One could be forgiven for believing that the entire mobile gaming industry vaporized the moment the words ‘Web3’ or ‘Metaverse’ were first uttered. Certainly, these concepts seem to have captured the imaginations of most investors, commentators, and Twitter pundits operating within or with adjacency to the gaming arena, and for good reason: they are exciting paradigms that might shape the future of the category. But these concepts aren’t new. ‘Web3 gaming’ is essentially a rebrand of ‘blockchain gaming,’ which whipped developers and investors alike into a frenzy around the time that the developer of Crypto Kitties raised its first round of financing in early 2018. The origin of the Metaverse concept dates back even further.
Reminder: the entirety of consumer tech didnt spontaneously evaporate when the terms Metaverse or Web3 were coined. These are potentially exciting categories, but they are nascent and unproven, and their labels are a form of marketing, intended to distract you.
— Eric Seufert (@eric_seufert) January 5, 2022
But despite the electricity of these new concepts, mobile gaming achieved impressive growth in 2021, especially given the banner year the sector experienced in 2020 as a result of the COVID pandemic. Newzoo estimates that mobile gaming revenue grew by 7% from 2020 to 2021, compared to just 1.4% year-over-year growth for the gaming category as a whole. SensorTower estimates that mobile gaming revenue grew by only 4% from 2020 to 2021, but it estimates that the category grew by 33% from 2019 to 2021, and the company projects an 11.2% CAGR for the sector through 2024. Mobile gaming hasn’t been displaced, and it likely won’t be: the immense pull-forward of smartphone engagement catalyzed by COVID has changed the way that society interacts with technology, and mobile gaming is an important component of that interaction. Web3 and the Metaverse are rousing, indeed — and I have written about them — but the mobile gaming market continues to grow.
I don’t see that changing in 2022. I don’t believe mobile gaming is entering a commercial winter, or that it will gradually see engagement siphoned off into other gaming formats. For one thing, the smartphone is the dominant form factor for consumer content engagement: these new business models and interactivity prototypes likely need to adapt to that, and not the other way around. Similarly, the mobile ecosystem offers a very robust and direct path to an enormous market through the platform app stores operated by Google and Apple. While I do believe the future of mobile content platforms necessitates the disintermediation of that distribution and curation dynamic, that isn’t likely catalyzed in 2022, at least appreciably (but more on that below).
The funding environment is friendlier for Web3- and Metaverse-pertinent start-ups at the moment, but it’s always true that the predominant, budding trends tend to monopolize investment attention. Mobile gaming is a mature industry at this point: 2022 marks the 10-year anniversary of the release of what I have called the “2012 vintage” of mobile games: Clash of Clans, Candy Crush Saga, and Mobile Strike were the first large-scale, commercially successful free-to-play games launched on mobile in the West. The industry has mellowed and been tempered in that decade. Growth has slowed, but it has not been extinguished. I believe that 2022 will be an important year for mobile gaming, for a number of reasons.
The first: the immense changes to privacy policy instantiated by Apple through App Tracking Transparency (ATT), but which are also being implemented in a much milder form on Android, requires that those platforms protect their principal source of revenue, which is gaming. Relatedly, both platforms must find a way to stave off the impending and inevitable reality of games streaming, which renders their stores irrelevant. For these reasons, the mobile platform operators must ingratiate themselves with the geese laying mobile’s golden, platform-fee-harvestable eggs, which are mobile games developers. And while the absolute number of mobile gaming start-ups might be diminishing, given the size and value of the market, the intensity and magnitude of ambition from early-stage mobile gaming start-ups has only been magnified.
Second, some global regulatory factors will meaningfully disrupt the operating status quo for mobile gaming, creating a tremendous amount of opportunity in the process. The mobile platform operators are under incredible scrutiny by regulatory bodies worldwide over the terms they enjoy in their publishing relationships with app developers, and those terms are being challenged regularly now in different jurisdictions. Apple in particular has ceded authoritative ground in various geographies, and just before Christmas, the Dutch competition authority ordered the company to allow for alternative payments methods for dating apps. These changes will accumulate until the point that the global de facto standard for app stores is a massively reduced platform fee given the alternative, which is web-based app stores that can’t be rendered within in-app content. My sense is that Apple and Google both try to delay the inevitable free-for-all of web-based transactions by offering incentives to mobile games developers — which, again, contribute the bulk of mobile app store revenues — to remain committed to the prevailing design principles of mobile.
And, lastly: China. As China continues to regulate game engagement, its domestic games industry must look elsewhere for opportunity. The re-allocation of even a small percentage of budget from Chinese firms into either (1) products developed for the Western market or (2) increased investments into Western firms would rattle the category’s equilibrium. I see this as a particularly acute change agent in 2022: Chinese firms will need to put billions of dollars to work outside of the country, and that will radically change the economics and product focus of every studio developing products for the West.
This is all to say: 2022 will be an intriguing and productive year for mobile gaming. As I did with my recent predictions post for mobile advertising, I’ll encapsulate my predictions for mobile gaming this year into broader, more conceptually-focused composite trends. Below I outline what I believe will be the five most dominant and influential trends in mobile gaming for 2022.
No play-to-earn games in mobile app stores
I don’t believe Google or Apple will allow play-to-earn games onto their platform stores in 2022. While some mobile game developers have already found innovative ways to incorporate cryptocurrencies into their mobile titles — see this tournament with a cryptocurrency prize pool in the mobile title Crazy Kings as an example — these efforts are not fully native to the game (ie. wallet paired to the account within the game) and involve cross-context validation and administration.
The concept of Web3 is mostly anathema to the mobile platform stores, which are wholly centralized and vertically integrated into the businesses of Apple and Google (and others). Apple especially must navigate the medium-term consumer behavioral arc away from hardware-based content platforms — as I detail in this three-part series on the future of mobile content platforms — very delicately. At some point, Apple will not be able to gatekeep content access by dint of manufacturing the iPhone; but it will cede ground minimally on the path to that eventuality out of necessity because the App Store is such a critical asset to its services business. And mobile gaming is the cornerstone of that asset, as I describe in The App Store is the Games Store: Apple can (and has) let almost every other category of mobile content avoid the full brunt of the App Store platform fee precisely because mobile games must pay it.
If Apple were to allow play-to-earn games onto the App Store, its grip on the iOS platform fee would loosen, not because play-to-earn would inevitably become the dominant model for mobile games (I don’t think it will) but because Apple would have set a precedent for allowing for off-platform transactions. This, to my mind, is a non-starter: Apple won’t allow that unless it is forced to, and I don’t believe that will happen in 2022.
Shift in attention away from platform app stores
This is somewhat related to the previous trend, and I have seen it take root already, but Apple’s intransigence with making substantive changes to its App Store policies around the platform fee (and while Apple’s small business program was a stroke of communications genius, it doesn’t meaningfully alter the economics of the App Store) has forced developers to think of creative ways to sidestep in-app payments in lieu of purchases on the web. As I wrote in What’s the real value of web-based payments for mobile games?, the use of web-based payments was already rampant in mobile games through VIP programs, WhatsApp and Slack groups run by game developers, etc. This was happening more or less out in the open, in full view of Apple’s App Store team but obviously not sanctioned by it.
The injunction issued by Judge Yvonne Gonzalez Rogers in the Epic Games v. Apple lawsuit that would have forced Apple to allow links to alternative payments methods within apps has been delayed, and it remains to be seen if or when it will be enforced (as an aside: it’s curious that Google has said very little about the future of web-based payments on Android, given that such activity is currently prohibited on that platform). My belief is that these links will become permissible under App Store guidelines in 2022, and certainly, most developers will pursue that option when it becomes available. But because the conversion funnel will deteriorate, and because many game developers had already implemented such stores, I don’t see web-based payments materially impacting the commercial dynamics on mobile, as I argue in Is app store regulation too little, too late?
That said: every developer will devote resources and attention to this if Apple is forced to allow links to web-based payments this year. But even absent that forcing function, I believe the web is becoming exciting for games developers as a distribution platform. Meta has made progress in this direction with its Pac-Man Community game, which is launching on the web with its Facebook Gaming platform, and its Stars Store, where streaming fans can buy stars to gift to their favorite streamers without using the App Store payments system in the Facebook app.
One underappreciated fact about the games streaming ecosystem is that, according to Streamlabs, Facebook has eclipsed YouTube in terms of hours watched. If Meta can integrate its efforts across distribution (in-app streaming), monetization (web-based payments), and content delivery (its games publishing program) into a web portal, it might be able to create a compelling gaming platform where Facebook Instant Games mostly failed. Concomitantly, the major games streaming services have successfully sidestepped the App Store through browser-based distribution on iOS, and Samsung recently announced a native integration of games streaming services into its televisions. Given these viable (although nascent and unproven) alternatives, mobile game developers will very likely focus some of their attention away from mobile platform stores starting in 2022.
Focus on portfolio management and network engagement
I have written extensively about the promise of systematic cross-promotion and portfolio management for mobile game developers over time:
- The app ecosystem and the fungibility of users (2012)
- Applying portfolio theory to mobile games (2014)
- Ketchapp: A case study in mobile portfolio management (2015)
- Portfolio dynamics for mobile games (2015)
- App portfolios and strategic cross promotion (2016)
- The Balkanization of the app economy (2016)
- Taking Flight Again: Planning the Launch of Angry Birds 2 (2016, GDC presentation)
While I personally have always been excited about the potential for these cross-promotion systems, very few scaled mobile game developers have implemented them, for a multitude of reasons (portfolio size needed to support the cost, political tensions involved in moving DAU across a portfolio, etc.).
Catalyzed by ATT, I believe that 2022 is the year that this changes. Firstly, the Content Fortress construction as applied to mobile gaming is effectively a cross-promotion strategy: the most blatant trend in the latter half of 2021 was the operational convergence of mobile ad tech and mobile gaming companies. A mobile games ad network is essentially a cross-promotion machine; when a mobile gaming company acquires an ad network (or vice versa), its goal is to execute cross promotion profitably. While I thought that systematic cross promotion was a good idea as far back as 10 years ago, it is now an imperative for mobile game developers: user acquisition is less efficient in the wake of ATT, so developers must monetize users better, and cross-promotion provides for that by allowing for multi-title LTV to be calculated and utilized for new user acquisition.
A resurgence of IP licensing
Less a premonition than an observation, I believe that ATT will provoke renewed interest in IP licensing for mobile games. This is perhaps a more specific interpretation of my prediction from 2022 predictions for mobile marketing around the temptation of brand marketing as a result of ATT, but I’m less circumspect of IP licensing for mobile games than I am of a single-minded brand marketing focus for any digital product’s marketing team. IP licensing for mobile games can be a very powerful strategy, but it needs to be constructed as a strategy. An IP is not a panacea, it’s not a discovery mechanic, it’s not a guarantee for earned media, and it’s not a proprietary advantage. I discuss the pitfalls of IP licensing in this GDC presentation from 2018, and I talk about the value of IP licensing in this post.
Gaming studios should look at IP licenses as tools to unlock efficiency from performance marketing. Viewed through this lens, a cost-benefit analysis is straightforward to develop in answering a few questions:
- How well does this IP pair with my chosen game mechanic?
- How well will this IP resonate with my target audience?
- How much more efficient will my user acquisition be (on a conversion basis) when my creative assets are wrapped in this IP?
- How much money will I spend on user acquisition for this title?
The combined effect of the above points of influence of the IP on a game’s marketability and reach will inform the developer of the value for the IP and what should be spent to acquire its license.
But I’ve seen game developers approach IP licensing from a different angle: as a standalone marketing strategy that should produce earned media and organic discovery, creatio ex nihilo. This doesn’t work; it’s a mistake to approach IP licensing this way. But faced with diminishing returns on advertising, developers may be charmed with false hope by the promise of an IP for their games.
Android-first development focus
ATT has created considerable distribution frictions on iOS for game developers, and this naturally raises an obvious question: will Android benefit as a result?
I think it will, and I believe mobile game developers will begin to pursue independent Android strategies, if not Android-first strategies, in 2022. For one thing, Google is ostensibly taking advantage of the divergence in marketability between the platforms by building advertising tools that exploit and highlight that gap. I talk about some of these tools in this piece, and I believe that Google will continue to build tools that are scoped specifically to benefit from the difficulties imposed on app advertising on iOS.
Google is, however, introducing privacy controls that emulate broadly what Apple has done with ATT, but to my mind, these controls are less heavy-handed and take the form of what I have called ATT Lite. I believe that Google’s Limit Ad Tracking-style setting, which will be rolled out to older Android devices early this year, is as far as Google will go in withholding the GAID from advertisers. While Limit Ad Tracking (LAT) did reach a high proportion of iPhone owners over time, it was a slow, compounding evolution that progressed over the course of five years. Given the public consciousness and awareness of digital privacy engendered by Apple’s ATT initiative (and especially its marketing campaign around that initiative), the opt-in rate for GAID access might be lower on Android, faster.
But while some of the advertising performance opportunity on Android might erode over time as a result of the LAT-like setting that will limit the availability of the GAID, Google will likely attenuate that diminishment by rolling out more tools for advertisers to help them reach relevant audiences on Android. This should prompt developers to consider which platform they want to optimize against: iOS, where aggregating an audience has become meaningfully more difficult and more expensive than it was one year ago, or Android, where aggregating an audience is expected to become more efficient over time.
I also think Android will become more attractive to developers for demographic reasons. Reaching users in the developing world almost definitionally means publishing for Android. And some regions — such as India, Brazil, Nigeria, etc. — have become much more attractive to game studios in recent history, in part because ATT created headwinds to growth in the developed world. And Android is pervasive in the developing world, but especially in India, where Apple has just a 5% share of the smartphone market.
What does this mean for game developers? Whereas an iOS-first development approach was previously commonplace to see for game developers — meaning core features, gameplay design, hardware operability, and live operations content were optimized for iOS devices — my suspicion is that many developers begin to prioritize Android as their focus platform. This is not trivial given the broad spectrum of devices that must be tested for with Android, but the advantage is clear given the changing dynamics of getting a game distributed on iOS.
