If you are interested in hypercasual games and but were unable to watch my appearance last week on Indie Game Business, the show is now available on YouTube. It was also a fantastic opportunity to reminisce about the game business with my first hire, Jay Powell. To view the show:
If you are interested in the hypercasual phenomenon and ecosystem, I will be discussing it with Jay Powell and Dan Long on Indie Game Business, Wednesday at 5 PM UK time, 12 PM EST. If you cannot make the show, they will be posting the talk on YouTube.
Last year, hypercasual games were the biggest story in mobile gaming. These games captured more than half of all downloads and saw several exits at high multiples. Five of the top 10 free games in the Google Play and Apple AppStores are hyper-casual while Ubisoft acquired Ketchapp for $100-$200 million, Zynga acquired Gram Games for $250 million and Goldman Sachs invested $200 million into Voodoo.
The space, however, is very reminiscent of the early days of social casino where any developer, small or large, could launch a slots product and then sit back and count the money. From Playtika (Slotomania was not great in the early days) to High 5 to Plumbee to GSN, anyone with a decent social casino app would enjoy high returns. As in any competitive industry, over the last few years the companies that could not create great products lost market share or failed whereas the good companies grew. While the social gaming market has grown every year for the past ten years, there have been winners and losers.
The hypercasual sector is likely develop similarly to social casino. Currently, virtually any developer (even one person) can build and launch (with the help of the many publishers) a profitable hypercasual game, with some earning hundreds of thousands of dollars monthly. You also see new companies flocking to the space daily: traditional developers who see it as easy money, established gaming companies looking for a new revenue stream and small independents.
With the influx of so much supply, the next few years will become much more challenging for companies in the hypercasual space. There will still be huge successes, but there will be equally large failures, especially among players who are not committed or do not understand fully the space. Those that succeed will likely follow the five principles below:
”Know your customer” was probably the three words that a caveman etched in stone when writing the first business book. Developers of hypercasual games, however, claim their customers are “everybody” and there is no way to have an intimate customer knowledge if everyone is your customer. Most hypercasual games are thus developed for the lowest common denominator, so anyone can enjoy them.
This strategy works in the early days of a market, where there is so much demand a fun product will see a huge market. Think of Bejeweled in the early Match-3 days or Farmville when invest express games first hit Facebook. Those games were the biggest the category would ever see because there were so few options and thus everyone did play them. It’s the same with hypercasual, you still have a limited number of games.
As markets mature, the next phase is games that appeal to a specific demographic. Games for men 15-25, games for women 45+, games for students, games for artists, etc. Once you have a choice of a game optimized for your demographic, you are much less likely to be interested in mass entertainment. Thus, the next phase of the hypercasual market will see different developers focusing on different customer segments.
Focused on one game mechanic
Currently, as the hypercasual market is not very critical, developers are more interesting in create a suite of games quickly. They will replicate popular games and finish a game in a few months (or weeks), then move onto another entirely different game.
As the market matures, customers will be more discerning and will pick the best game in the category they like. The game industry is traditionally winner take all (or at least winner take most), so the likelihood the twentieth best stacking game will find a sizable audience are slim to none. Just as a slots developer is not going to create the best bingo game, a hypercasual developer is not going to create the best games for each hypercasual mechanic (tapping, swiping, drawing, turning, rising, stacking, merging, etc).
In the future, to succeed in hypercasual, you will need to master a game mechanic and create unique experiences. Rather than creating one game in each-sub-genre, create a great rising/falling game then iterate and keep making it better. To succeed, you will need to add unique features or elements to the genre and take it to the next level (pardon the pun).
The current crop of hypercasual games often have poor user interfaces and mediocre customer experiences. While they are easy to learn, they are often difficult to understand and thoroughly enjoy. Most, even the successful ones, feel thrown together and the player has to figure it out as they go along. It is not a refined experience. They are the equivalent of cars that do not have handles on the doors or put the mirror control next to the back seat. As the industry evolves, customers will expect a smooth, intuitive interface and user experience.
Additionally, advertising now greatly diminishes the customer experience; with more product options players will be less accepting of so many intrusive ads. The only way to create a great UIUX is to devote the time to user testing and polishing and focus on the customer experience from installation through their lifetime, and this polish will be required to succeed in the future.
More robust revenue model
Now, most hypercasual games primarily generate revenue from ads. They do not have robust monetization models because they do not need it, revenue from ads is sufficient to cover user acquisition costs in successful hypercasual games.
Gram Games has expanded into IAP (in-app purchases) while several have a Freemium model that allows players to remove ads for a price. As the space gets more competitive, so will user acquisition. Simple supply and demand shows that UA costs will increase significantly while organic users will decrease as people will have more options. This phenomenon occurred in the social casino space and almost certainly will be replicated in hypercasual.
To mitigate higher acquisition costs, developers will have to increase LTV. Rather than simply relying on ads, successful developers will personalize monetization for each customer, with some happy to generate ad or affiliate revenue, others paying for IAP and some preferring a Freemium or subscription model.
High quality and tested
In the early days of any business, simply being first to market covers a lot of sins. Think of US automakers through the 1970s or the first Facebook games (which seemed to be in maintenance mode as much as they were live). As these and other industries matured, people placed a premium on reliable products. I have been amazed at how often the current generation of hypercasual games crash and how little time the developers have apparently devoted to QA. Success in 2019 (and beyond) will depend on making games that are reliable and bug-free.
How to win
To succeed in hypercasual in 2019 and beyond, you need to create a game that is best of breed for your target customer. Understand your customer and grow the segment, rather than trying to be everything to everyone. Most importantly, make sure the product is fun and polished.
- In 2018, the hypercasual market was like the early days of the social casino market, put out a decent product and count the money. As companies flock to the hypercasual market, success will be much more challenging in 2019 and beyond.
- To succeed, rather than every developer putting out a plethora of different hypercasual games, the successful ones will target a demographic and specialize in a game mechanic that allows them to create a superior experience.
- Successful hypercasual developers will also polish products so that they have a professional UIUX and they work flawlessly.
As I write virtually every year at this time, I cannot predict the future, nor do I think ANYONE else can. While the Mary Meekers, Elon Musks, Bill Gateses, etc., will often come up with insights of how the economy and world will evolve, if you review their predictions you will find they are wrong as often as they are correct.
December, however, is a useful time to reflect on the key trends from 2018 that are likely to extend into 2019, impacting opportunities for those in the mobile and gaming space.
Two emerging revenue models will become much more important
While in-app purchases (IAP)will continue to drive revenue for social casino and social games, two other revenue sources will grow in importance.
- Advertising revenue.While advertising revenue already been the primary revenue source for many social games, it still represents only a small percentage of total social game revenue and many applications. In 2019, I expect advertising to become more important for all apps, particularly social casino. If done correctly, watch to earn videos do not cannibalize IAP revenue from spenders and creates revenue from the 95+ percent who do not monetize. Not only do ads not cannibalize IAP revenue, it often increases it by improving engagement and retention.
Additionally, as customer growth in many social gaming verticals stagnates, particularly social casino, it will be increasingly important to generate additional revenue from existing players. Advertising will provide incremental revenue that complements the other product initiatives and allows companies to cast a wider net in their user acquisition activities.
- Subscriptions become another revenue option. While advertising will grow as a revenue source for social casino and social games, subscriptions will make an even greater impact. The subscription model has worked very well in Asia, it is a large part Tencent is valued at over $350 billion, but has not made a big difference in the mobile gaming space in the west (US and Europe). It is also the key to Netflix’s success and arguably Amazon’s (see Amazon Prime). Mobile game companies are finally understanding how to incorporate subscriptions in their business models, rather than just throwing them out there as an additional in-app purchase. The strength of subscriptions throughout the economy suggest it can become as important or even more important than IAPs eventually for social games.
Hypercasual will prove it is not a fad
The biggest development in social gaming in 2018 was the rise of hypercasual games, which now make up more than 50 percent of all mobile downloads. They have also dominated the M&A scene, with Zynga buying Gram Games for $250 million, Goldman Sachs investing $200 million in Voodoo as well as multiple smaller deals. Hypercasual games typically have a single mechanic and a single goal, yet reaching a high score can be very difficult. Effectively the core game loop is very straightforward, do one thing, get rewarded (so you can try again) and keep repeating to get a higher score.
In 2019, I expect the hypercasual segment to mature. By mature, I do not see lower growth but a more professional approach. Companies will no longer succeed by throwing a lot of products at the market. Instead, the industry will fragment, with different companies focusing on specific demographics or gameplay mechanics. I also expect you will see higher product values, while a $25k hypercasual game can be a huge success now, competition will raise the bar. UIUX will improve as will technical stability (today’s hypercasual games remind me of Facebook games from 2012, while games crashing are part of the experience). The increase in quality will eventually drive out the small and independent developers (except for the best and the brightest) but will result in better consumer experiences.
Convergence of Real Money Gaming and Social Casino will accelerate
With both Real Money gaming and social casino becoming increasingly competitive, they will lean more heavily on each other to capture best practices and improve their businesses. Social casinos are great at progression and social mechanics and these features will increasingly find their way into real money gaming, where just adding games no longer will be enough for success. On the social side, with the ability to grow the social slots market seemingly coming to an end, social casinos will take more gaming mechanics (sports betting, live dealer, virtual sports) from real money and adapt them to the social space.
Also, real money online gaming companies will get over their phobia that social gaming is cannibalistic and realize what their land based brethren discovered years ago, the two businesses are complimentary and increase the size of the pie. Social gaming provides the trigger for players to want to play roulette or slots and can also prove a great brand building opportunity. Partnerships similar to MGM’s relationship with Play Studios (where MyVegas and Play Studio’s other games share MGM’s rewards program) will extend into the real money space. As the US real money market emerges, real money operators will be increasingly anxious to partner with social casino companies to access their players.
Social casino consolidation
With user growth slowing in the social casino space, the top companies have to look elsewhere to grow their businesses. They have proven quite adept at increasing revenue from existing users, leading to unbroken annual growth for the past ten years that is likely to continue for at least another few years. But growing revenue per user has its limits, and the owners of the top social casino companies are demanding even more growth. While companies have had mixed (i.e. disappointing) results purchasing small players, the major casinos are driving growth by acquiring the other big boys. Late 2017, Aristocrat purchased Big Fish for about $1 billion. DoubleU also acquired DoubleDown Casino for over $800 million. These two deals have created the number 2 and number 3 social casino companies and I expect this trend to accelerate in 2019 as there will be limited other options for rapid growth.
Return to blogging
One prediction I can be 100 percent confident in is that I will be blogging more in 2019. While the real world got in the way of my blogging in 2018, there are many topics I plan to cover in 2019. I also look forward to any ideas from my friends and followers on topics you would like to see me discuss.
It would be intellectually dishonest if I wrote about my expectations for 2019 without reviewing how my picks for 2018 did. So how did I do last year:
- The convergence of micro-segmentation, AI and machine learning to create extreme personalization. In 2018, the social casino industry continued to experience strong growth despite flat user numbers. The key driver for this growth has been better personalization and segmentation, the successful companies are tailoring promotions and sales for individual users. If anything, I expect this trend to accelerate in 2019 as companies actually understand what they are doing with machine learning and AI.
- Voice recognition. While it has not had a big impact on the social casino space, voice driven devices continue to gain ground with Google and Apple joining Amazon promoting voice heavily. I expect in 2019 game companies will figure out how to combine the growth of voice with gaming products.
- Big change in social casino. I will call this one a slight miss as the space has not evolved dramatically. Stars Group did release the first social casino games, PokerStars Play and Jackpot Poker, with Live Dealer but overall the industry did not change much from 2017. I still expect an innovative company will change the market in 2019.
- Devices and platforms will become less important. I will admit to a miss here, the ecosystem still revolves around Apple and Google.
- Dual devices. Another slight miss here. Dual devices have become a reality but they have not significantly impacted the game space.
- Big players will enter free to play, and fail. This was a big miss and indicative of a sea change but one I am very happy about. After years of social casino and mobile gaming overall being the shiny thing and companies make stupid investments to get into the space, the business has rationalized. Companies are now looking at the competitive situation and financials before moving into the space, leading to a much more rational environment.
- Privacy. BOOM, did I get this one correct. As someone who personally does not worry too much about my online privacy, privacy became the story of 2018. While privacy concerns will not go away in 2019, I think the concerns will ebb as people understand how to control what they share. The days of aggressively compiling and sharing user data, however, are gone and those companies that still act in a rogue way put their whole business at risk.
See you in 2019, have a great year.
- 2019 should see the emergence of two additional revenue streams for social casino and social games, subscriptions and advertising.
- Hypercasual will prove to have legs, remaining a dominant genre in gaming
- Real money gaming will borrow more from social casino in 2019 while social casino operators will try game mechanics popular in real money.
In February, I wrote that the next big casual gaming phenomenon would be hypercasual, but even I did not expect the genre to take off as quickly as it did. Last week, Goldman Sachs invested about $200 million in French hypercasual game company Voodoo. The next day, Zynga announced it acquired hypercasual game company Gram Games for $250+ million. These deals follow Zynga’s acquisitions of Harpin and Peak Games’ card business for $142 million. With about $600 million in deal, money talks, and money is saying hypercasual is for real.
What are hypercasual games?
Hypercasual games have a single mechanic and a single goal, so they are very easy to learn. Mastering them, however, is almost impossible, as the games get more challenging as you try to reach a high score. Effectively the core game loop is very straightforward, do one thing, get rewarded (so you can try again) and keep repeating to get a higher score.
Are hypercasual games here to stay?
As I said in February, unlike fads, hypercasual taps into the key to product success, simplicity. Most successful products are not crammed with features that generate a lot of checkmarks on a competitive analysis. Instead, products with very few options generate tremendous value. Uber is valued at tens of billions and when you open the app you are asked where you want to go, and then you are given 3 or 4 options to get there. You are not picking the color of the car that collects you, the height of the driver, what route they will take, etc., which is all handled by Uber. Apple is another great example. The iPhone and iPad have virtually no extraneous features or options.
The science behind simplicity is neuroscience, particularly related to cognitive load. Cognitive load is how much info people are processing at any one time. A simple user experience minimizes cognitive load, thus not creating too much strain and making enjoyment more likely.
Many people often do not realize it is much harder to make a simple product, just as it is harder to create a five slide presentation than a 50 slide one. Keeping a product simple means you must decide what features to exclude, so you need to understand your customer and what you are trying to achieve. Given the market’s feedback to Gram and Voodoo last week, the effort is worthwhile.
Do opportunities remain in hypercasual?
Often when there is a spate of deals it means the end of bubble, or at least the end for small developers, but that is not the case with hypercasual. First, hypercasual is not really a genre, but more of a game making philosophy. It is about creating games with a straightforward and simple mechanic. There is no reason to believe this philosophy cannot be extended to every genre, from simple car racing games to hypercasual social casino titles. The opportunities for hypercasual are as bright now as the opportunities for free to play were after Farmville and Who Has the Biggest Brain.
What should you do
<pThe key is to learn from hypercasual rather than try to imitate what is already in the market. If you have a successful game, see how you can simplify it. What can you do to reduce players’ cognitive load. If you are looking for new product opportunities, identify what player segments currently do not have good hypercasual options and build products for these players. This can be an extension of your current customers or can create games for customers where the competition is irrelevant. By focusing on simple yet repeatable fun, there is a great opportunity in the game industry.
- Hypercasual it the hottest sector in the gaming space, with two deals valued at $450+ million announced last week.
- Hypercasual games have a single mechanic and a single goal, making them easy to learn and play but hard to master
- The key is simplicity, and the opportunity is to make your own games simpler or create products for an existing or new market that leverages simple mechanics.
There is a lot of buzz now about hypercasual games, and, for once, I agree with the buzz. There is a new big thing in gaming every year – a new console, technology, mechanic, etc. – that people expect to change the industry, investment flocks to it and a few years later it becomes an afterthought and a lot of people have to send out their resumes. I am usually skeptical of these fads, if you look at my posts there is not one about VR, blockchain, 3D, etc., but hypercasual is the exception
Hypercasual, is not a fad because it taps into what is one of the strongest drivers of building a successful product, simplicity. I have written repeatedly about how people gravitate to easy products that minimize cognitive load, and often use the example of Uber’s success to show that simple and straightforward can generate tens of billions of dollars of value. Hypercasual games tap into that formula for success.
A recent article, 100 Million Downloads: How Hypercasual Mobile Games Are Rewriting the Game Design Rulebook by Tom Kinniburgh, does a great job of both quantifying the success of the genre and pointing out key rules to building hypercasual games.
What is hypercasual
The first step to analyzing the hypercasual market is defining what is hypercasual. If you do not define it, you cannot build towards it. As Kinniburgh writes, “the term ‘hypercasual’ has become a collective way to reference games of this nature. Such titles typically have a single mechanic and a single goal, yet reaching a high score can be fiendishly difficult.” Effectively the core game loop is very straightforward, do one thing, get rewarded (so you can try again) and keep repeating to get a higher score.
The state of the hypercasual market
Hypercasual is not the next big thing that developers and investors are flocking to but an already established space in the game ecosystem with hundreds of millions of players. There are already tens, if not hundreds, of hypercasual games with over 100 million downloads. To put that number in perspective, 100 million downloads is more downloads than if everyone in Germany or France or the UK installed the app. These games include Agar.io, Finger Driver, Balls Race, Dunk and most of the other games at the top of the various app stores’ charts. The acquisition of Harpin, a one-person studio that built a solitaire game, for over $42 million also validates the hypercasual market, as companies usually do some due diligence before investing millions of dollars.
How to build a hypercasual game
The core game mechanic is even more important in the hypercasual space. As mentioned above, hypercasual games have a single mechanic that the player keeps repeating to get a superior score. Thus, the single mechanic needs to be fun, easy and compelling or else the player will not want to continue.
This core mechanic must also be easy for the player to understand quickly and provide for ever improving scores. Kinniburgh writes, “Great hypercasual are easy to grasp, but rely on players having a perfect run to succeed, and they measure that perfection with a score.”
By being easy to understand quickly, players recognize that playing more leads to better scores. If it is difficult to comprehend how to play, the score and activity would not be linked in the player’s mind so they would not be driven to keep playing. Also, if continued play did not yield higher scores, then the key incentive to more gameplay would not exist.
This simplicity exists throughout the game. Unlike other game genres, you do not introduce more features (complexity) as the game progresses. According to Kinniburgh, “great games in this genre rely on mechanics that provide everything the player needs to play from the start of the game, either with a single life on offer – such as Flappy Bird – or with multiple lives, like Ballz. In each case, however, the game ends when said lives count reaches zero.”
While the gameplay mechanic needs to stay consistent, the game must also scale so players do not get bored. If they can master the game, then the score is capped. Instead, you need to introduce variety by making higher levels more difficult (less time, bigger opponents, etc) or making the level more complex (a puzzle game with more area blocked). According to Kinniburgh, there are three ways to scale hypercasual games:
- Changing the underlying environment
- Changing the speed
- Adding a PvP element
When designing, use one or a combination of these elements to keep the player engaged.
How do you make money
I, and most others, would not care about hypercasual if there was not a way to translate the popularity of these games into revenue. The most obvious answer is in-game advertising. Throughout the game space, advertising is becoming an increasingly important revenue stream. Players in games already see rewarded video as a benefit; adding watch to earn almost always increases your retention metrics. Machine learning now allows for more targeted advertising, creating a better user experience (you see ads you are actually interested in) and a better value for advertisers (you only pay to show ads to people who are really potential customers). These two forces are further driving ad revenues for game companies.
Hypercasual taps into this trend because of the sheer number of players you attract. With hundreds of millions of players, algorithms have more data on who to target with what, providing better advertiser and user experiences. And, with each player generating some revenue, hundreds of millions of players directly translates to more revenue.
In addition to direct advertising revenue, you can improve company revenue by using hypercasual as an acquisition channel. While the Harpin acquisition may be ROI positive based on advertising revenue, my guess is that the revenue it generates by driving players to Zynga Poker and other games with strong lifetime values actually is more valuable than the direct revenue from Harpin’s games. Using hypercasual as a portfolio play rather than a standalone opportunity further builds value.
Future opportunities for hypercasual
With many trends, by the time you read about it, it is too late to capitalize, but in the case of hypercasual there are still many opportunities. First, the underlying principle of a single, simple mechanic will always lead to a good user experience. My philosophy is simpler is better, and hypercasual is defined by simplicity.
Also, for those in the casino space, hypercasual has barely raised its head. While Harpin and several other hypercasual companies have built great businesses around solitaire or solitaire like apps, that is largely the extent of its penetration of the most exciting gaming vertical (social casino). There are no hypercasual games that target slot players, which represents about 80 percent of the social casino market. Same for table games (roulette, baccarat, etc), which seem to lend themselves perfectly to hypercasual.
The opportunity also is not limited to free to play casino, but the real money space can learn from it. The success of lottery products not only shows willingness to gamble on hypercasual experiences but a strong and continuing desire to do so. Also, the high customer acquisition costs in real money suggests the value of hypercasual as an acquisition tool would dwarf the benefits free to play companies get from these games.
- Hundreds of millions of people play hypercasual games; apps that have a single game mechanic where players keep returning to get a higher score.
- Hypercasual games are a great opportunity in the free to play social casino market, as there is still no hypercasual games that target slots players, the biggest segment of that space
- Hypercasual is also an untapped opportunity in real money gaming, as lotteries show players willingness to gamble on a hypercasual experience and they provide a way to offset the very high customer acquisition costs.