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Mobile Dev Memo
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Successful mobile game launches often require approximately $1 million in combined development and marketing costs.
Eric Seufert argues that 2013 marked the maturation of free-to-play mobile gaming, as optimism from late 2012 gave way to sobering realities. Top developers became billion-dollar companies, but they also raised the cost of entry. High marketing costs, commoditized analytics platforms and a maturing mobile advertising market are eliminating the inefficiencies that once let small studios build competitive advantages. Freemium development, he contends, now depends on money, time and talent, all of which favor large, established developers.
On money, a GamesBrief discussion put the cost of developing and marketing a game able to reach the upper Top Grossing ranks at roughly $1MM. VC investment slowed substantially in 2013 and is not expected to recover in 2014. Publishers typically cover only marketing, leaving studios to fund development, which pushes them toward quick, shallow games unlikely to become hits. On time, hits rarely arrive quickly; months of soft launch iteration are needed to validate retention and monetization before launch campaigns, which can be up to half of total cost, are committed. On talent, small studios struggle to staff and sequence specialist hires such as user acquisition and analytics, and often outsource those functions, leaving them dependent on third parties. Experienced free-to-play professionals are also scarce.
Some hope remains for studios with modest ambitions. Plain Vanilla and Dirtybit showed that strong virality can substitute for paid acquisition, and ZeptoLab's Cut the Rope 2 showed that a well-produced paid game with heavy featuring can still chart in Top Grossing.
Five predictions for 2014 close the piece. VC investment will stay well below 2011 levels while M&A rises, driven by Asian markets. Zynga, with $1.2BN in current assets, will acquire a high-profile studio, and Glu will repeat its Deer Hunter 2014 success with Eternity Warriors 3. Analytics and metrics-as-a-service will consolidate further following the PlayHaven-Kontagent merger, as platforms like Facebook and Amazon integrate analytics. Marketing costs will rise as budgets shift from desktop to mobile and a few apps dominate. Finally, at least one sector IPO is expected as Asian growth and proven monetization restore investor confidence.
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