There is a recurring narrative that mobile gaming is beginning to stagnate due in part to a crowded market that is becoming increasingly competitive. But that crowded market and increasing competition are by-products of something truly positive: growth.

In this guest post, Daniel Tchernahovksky, VP of Global BD at AppLovin, covers emerging trends in the mobile gaming industry today and shares his own industry observations on market growth and the potential ahead in 2024.

We meet daily with partners who are launching new products at a rapid pace – and continuously finding success, even amidst this competitive landscape. In fact, two of the five top-grossing games in app stores, Monopoly Go and Honkai: Star Rail were released this year. (Sensor Tower, Oct. 2023)

Here’s how they’re finding success and why we think other studios will see continued growth in 2024.

AI is making game development faster and more economical than ever before

Recent advancements in AI are impacting the industry tremendously, helping developers create games much faster and at a lower cost than ever before. Developers can now create different content and experiment with more variety in their outputs, such as characters, themes, and genres. As a result, they can set and build specific game mechanics more quickly and efficiently. For example, if you build a runner game, you can use AI to generate different running environments like a sports stadium, a field, or a wooded trail. This is an easy, cost-effective way to create more levels and add longevity to a game, and I suspect we’ll see it implemented more widely in the year ahead.

IAP-based games are making a successful comeback

Surprisingly, we’re seeing a surge in IAP-based games that we think will continue. Most gaming businesses are heavily dependent on marketing for growth. In the IAP world, historically, that function was filled by a limited set of digital advertising partners. However, the increased focus on privacy has reduced the effectiveness of those channels, and consequently, companies believed there was less growth possible in those types of games.

Lately, we’ve seen that isn’t the case. With the latest AI enhancements in AppDiscovery, our smart user acquisition platform, growth managers can scale campaigns more quickly and accurately. As a result, many of our partners are finding rapid success and seeing their games top the charts in both downloads and revenue. It’s still early days for this trend, but we suspect that the success is sustainable, and the resurgence of IAP games will continue.

Personalization will help developers create more engaging experiences

Developers are always aiming to make games sticky and increase long-term retention. The best way to achieve this is to make the game or app feel like it’s designed especially for the user. Take match-3 games, for example. The levels should never seem too easy or too hard; they should feel just challenging enough. If they’re too easy, there’s not enough skill or thought required, and the user will get bored. If it’s too hard, it will be frustrating because they will feel as if the current level can never be passed. In either case, users are sure to lose interest and stop playing. Retention relies on the user feeling a sense of accomplishment when they complete a level - like they’ve achieved something.

So, how does AI help? It enables the developer to segment users and customize game progression so the user feels as if the game’s difficulty level has been uniquely calibrated for them. We’re likely to see more of this application of AI – in gaming and beyond – to personalize app experiences and successfully retain users.

More studios will collaborate with growth partners to launch games and scale faster

The industry has become more complex and competitive, and scaling games today must be collaborative. Some of the most successful games work because they appeal to a variety of user segments. To build games that have broad appeal, it’s essential to team up with growth partners to see what works, and we expect to see more collaborations like this in the coming year.

Studios will align with growth partners who can arm them with the data and insights necessary to kick off campaigns quickly and provide a feedback loop for experimentation. These partners will enable studios to iterate and buy across various types of users and audiences, further driving growth. Close collaborations will allow developers and UA managers to understand the best outcome for their use cases.

New creative strategies will drive down acquisition costs and increase installs.

Much has been said about misleading ads, but this perception is pigeonholing creativity in the industry. The top studios continue to innovate, experimenting with an incredibly broad set of creative concepts. How these pioneers think outside of the box is really astonishing.

Every month, new ideas pop up and go beyond gameplay itself. Our in-house creative shop, SparkLabs, is designing and building high-performing ad creatives that meaningfully scale titles by creating, testing, and understanding the data behind what’s working and what isn’t. They leverage that knowledge to act as advisors, helping app marketers increase installs at a higher ROAS. We expect this creativity and innovation to evolve and expand in the coming months, and we’re excited to see the creative ads that result, as well as the impact on UA and retention for our partners.

Improved algorithms will play an increasingly important role in helping UA managers identify and reach target audiences

The beauty of the advancements in AI technology - including the algorithms that power our platform - is that UA managers can now have confidence that their campaigns will deliver precisely the results they are looking for with improved accuracy and scale. That will only improve as time passes, as AI more accurately determines where to spend to deliver on performance goals effectively. The need for manual optimization is all but eliminated, increasing efficiency for advertisers of all sizes.

The goal of any business is to acquire as many users as possible that engage with the app and yield a profit. In the past, a UA manager spent most of their time on manual work to ensure they hit specific short-term results like a 10 percent ROAS on day 7 (D7) because that number indicated a high likelihood of profitability in the long run.

Today, the priority is to understand user behaviour. For example, a cohort of users with a 1% return on the first day and an 8% return on the 7th day is likely to be more profitable in the long run than a cohort with 5% on day 1 and 10% on day 7, given how much more growth the first cohort shows.

AI delivers data and insights like this to UA managers, who can now dedicate more time and energy to understanding their different audience segments and building predictions for each. The combination of better algorithms, which give more control, and better user segmentation, which yields better growth, means that UA managers and developers can achieve profitability more quickly.

With these improvements, UA managers settle into this more strategic role, and the benefits for app businesses will only increase. 2024 may be the best year yet for mobile gaming.

 Edited by Paige Cook