mechanic blending, as older and once significant players fight to stay relevant.
Voodoo will continue to lose market share in 2019, unless it sustains stellar live-op activities or furthers new game launches.
Playgendary will build on the “Bowmasters” brand with a few follow up game launches.
“Coin Master” will sustain a position in the Top 25 grossing games list, while “Pirate Kings” will break into the Top 150 grossing games list.
More Social Casino Builder and Social Casino games with meta-game differentiation will enter the market in 2019, and synergies will build with the traditional Casino genre.
2019 will not see any major market movement, as publishers will continue to hold their respective market positions.
Possibly some evolution around Platformer meta systems to further grow sub-genre LTVs.
Shoot ‘em Ups
2019 will not see any major market fluctuation - Onesoft will continue to gain ground in the sub-genre and maintain its sub-genre leader position, while Mail.ru will eat into Space Ape’s market share.