Eight years A.C.C. (After Candy Crush), the mobile gaming industry is ready to win big
When Candy Crush Saga first launched in 2012, mobile gaming was more so an anecdote than a saga in the global games market, where it made up 18% of industry revenues (Statistica). Today, it’s the most valuable and fastest-growing gaming format compared to P.C. and console, accounting for 45% of gaming revenues worldwide in 2019 (Newzoo).
Like any great epic, Candy Crush left a lasting legacy. It’s still generating its developer and publisher, King, more than US$1.7 million daily as of February 2020 (Think Gaming). For many commuters, it’s still the activity-of-choice for just the right amount of escapism. It also pioneered the freemium model, where users play for free and have the option to pay for add-ons.
But Candy Crush’s most significant contribution was propelling mobile gaming into a dominant position in the games market through its explosive commercial success and culture ubiquity alongside other industry-defining sensations, such as Angry Birds, Clash of Clans, Pokémon Go!, and Fortnite. These chart-toppers, together with the general rise of smartphone users, have made casual gaming into serious business.
Mobile gaming is still a relatively new industry, with Apple opening the App Store to developers in 2008–one year after the initial iPhone launch. The number of active gamers has increased exponentially since, growing from 1.5 to 2.5 billion between 2014 and 2019 (Newzoo). Mobile games are only second to social media and communication apps in terms of time spent in-app and accounted for 74% of consumer spending in-app in 2019 (App Annie). This spending totaled $68.5 billion in revenues last year, with a projected 10.2% year-on-year growth to reach $95.4 billion by 2022 (Newzoo).
The accessibility of mobile gaming has pushed studios to create new experiences for new audiences. With more women and age groups entering the ‘gamer’ demographic, mobile gaming’s influence will only become more far-reaching in our digital lives. How developers adapt to these changes and apply the tools available to them, such as 5G and augmented reality (AR), will be up to the players to decide.
Road to twitches
Mobile gaming first appeared on Edward Li’s radar in 2012 after a friend recommended that he play Candy Crush and Clash of Clans; he was intrigued after learning that the former had grossed over $1 billion in revenue. Surprised by their appeal, as he “grew up playing on P.C.s and consoles,” Li decided to look into the potential of the emerging gaming medium, having spent most of his career in music production.
“I had a discussion with my co-founders, and we thought: There’s an opportunity. There aren’t a lot of studios in Hong Kong. The field is still very new, so this is something we can try to move into. That’s how Twitchy Finger started,” says Li.
Together with Howard Lau and Anthony Kwan, Li co-founded a mobile game development and publishing studio in 2014. With over 30 employees across its offices in Zhuhai, Vancouver, and Hong Kong headquarters, Twitchy Finger has won several industry awards since founding, including the 2018 Tencent Game Innovation Award, 2018 HKDA Global Design Award, and the 2016 Google Play ‘Best Independent Game’ Award. Its flagship game, Mini Legend, is a mid-core racing game that boasts over eight million downloads in the App Store.
Creating a profitable game is no small feat for young studios, as their resources pale in comparison to that of gaming giants. Development-time aside (it takes the Twitchy Finger team around four to six months to develop a casual game), there’s no formula to success, and metrics can only take a studio so far when it comes to deciding on a genre to pursue. Like any creative medium, studios simply have to take risks until they release a hit.
“Starting a mobile game company is tough. By 2015, we were developing our second mid-core game, and we were running low on money. We thought: This game is either going to make us or break us,” says Li. “We were lucky that it did very well.”
Twitchy Finger’s next release was a casual puzzle game with a comic art style–a stark contrast to what the studio was known for, which raised a few eyebrows. To Li and his co-founders, it was necessary to “not always do the same things over and over again even if it’s a cash cow” because it keeps the team adaptable and creative. This decision also followed on the heels of a broader industry shift toward the reward video model within the freemium segment, as Twitchy Finger used the game to test the monetization strategy in a new genre.
The decline of paid games and pop-up ads were, interestingly, a result of consumers’ receptiveness to advertising in games, which prompted studios to explore new ways to capture their attention. A study by TapJoy found that 41% of consumers are likely to pay attention to advertisements placed in mobile games, versus 17% for general Internet ads and 15% for billboards. Studios can bring in recurring revenue and increase time-in-view by, for example, showing a video ad in exchange for lives, whereas paid games are a one-time purchase, and users may be turned off by frequent pop-up ads.
Such revenue opportunities have led to a flurry of investments and acquisitions by VCs, financial institutions, and large gaming companies in the past several years. Tencent has been notably aggressive, obtaining stakes in Supercell, Pocket Gems, Glu Mobile, and Epic Games, to name a few. Goldman Sachs invested $200 million into hyper-casual mobile gaming studio, Voodoo, in 2018. Such trends have made investors much more discerning when it comes to dissecting industry metrics.
“When we first started six years ago, [VCs] just looked at download numbers, but they are very savvy now. Downloads don’t mean anything to them. They look at the revenue, which is always important, but even that’s not everything,” says Li. He adds that retention rates, session lengths, average revenue per user, and lifetime value of the user are just some of the numbers that investors evaluate in the due diligence process.
Li cites the example of Pictionary game Draw Something as a watershed moment for gaming investment. Its developer, Omgpop, was acquired by social gaming powerhouse Zynga for more than $180 million at the game’s peak in early 2012, after reaching 50 million downloads in only 50 days (The New York Times). But Omgpop’s valuation dropped to $95 million by the end of 2012–as Draw Something lacked an engaging, competitive factor to keep retention rates up–and it took years for Zynga to recover from the loss (The New York Times).
While many acquisitions and partnerships are motivated by data sharing, large gaming companies are also after soft benefits, such as acquiring new talent or refreshing their company culture by working with an agile team. In 2017, Twitchy Fingers entered a joint venture with Kingsoft, a Hong Kong-listed and Mainland China-operated software and Internet services company, as a way to inject more creativity and perspectives to its games division, Seasun Games.
It’s anyone’s game
Confidence in the future of mobile gaming is bolstered by advancements in hardware and software, new monetization models, and genre diversification. The application of AR, best epitomized by Pokémon Go!, is reinventing player experience and introducing new monetization opportunities. In addition to in-app purchases, the game uses a cost-per-visit model, which attracts players to a specific place through Pokémon placement and charges sponsored locations for each visitor. According to Dice, this model has brought in $75 to 250 million in revenue.
Mobile gaming is also well within the disruptive reach of 5G, which will pave the way for cloud and on-demand gaming. Running games on remote servers and streaming them directly to a user’s device will not only enable faster loading speeds and undisrupted gameplay as users switch from one device to another, but it will also set a new standard for the mobile gaming experience.
“Right now, all mobile games are limited by hardware. In general, we don’t worry about iOS devices because Apple has a well-optimized software-to-hardware integration. But on the Android side, it’s very fragmented,” says Li. “You have lower-end phones that are bare-bones; games run on it, but not well. So we still have to make sure we make a compromise for now.”
Like countless other industries, the subscription model is also taking mobile gaming by storm. Apple Arcade and Google Play Pass both offer a curated selection for $4.99-a-month. Subscribers can try new games ad-free or access exclusive perks, while developers can enjoy recurring revenue.
Subscriptions also have the potential to impact spending behavior, as consumers perceive them as better value. Currently, 2.8% of mobile gamers spend money on in-app purchases for freemium games (Newzoo), and only 10.3% of App Store games are paid (42 Matters), suggesting that user spending has much room to grow.
Traditionally an activity occupied primarily by teenage boys and young adult men, the gaming market is now benefiting from an older and more female consumer base–much to the credit of mobile gaming’s accessibility and the general aging of gamers. Last year, the proportion of female mobile gamers reached the majority at 51%, and the average age of a mobile gamer was 36.3, according to the State of Mobile 2020 Report by App Annie.
A study by Newzoo and Activision Blizzard Media also found that while female and older gamers prefer puzzle games, they are also branching out to the action and adventure, and competitive genres (Betting on Billions: Unlocking the Power of Mobile Gamers). Such findings will undoubtedly affect how studios approach development, but Li believes that the industry needs to do more.
“We’re seeing more and more women coming into the field, and they’re providing insights and ideas that a lot of male programmers and game designers just don’t have. There’s always been a lack of gender balance, but it’s good that this is starting to change,” says Li. “For our Vancouver studio, we’re half-and-half for gender representation, which is rare.”
It’s evident that, as we enter the golden age of mobile gaming, its presence will be seamlessly integrated with our day-to-day. With this growth comes opportunities to make mobile gaming more inclusive and solve problems that plague us, big or small. Whether it’s the gamification of anxiety treatment or getting us from A to B, tactical engagement in our digital lives will not only be prevalent, but expected.
Hardware and software advancements have shone an even more promising light on its trajectory, but growth is not without its caveats. The industry is facing criticism for using psychologically-manipulative tactics to draw users into addictive play, creating appealing sensory stimuli to create a cycle of dopamine-charged rewards. This narrative has played out time and time again in the gaming world, so only time will tell if studios’ efforts to address users’ concerns will be sufficient.
For now, the industry and gamers alike will be focused on getting to the next level.
Min is Jumpstart’s Editor in Chief.
This story was originally published in Jumpstart Issue 29: Back to Basics as A Golden Age for Power-Ups.