Mobile gaming revenue is expected to surpass $21 billion by the end of this year, a 19 per cent increase from 2013, but it's not all sunshine and roses in the mobile gaming industry. While opportunities abound, evidence has shown that success, as significant as it may be, is often short-lived. In fact, a recent Flurry report shows games have the shortest half-life of any app category. On average, it takes just two months for a game's monthly users to decline to 50 per cent of their lifetime peak.
And even the best of the best seem to be susceptible to this limited lifecycle. Take for instance, one of the most popular games over the last two years, Candy Crush, which recently reduced its 2014 forecast after reporting lower-than-expected second-quarter revenue. There was also Rovio, makers of the blockbuster hit Angry Birds, which recently announced it was cutting 16 per cent of its workforce. The fact is, no matter how big a mobile game gets, it can seemingly only ride the wave for so long.
To analyze this trend, we gathered our own data from five games that have been out for over three years, with over 20 million downloads each. They included two simulation games, a trivia game, a card game, and a family game. What we found is that Candy Crush and Rovio are experiencing a completely normal cycle of usage.
As you can see from the chart above, this data reveals a remarkably consistent retention curve, even among these five very different games. (Yes, there are actually five lines on that chart!) In month 0, by definition, these games have 100 per cent engaged users. By month one, that drops to 43 per cent. By month five, it's at just 12 percent, and by months 10-12, it has stalled out in the 3-4 per cent range.
Based on this data, we can model out how many active users a developer can expect to see given a fixed number of users acquired per month. A pattern is clear with these curves, regardless of the number of new users acquired per month.
Despite a strong 19 percent growth in monthly active users between months one and two, that percentage growth is under two percent by month 10 and has stalled out at less than one percent by month 16, even for apps driving hundreds of thousands of monthly installs. Knowing this, it's easy to see that the decline of Candy Crush - which is now in its 22nd month - is completely normal.
So what does that mean for mobile games?
For starters, the opportunities for long-term, sustainable success are clearly limited, but that doesn't mean there aren't things that can be done to help mitigate the drop-off in users over time. To figure out how to do that, though, it's important to figure out which approach you want to take with regards to mobile game development. We believe there are three main approaches, which we will call Property, Portfolio, and Platform.
The Property approach focuses on supporting one app full-time over the long haul, which takes a great deal of effort. As an example, note that Clash of Clans today is an entirely different and more robust game than it was upon its initial release due to the continued support and development efforts of Supercell. This increased effort will by no means insulate a game from facing the challenges mentioned. However, it will give you an opportunity to develop a robust and engaged user base over time, which you can then continue to re-engage upon development of new features within your game. This can help you break out of the dropoff curve illustrated above.
"With a Portfolio approach, it's important to figure out what each app will contribute to your overall business. Some apps are great at bringing users in, while others are fantastic at monetizing them"
Instead of pouring effort into a single game, some developers choose the Portfolio approach, building and launching multiple games each year. In this case, they don't put as much development support into each game, but they spread their wings by appealing to a broader group of people to get their target audience.
With a Portfolio approach, it's important to figure out what each app will contribute to your overall business. Some apps are great at bringing users in, while others are fantastic at monetizing them. In this case, a key to long-term success could be in leveraging re-targeting to encourage users of one app within your portfolio to download another. This way, while you may face some drop-off in one game over time, the overall effects won't be as significant.
Finally, some developers choose to build a full-blown Platform of inter-connected games that they plan on monetizing (a la GREE, DeNA, etc.). Often, this also means bringing other developers into your platform to leverage the network effects of a bigger audience. This builds upon the Portfolio approach and means even more options for acquisition strategies and more virtual shelf-space in the market, thus helping to drive more long-term success across the Platform.
There is no right answer, as companies have been successful using all three approaches. The important thing to remember is there are things you can do to help mitigate the drop-off in users many mobile games face.
Everyone is playing mobile games, but they don't play them forever. Understanding and planning for the cyclical nature of mobile games before they launch may be your ticket to long-term success.