The economic uncertainty of recent years has created opportunities in the hyper-casual gaming industry. The COVID-19 pandemic led to an increase in online entertainment usage and a subsequent influx of investment coming from traditional industries to the gaming industry. However, as the pandemic slowed down and people returned to their normal activities, the time spent on online entertainment started to decline. This led investors into moving their money back to more traditional industries. Despite this, the gaming industry continues to see growth and is expected to continue growing in the future. In particular, the hyper-casual genre has seen success due to its low entry barriers on the product side, and its ability to generate revenue through in-app ads. It is important for studios to understand the changing market to take advantage of the opportunities available in the hyper-casual industry.
The gaming industry is evolving and undergoing a consolidation process, with larger companies acquiring smaller ones and smaller companies merging with each other. Specifically for game studios, this process is driven by the value that a studio can bring through its ability to either create hit games or target a niche audience. The challenge relates to a crowded market, with an increasing number of games available on the Apple Store and Google Play Store, particularly within the hyper-casual genre. This makes it more difficult for studios to create a successful game, whether it be a hit or targeting a specific niche. It is important for studios to understand the current market conditions in order to navigate these challenges and take advantage of opportunities in the industry.
Recent changes to privacy policies, particularly with the release of iOS 14.5, have impacted the ability to monetize hyper-casual games through traditional means i.e. ads. This is due to the fact that users are now given the option to opt-in of sharing their advertising ID with advertisers while in the past this was the default, leading to a decrease in demand for ads and a lower eCPM. Additionally, a change in users' preferences in which they are looking for less ad-aggressive experiences and a product that may engage them in the long run affected the demand for ads even further. In response, studios may need to find ways to monetize their games through other means, such as targeting niche audiences or finding new revenue streams. The initial release of iOS 14.5 also caused uncertainty in the market, as advertisers shifted their budgets from iOS to Android in order to target specific actions that correlate with a higher user value. However, the market has since adjusted to these changes and both iOS and Android have seen a stabilization in ad spending and revenue giving us an overall increase in the market value.
The industry is now seeing a trend towards hybrid-casual games, which offer higher quality and complexity compared to traditional hyper-casual games. In a nutshell, these games rely on hyper-casual creatives and basic mechanics, and the addition of some more complex mechanics, monetization strategies, and meta. These changes have created new opportunities for studios, particularly those that are able to adapt and create high-quality, complex games with advanced monetization strategies. As a result, publishers are also evolving together with studios, as they are now required to provide studios with broader and more complex services, such as game economy, ASO, level design, balance, UX/UI, Unity support, and others, compared to the classic services provided in the past (e.g. creative marketing, UA and monetization). The current economic uncertainty, together with the high-interest rates, inflation rate, and geopolitical instability brings with it a huge opportunity for those who can adapt and catch a share of this new “complex hyper-casual” market.