Gaming is one of the strongest assets in the entertainment industry. We focus on mobile gaming and specifically on the recent and promising trend called Hyper Casual Games. We borrow the term ‘trend’ because that is how it is commonly called in the field, but we make it clear that Hyper Casual is not related to visual style or specific gameplay but is a sociological definition that emerges from the maturation of mobile gaming as a business act.
The story in fast forward
And suddenly, in a few years, the first video games of Konami and Namco migrated from the huge arcade machines (coin-ups) to our home consoles (Atari, Amstrad, Commodore), dived into our ‘personal’ computers and in the end they landed even more ‘personally’ and with a big kaboom on the first smart phones, making them available to their owners anytime, anywhere. The hitherto windswept but ultimately triumphant ‘Apple’ of the genius Steve Jobs, with the creation of the iPhone and the App Store, became the ‘game changer’, creating an empire that in 2018 was worth a trillion dollars, with Android Market (today Google Play) to be the ultimate competitor (or companion).
Millions of applications and among them, thousands of remarkable games, flocked to stores while the smart phones list billions holders: with relatively small amount of money can have a multimedia super device which makes video calls, holds a complete digital office, communicates with satellites to guide us in our destination and – on our subject – can fit hundreds of free games, available with just a ‘ tap ‘.
Who would have told you today 40’s, when you ‘fed’ coins to Pac Man in the 80’s, that one day you would play Call of Duty at the bus stop!
This fact, games in everybody`s pocket, dramatically changed the target group to which the big publishers are addressed, resulting in the evolution of the DNA of mobile games: The target audience is no longer core gamers but anyone, regardless of age, gender and ‘ gaming skills’, has access to Apple and Google App Stores in the Western World (or Xiaomi, Tencent, etc. in Asia), thus creating a new ‘category’ of games, called ‘ Hyper ‘ Casual Games.
What is Hyper Casual
It is the game that will be played with the same interest by the kid who has been ‘burned’ on the PlayStation but also by the mature lady who when she hears the word ‘leaderboards’ thinks that it is a town in the United Kingdom.
“Is it possible to meet the needs of so many different players in the same game?” one might think. It is entirely possible and it is happening now.
These are simple games that are meant to be played when the user wants to spend some of their time rather than “play”. To separate Hyper Casual from (plain) Casual or (plain) Mobile Games, the former would be described as a snack while the latter would be called a main course. Representative examples of Hyper Casual games are ‘Helix Jump’, ‘Knife Hit’, ‘Love Balls’ etc.
The main characteristics of Hyper Casual Games are the short duration of levels so they can get completed fast, to forgive player`s mistakes and at the same time to reward the player regularly to make his mood, to be attractive at the majority of players without being identified with specific gender in terms of graphics or gameplay and be understandable at first glance without the need for a “manual” to handle them.
Some the top “Hyper Casual” game publishers
- Ketchapp (France): Acquired by the ‘big’ Ubisoft in 2017. Rumors speak of $200m to $350m acquisition cost.
- Voodoo (France): Received a $200m investment in 2018 from Goldman Sachs.
- Lion Studios (USA): Created by one of the largest ad networks in the world (App Lovin).
The above, among other things, hit the top charts of mobile gaming, with the profit of a ‘moderate’ hit being around $25,000,000 in a year. A great hit like Voodoo ‘s ‘Helix Jump ‘ exceeds $350,000,000.
The news about the potential of the ‘trend’ continues as well-established publishing companies try to get involved dynamically. Zynga (USA), known for the social games ‘Farmville’, ‘Texas Hold’Em Poker’ etc., on its turning point in 2018, acquired ‘Gram Games’ (primarily manufacturer of Hyper Casual Games), for of the amount of $250m.
Key metrics for profitability (KPIs – Key Performance Indicators)
The Hyper Casual games are based on the Free To Play model monetization (F2P or otherwise ‘Freemium’, that are installed without charge to the user’s device) and designed to show ads and offer some goods purchases within the game (In App Purchases / IAP) to create profit. Because of their ‘shallow’ background, Hyper Casual Games usually focus on showing ads to make it work. But there are also publishers who have Hyper Casual as their core, such as ‘Fun Games’ and ‘Playgendary’ but try (and succeed) hybrid monetization modes that include ads, IAPs and subscriptions.
In contrast, mobile games like Clash Of Clans (not Hyper Casual), although freemium but with a much greater depth of activity for the user, rely on in-game purchases generating huge revenue:
“Chinese giants are making significant investments in European Mobile Game Developers, culminating in the acquisition of 80% of the Finnish Supercell (Clash Of Clans) by Tencent for an astronomical sum of $ 8.6 billion.”
The main performance indicators on which a game’s profitability depends, when it relies on ads to prosper, on how often the game will be replayed by the average of the users who downloaded it (known as retention), the cost of installation per user through advertising (Cost Per Installation) and by an indicator known as ECPM (Cost Per Mile) and shows how much profit (in dollars) is attributed to the publisher by the ad networks, per thousand ad impressions. They work like a puzzle, of which if a piece is not placed correctly, it will never be completed. The good thing for companies in this industry is that those data are measurable and improvable.
How Safe is the Investment?
Hyper Casual gaming as a business is one of the most dynamic and profitable business options today for the following reasons:
- Low production costs
- Measurable & secure forecast before the large scale
- High profit ROI
It should be emphasized here that the mobile gaming industry is a living organism that is determined in real time by fermentations and trends. Hyper Casual is a broader approach to building a game with specific features, but by no means do we claim that it is the ‘goose with the golden eggs’. For a company to succeed, it is not enough to follow a well-trodden recipe. It needs to be vigilant, follow the trends and always be ready to redefine the ways in which it will generate revenue.
So yes, it is a good investment but with careful – studied methodology.
Unfair competition, or ‘just business’ (Publishers VS Indies)?
We could not overlook the Indie game developers, who are the cornerstone of the existence of the games as well as the source of inspiration of the big companies since many of the well-known hits have either been created by independent manufacturers or are copies by (excerpts or in ‘whole) indie games!
The majority of Hyper Casual games made for profit through mass consumption are also advertising platforms besides games and the companies with the above business model, intrude with many ads so that the LTV (Lifetime Value of the user to the product) wins the CPI (cost of installation through advertising) to make a profit in the short period of life of a hyper casual game and ‘attack’ the charts due to over-promotion through huge advertising budgets.
With indie developers unable to compete major publishers in advertising, even when their games are good enough, the most important problem that negatively affects creativity and the evolution of gaming is that there is less room for independent teams of manufacturers.
The good games are many, the weekly featuring slots from Apple and Google – which also give indies a go – are limited and those indies who do not have the means or knowledge to properly communicate their work, or nor are they willing to work with major publishers, get lost in the ocean of apps.
Mobile gaming, on the other hand, continues to be an industry where the strongest are those who set the business rules.
“In an entertainment industry that surpasses Hollywood in revenue, the business environment makes sense to turn it into an arena.”
The reality among investors
VCs seem skeptical. The reasons we assume this to happen are:
- on the one hand, the lack of information at the level of insights on the part of VCs that leads to confusion between game development and the mobile game industry as a business
- and on the other hand, the fruitless efforts of the plethora of teams/companies in the field of mobile gaming, which lead to premature cessation of efforts and therefore to the lack of substantial knowledge of the subject operationally.
The App Stores are goldmines but not for everyone and as in all business areas, winners are those that insist, learn and finally succeed after they have failed multiple times. How many can afford it mentally and emotionally? If we take for example ROVIO which is one of the first success stories in the field, to reach the admittedly exciting success of Hyper Casual ‘Angry Birds’, it had already made 51 titles that did not perform, according to Sara Antila, communications director of ROVIO. The first Angry Birds edition became hit on the Apple App Store by Publisher (2009, Chillingo). Could the ‘small’ ROVIO had managed to do it alone without Chillingo? Before the first success, that will give serious insights (but also the financial probability for growth), the indie developer is in the dark about the methods of promotion and monetization.
We speculate that it will take time to mature and build the appropriate mindset that will bring the truly remarkable indie mobile game developers to the fore. In addition to the ‘guts’ / stubbornness / vision of the developers, the cooperation with Publishers, the initiative of Venture Capitals to invest as well as the support from International or National Organizations could contribute to this.
To summarize, the key points for the reader are the following: Hyper Casual mobile gaming as a broader framework and mindset, is an important part of the ever-evolving gaming industry that offers amazing growth opportunities, whether professionally for youngsters that seek for non- oversaturated areas of employment and specialization, or as business for investors that look at new ecosystems for profitability.