The myth of mobile gaming consolidation

Talk to smart people about mobile games for long enough, and a common refrain is that the days of the small mobile game developer are numbered. Gameplay standards are rising, which means it costs more to develop artwork, sound, and game play. Discoverability is a crapshoot, which means most games need to buy distribution.  And there is a long-list of post-launch tasks to tune retention and monetization that require both technology and in-house experts.

All of this is true, and logic would tell you that giant publishers with big budgets and armies of analysts should be steam-rollering the market. Cue evil laughs in fancy glass skyscrapers.

The problem with all this smart logic? It’s not happening.

The 300 top grossing games are made by 161 different publishers, and only one of them has more than 10% share. Supercell has ~11% of US daily revenue between Hay Day and Clash of Clans. has 9% with Candy Crush Saga. EA has lots of titles that add up to a measly 5% share of revenue. 158 publishers split the remainder. Not only is that a ton of fragmentation, but it’s fast turnover: the top two players weren’t around 2 years ago.

So what’s really happening? Our guess is that it’s a combination of a few things:

1) Google & Apple promote fragmentation. The app store providers have a big economic incentive to ensure that no one publisher gains too much leverage. We’d expect that there’s some bias towards promoting diversity in both publishers and game play styles. As gamers, we like this too. Keeps everybody honest.

2) Authoring & monetization tools are cheap and improving fast. Unity provides authoring tools to build high-fidelity games in less time. Think Gaming provides a monetization platform to turn that can quickly turn developers into sophisticated self-publishers. As e-commerce platforms and web frameworks drastically lowered the cost of building a website, so too these tools will allow great games to get built faster & cheaper.

3) The freemium and mobile waves are changing the publisher playbook faster than anyone expected. Everything is happening fast, with 82% of the top grossing games using virtual currency to monetize, and 93% using a freemium model

Our prediction: none of these factors are going to change fast. Instead of the relentless consolidation of the giant publisher, we’ll see several years where smaller development shops look like web startups, deploying great new games at a breakneck pace. A new publishing model may emerge, but it will happen over time.

Long live the indie developer! Cue a nerdy giggle in someone’s garage…


Math: The Soul of the New Games Publisher

Eric Seufert has a great blog post in which he provides advice for the typical indie game developer he meets. The post is solid gold for an aspiring game developer, outlining the necessary steps required to get a great game to the top grossing charts.

Eric’s central point is that while making a great game is essential to success, it’s no longer enough. Developers also need to tune their game for both retention and monetization, then use that information to launch intelligent acquisition campaigns that acquire users profitably.

This is time-consuming and expensive, requiring both a technology platform and experts who know how to interpret the huge volumes of data you can create. Eric also outlines a few alternatives, such as working with a publisher or emerging development partners like Tilting Point.

Think Gaming’s take: we’re seeing the emergence of a new type of publisher, one that uses math to create value. Finance and advertising have seem dramatic shifts to quantitative approaches in the last decade. Expect to see the same in free-to-play gaming.

How to maximize in-app purchase revenue in games

Emily Greer at Kongregate has a great presentation from Casual Connect on maximizing revenue from in-app purchases:

She brought some great statistics from Kongregate’s games, a broad enough sample to see how differing strategies impact ARPU. A few things that she highlighted that we see come up repeatedly:

  1. Low entry prices don’t work. $0.99 in-app purchases don’t entice more people to purchase, and simply drags down the average purchase price and ARPU.
  2. Big spenders represent 50%+ of revenue for high performing games. While they are less than 10% of users, they are critical for overall monetization. You need a strategy for how a user can engage
  3. Prices of in-app purchases are usually inelastic. Put differently, great games can raise prices on their in-app purchases and increase ARPU. (connect this to #1 and #2 for more justification)
  4. The highest earning games are all about retention. Games with great long-term retention keep the interest of big spenders and create an in-game economy that continues to provide reasons for them to spend over time.

Emily backs it up with lots of stats from Kongregate and some case studies. If you want to read about how to make more money, go read the piece. It’s full of gold nuggets from her hard won experience.

When you’re ready to put it into action, integrate Think Gaming’s SDK. We make it easy and automatic to uncover your own gold nuggets.

Becoming mobile-centric

Great thoughts (as always) from Bill Gurley about the transition to a mobile-centric world:

While he doesn’t focus on games, they’re experiencing exactly the same changes, including changes to distribution, monetization, and core design principles.