Enlarge /. Apparently enough people bought Fortnite's completely optional outfits and dance moves to win $ 100 million in prizes for the first year of the game's esports tournaments.
The corona virus crisis has proven to be a gold mine for video game makers, as closed consumers are turning to digital distractions in larger numbers and for longer sessions than ever.
While major listed groups in the sector, such as Nintendo, Activision Blizzard and Take Two, have seen their share price rise by more than 25 percent since early March, a variety of mobile gaming studios, many of which are privately owned, have enjoyed the true gust of wind. Along with the sudden increase in leisure time in a market with more than two billion smartphone owners, they have taken advantage of a slump in mobile advertising prices as other business sectors have cut their marketing budgets.
"It gave companies like us a big opening," said Alexis Bonte, Group Chief Operating Officer at Stillfront, a free-to-play gaming group based in Stockholm, whose share price has more than doubled since mid-March. "We have a double effect – the increased proportion of organic substances [growth in use], but also the effect of more efficient marketing. . . It was big. "
According to the data groups App Annie and IDC, the income from mobile games, which already eclipses the expenditure for PC and console titles, according to data groups App Annie and IDC this year will be more than three times the total for Nintendo Switch, Xbox One – and PlayStation 4 titles. Companies such as Fortnite developer Epic Games, the puzzle app specialist Playrix and the manufacturer of mobile games Playtika spent more than $ 2 million a day on digital ads at the end of March, April and into May, insiders say the gaming industry.
"Every other developer sees this as something unprecedented," said Stephane Kurgan, former chief operating officer at King, maker of Candy Crush Saga.
Kurgan, who recently joined technology investor Index Ventures, says mobile game companies have more of a pandemic advantage than console publishers, besides the biggest hits like Nintendo's Animal Crossing: New Horizons, Activision Blizzards Call of Duty: Modern Warfare, and Take Two & # 39; s Grand Theft Auto V.
"A large majority of PC and console titles haven't really benefited from it," he said. "It is more the mobile free-to-play industry that has seen very significant sales peaks."
US spending on console games – including physical discs and downloads from Xbox, PlayStation and Nintendo digital stores – rose to $ 662 million in April, an increase of 55 percent over the previous year, according to market researchers NPD. Revenue rose 67 percent in May to $ 438 million.
In Europe alone, spending on mobile games between February and March rose 12 percent to $ 740 million between February and March, according to the Sensor Tower. This set a new monthly record for the region in a season that is typically characterized by a decline after Christmas.
According to Unity, a gaming technology provider, daily in-app payments for mobile games – for extra lives, virtual items and outfits for avatars – have increased 24 percent worldwide since the pandemic began. Smartphone users have installed 84 percent more apps than in the same period last year.
At the same time, Unity found that the average cost per installation – the price that game manufacturers have to pay for ads that entice new players to download their app – decreased by an unprecedented 33 percent from March to April.
This led to a land grab that boosted the lockdown gaming boom as well as bored iPhone violinists. With many other marketers getting their dollars out of the online auctions that set the most ad prices, gaming companies came forward to take advantage of the falling costs of reaching millions of eyeballs on Facebook, Google and other networks.
In recent years, publishers of free mobile games have become the most accomplished online marketers and have optimized a system that is based on constant tests and measurements. The goal is to ensure that the cost per installation on each new player's phone is exceeded by the player's predicted lifetime value, which is typically generated by in-app purchases of additional lives, virtual items, and avatar outfits.
Tracking CPI and LTV has become an obsession for game makers as well as Roblox for tweens.
"The entire mobile gaming industry has focused on these two key players," said Thor Fridriksson, general manager of Teatime Games, a Reykjavík-based start-up that launched a new trivia app, Trivia Royale, in mid-June. "It's basically an arbitrage money machine. That's the whole deal now."
Increasing marketing budgets in a time of great global uncertainty was still a multi-million dollar gamble.
"It was a very stressful time," said a senior executive at a leading mobile game developer, who spent more than $ 2 million a day on ads at the height of the pandemic. "You spent a lot of money and didn't know if the world would go under."
The bet appears to have paid off for games with the highest earnings, such as PUBG Mobile, Roblox, Candy Crush Saga, Gardenscapes, Fortnite and China's Tencent & # 39; s Honor of Kings, all of which were among Sensor Tower's top games in March belonged and April.
"When you look at the rankings, you can see today that many of the games in the top 10 were there five years ago," said Kurgan. "Nobody expected that."
For years, investors viewed games as a hit business, with today's Angry Birds being toppled by tomorrow's Flappy Bird. The appearance of "live operations", in which games are constantly being expanded with new levels, functions or seasonal events, has called this view into question. It is now considered easier to maintain an existing hit on the phone than to develop another one.
"Check out the top game studios: The number of games that actually produce a successful second, third, or fourth title is extremely small," said Paul Murphy, partner of Northzone venture firm and founder of Dots, a mobile game developer.
This drives ratings for studios with breakthrough intellectual property behind which larger publishers can build their marketing muscle. The multiple for a mobile developer has increased from five times earnings before taxes, depreciation and amortization to ten times or even more for a company that has defined a particular niche.
The dealmaking has since continued. This month, Zynga Peak from Istanbul, known for the game Toon Blast, acquired for $ 1.8 billion.
"They buy their way to growth – that's what all big mobile studios do," said Murphy. "It's cheaper to buy a business than to build something."
Although the science of using CPI and LTV metrics to milk venerable franchises like Candy Crush is well understood, no one knows what will happen now when the locks begin to wear off. Many in the industry see social networking features as the key to retaining players.
"Another thing that went well [during the pandemic] is all about community building," said Bonte. "We don't see these people go."
Trivia Royale from Teatime Games was developed to encourage connection via a cartoon avatar, similar to Snap & # 39; s Bitmoji or Apple & # 39; s Animoji, which uses the smartphone's front-facing camera to capture the reactions and expressions to imitate the player. According to App Annie, Trivia Royale topped the U.S. iPhone App Store charts last weekend. But Fridriksson admits that launching his new game during the suspension was more of a coincidence than a strategy.
"The use of mobile phones has increased dramatically in the past few months, which would be a good thing for our title," he said. "But maybe people get bored to death if they play all these games on their cell phones and want to go out in the sun."
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