5 mobile games industry predictions for 2018

What will the next year look like?

• 1 Augmented reality gaming hots up

  Augmented reality became a hot topic in 2017 following 2016’s Pokemon Go and the development of ARKit and ARCore.

  By September Apple had doubled down on AR with ARKit compatibility launched in iOS 11, as well as adding AR Games and Apps categories to the new App Store.

  I already wrote about AR being the next frontier for smartphones. By developing ARKit and ARCore, Apple and Google are providing the basis for a significant new feature for mobile devices. Out of almost nowhere, AR has sprung itself to the forefront of smartphone innovation.

  Big releases

  I think 2018 will see a lot more innovative game experiences as developers come to grips with the tech and what’s possible.

  We’re already set to see Niantic’s next game, Harry Potter: Wizards Unite, this year, which could set the tone for AR for years to come.

  It could be argued that Pokemon Go is actually a poor AR game - does anyone still playing it use the AR feature? Perhaps Harry Potter could do something majorly different and truly innovative.

  There’s also Next Games’ upcoming The Walking Dead: Our World, bringing the dead to life in the real world. It’s a huge IP - it’s one of the biggest TV shows in the world and its licence has also been harnessed for some very lucrative mobile games already.

  And then of course we’re set to get hardware solely focused on AR, or ‘mixed reality’, if you like.

  I’m of course talking about the Magic Leap. After raising around $2 billion to date, including a $502 million Series D funding round in October 2017, the technology start-up finally unveiled the Magic Leap One headset in December.

  No precise price or release date has been given for shipments to start this year - though it is expected to launch in 2018.

  With such exciting technology and huge new games set to launch, there's no question it'll be a big year for AR.

  
  

• 2 Eastern influence increases in the West

  2017 saw some significant deals in the mobile games industry involving takeovers and investments from major Asian companies.

  To name a few:

  • Netmarble closes acquisition of Kabam Vancouver and Marvel: Contest of Champions
  • Chinese chemical firm acquires Talking Tom developer Outfit7 for €1 billion  (The chemical firm ultimately lost out, before coming back in once again to buy the company from a consortium of investors in Asia)
  • Tencent snaps up 12% stake in Snapchat owner
  • South Korea’s DoubleU Games splashes $825 million on social casino dev Double Down
  • Nexon acquires Choices mobile games developer Pixelberry Studios
  • Chinese developer NetDragon buys LA educational games studio JumpStart
  • ZPlay acquires indie game developer and publisher Noodlecake Studios for $4.9 million
  • Tencent ploughs $90 million into Episode and War Dragons developer Pocket Gems
  • Pokemon Go developer Niantic catches $200 million investment (Chinese publisher NetEase was one of the backers in the funding round)
  • Razer acquires cloud-focused smartphone manufacturer Nextbit (Razer would later IPO in Hong Kong and has dual headquarters in Singapore and San Francisco)

  And that’s just the tip of the iceberg of a trend that has been emerging for the last few years which has seen Asian firms, particularly Chinese companies, acquire or gain stakes in Western companies.

  

  As companies like Netmarble, Nexon, Tencent and NetEase become more successful in their home countries and get more ambitious about overseas expansion, it seems likely more deals are to come. Indeed, Netmarble’s 2017 IPO was launched in an effort to raise capital for large acquisitions.

  It’s not just games companies either, as past acquisitions have shown for the likes of Splash Damage, Jagex and Outfit7, non-games firms are getting in on the act too.

  Top picks

  But who could be acquisition candidates? Rovio was rumoured to be a target for Tencent before it launched its own IPO, but there are many other developers that could see a takeover or significant investment.

  Final Fantasy XV: A New Empire developer MZ could become a target from one of the big Asian players. Not just showing expertise in building highly lucrative games, it also has its technology platform Satori that could prove an attractive proposition for buyers.

  Then there’s other successful companies like Roblox, Peak Games, Playrix and Scopely that could be on the radar, all creating sustained hits played by millions.

  These companies may choose to stay independent of course, and even launch an IPO - as seems to be another games industry trend (Jam City anticipates a 2019 flotation). Or the overtures could come from from bigger Western companies. We've already seen big deals from Take-Two and Ubisoft for Social Point and Ketchapp, and prior to that Activision for King.

  But one thing’s for sure, we’ve not seen the end of Asia’s influence over the Western market, and it’s only going to grow.

• 3 Discoverability gets worse

  Apple and Google face a difficult challenge in 2018 when it comes to discoverability.

  How can these two enormous companies make it ‘easier’ for small developers to get their games noticed on the App Store and Google Play? Is there really anything else significant that can be done?

  Other questions that should be asked: Do Apple and Google care enough about this issue? Is it really up to the platform holders to get more game sales for developers?

  Is more curation the answer?

  Both stores now have dedicated indie sections to promote games from small devs, which is definitely good for indies.

  The App Store meanwhile has gone for a more wholesome curated approach with ‘Game of the day’ to send a signal flare to its countless users about new and significant games.

  Apple also now features interviews, how-to guides, articles and lists on developers and games to encourage downloads.

  

  But there are only so many days in the year - and this isn’t exclusive to indies by any means, but big publishers too.

  Some of our Indie Mavens recently noted just how difficult discoverability could become in 2018 for indies in an overcrowded market that sees thousands of submissions every day.

  It seems likely that more mobile developers will continue to seek out publishers and/or investment to support their marketing efforts.

  More curation of the app stores could also help boost discoverability, but as the big publishers take a stranglehold on the charts (Voodoo and Ketchapp recently had eight of the 10 top downloaded App Store UK titles in the lead up to Christmas) and Apple offers its game of the day slots to big companies, the ‘easy’ ways to get in front of consumers are running out - or are certainly getting more expensive.

  For all the doom and gloom above: it’s not impossible for small developers to get discovered and make money on mobile. But it is getting harder - so going in with that knowledge and finding ways to tackle the challenge head on will be key.

• 4 New world for monetisation

  It looks like 2018 will see significant changes to how developers monetise their games.

  The furore around loot boxes - most notably but not exclusively around Star Wars Battlefront 2 - has sent ripples throughout the industry. Governments around the world are piping up about certain monetisation practices, likening it to gambling (whether or not this is strictly a true definition).

  Some form of regulation seems increasingly likely in various regions as more and more government officials and regulators speak out.

  Big talk

  The furore has seen Belgium's Gaming Commission declare loot boxes a form of gambling and calls for a ban on the monetisation model, while recently the UK Gambling Commission has said it’s in discussion with developers over the issue.

  

  Beyond these crowd-pleasing quotes, it’s Apple that has fired the meaningful first shot. In December it changed its guidelines to require mobile games with loot boxes to disclose the odds of receiving items.

  It states: “Apps offering ‘loot boxes’ or other mechanisms that provide randomised virtual items for purchase must disclose the odds of receiving each type of item to customers prior to purchase.”

  The wording is not particularly clear however on whether games already released will need to display item probabilities, where developers will need to display these odds, or even if there is a deadline to make the changes by.

  Perhaps Apple taking the first step though will also see Google follow suit this year with new guidelines of its own.

  Regulations have already come into force in countries such as Japan and China, similar to Apple’s new proposals: developers have for a while now been required to display the odds of getting items through such mechanics.

  The term ‘regulation’ may sound more worrying than it actually is under these terms and an outright ban on loot boxes is unlikely. More transparency is a good thing, and if it drives people away from your game, perhaps there was something wrong with your implementation of monetisation in the first place.

• 5 Could 2018 spell the end for mobile app intelligence?

  An interesting prediction by MobileDevMemo's Eric Seufert this one.

  He suggested 2018 could see the end of app intelligence. It's a bold prediction given these are multi-million dollar companies with a a huge combined client base.

  But as the nature of the industry changes, could it at least represent the end of app intelligence as we know it?

  The growth of advertising revenue, which Seufert cites is "almost impossible for any intelligence company to estimate for a given app with any serviceable accuracy” and subscription models mean single IAP-focused transaction tracking may not be as accurate as it once was (though it has always been an estimate for private companies).

  Easily available data from public companies also means estimating revenues is a "fairly trivial" process.

  "Buried in the details"

  In response, Jonathan Kay, COO of app intelligence firm Apptopia, said there is still a place for these companies.

  "The value is buried in the details," he said.

  "Which countries are your competitors seeing the highest LTV (ARPU plus retention plus cost to acquire users) in? How does this evolve over time? What advertisements are my competitors having the most success with? Are there certain apps my competitors are advertising on the most, and acquiring the highest quality users from?

  "Answers to these questions are extremely difficult to get to without an app intelligence solution and are often changing daily/weekly."

  It's unlikely these businesses will go away any time soon and many offer a variety of services for publishers to use. You can read a further rebuttal of the notion that app intelligence firms will go away in Kay's article 'You’re Looking at Mobile App Intelligence All Wrong'.

  But the way these companies track some of their data will need to change and by the end of 2018 could be too late if they are serious about providing accurate information on revenue estimates.

  One other thing to note: It's not entirely inconceivable that Apple may abolish its grossing charts even for businesses, like it has already done for consumers.

  Much like it's suddenly adding new guidelines regarding loot boxes and similar monetisation practices, platform holders aren't averse to making big changes that affect companies operating around their marketplaces. Particularly if they see a benefit.