Essential for all watchers of the MENAP region (MENA plus Pakistan) The SHFT Q1 2023 Gametech Report from Shorooq Partners is available now.

The new report continues to confirm the regions potential with local publishers able to capitalise on the rapidly growing mobile market but with plenty of opportunity for overseas companies to move in if they can recognise and work within the region’s unique market.

The global outlook

The report first looks globally, cementing the current understanding that while mobile gaming spend dropped by 5% in 2022 to $110 the number of downloads continues to increase.

Such a landscape has prompted companies to prioritize profit over growth, affecting installs, costs, and revenues. Mobile gaming has also seen major changes in the ability to attract and acquire users with privacy changes, and enforcement of privacy guidelines restricting marketing campaigns.

The impact of Apple's ATT has been massive thanks to the previously high share of marketing-driven installs in gaming. Apple’s ‘solution’, SKAN (now in version 4) - a privacy-friendly way to measure ad campaigns without user-level data - offers improvements, but it may take most of 2023 for marketers to fully utilize its features.

To some extent Apple’s intentions have been successful with some gaming studios seeing growth by virtue of increasing the ‘enjoyability factor’ of their games and understanding of their user base. But there remains a degree of uncertainty about how mobile gaming app marketers will fully adapt to a post IDFA and SKAN4 world.

“In the mobile market, despite significant industry headwinds such as the IDFA, we're seeing stability in downloads and spend, which are both significantly above pre-Covid levels. We're also seeing examples of studios adapting by either continuing to optimize LTVs or leveraging ad-revenue opportunities to a greater extent where possible,” says Affan Butt, founding partner at independent investment bank Aream & Co.

The problems of payment

An interesting aspect to the report is its observation that work is still required for the provision of “effortless subscription process(es) and in-app purchases that have negligible impact on gameplay”. The report finds that companies that are able to offer seamless payment opportunities will increasingly have the edge in more harder-fought times.

“A strong and reliable payment infrastructure is essential for the success of any gaming company, particularly as the industry grows rapidly with millions of players worldwide. It also enables gaming companies to expand their reach into new markets by catering to the different payment systems and needs of customers in different regions, offering a variety of payment options such as credit cards, debit cards, e-wallets, and mobile payments.” the report concludes, noting that 15% of all gaming payments fail after a user has willingly initiated them due to technical issues, human error or suspicion as to the transaction’s security.

Such problems limit company’s ability to target users in MENAP effectively, the report finds. But ultimately the report predicts growth in the region.

MENAP gaming market set to grow

The report predicts that the MENAP gaming market will be worth $2.8bn by 2026. That’s growth at a compound annual growth rate of 10%.

It attributes this growth to the increasing popularity of mobile gaming within the region, tracking previous growth contributed to by the increasing affordability of technology, data plans and the number of game developers and publishers being established in the region. Plus, of course the number of developers and publishers finding success only stimulates further growth.

MENAP has seen three time more games published inf 2023 - 2023 than the previous period and the report concludes that the region is now on the road to compete with China as regulations continue to restrict growth on Chinese companies on home-turf

In all more than $6 billion was invested across the gaming value chain in the first quarter 2023, bringing the total of invested capital to $15Bn to date, with Saudi Arabia's Public Investment Fund (PIF) being an important investor.

Likewise the number of gamers within the MEMAP region is projected to increase from 67.4million in 2022 to reach 87.3 million in 2026.

Esports notably is increasingly becoming a unique area of interest within the region attracting both fans and players and investment too.

Best performing genres

On the whole the report finds MENAP gamers leaning towards skill-based and social play games with notable games being Rise of Kingdoms and PUBG mobile for their Strong affinity for strategy and competitive play, while local favorites such as Yalla Ludo continue to perform. Meanwhile Roblox is notable for its open world play and customisation and Royal Match for its game mechanics and social play elements.

But overall it’s match3 games that are highlighted as being a particular growth area with 30% increase downloads but this comes alongside a 200% increase in cost per installs due to more and more developers targeting this lucrative market and driving up costs.

Notably simulation games have seen in-app purchases decrease by 35%, spearheading the fact that in-app purchases and ad revenue has dropped by 20 % as players have become more selective and have began using ad-blocking tech to prevent new monetisation options from appearing.

Key takeaways

Overall it’s notable that the MENAP region is emerging as a lucrative market for the gaming industry, with several governments in the region showing support for the sector.

However, entering the MENAP market can be challenging for foreign game developers due to several barriers to entry, including unique monetization requirements, cultural specificities, language, and a heavier-than-usual need for community management.

So while the opportunities are certainly there, expert management and consultation are still required to maximise success. And while market forces and regulations continue to present challenges, the tools, intention and investment are all in place,