Comment & Opinion

Lessons to be learned from the telecoms saturation in the late 2000s to counter mobile gaming’s latest market figures

How can game developers deliver growth in a mature market? Product Madness's Matt Labbat offers insight - from the earliest days of the telecoms market

Lessons to be learned from the telecoms saturation in the late 2000s to counter mobile gaming’s latest market figures

Matt Labbat is VP Evergreen Games at Product Madness. Product Madness is one of the world’s largest mobile game publishers and market leaders in social casino games. Headquartered in London with a growing number of creative studios worldwide - watch this video to learn more about Product Madness.

A game-changing development

In 2022 the mobile free-to-play gaming market contracted for the first time ever. For an industry used to double-digit growth since the inception of the Appstore in 2008, this was a game-changing development.

Fastest growing entertainment medium

Over the last decade, mobile free-to-play gaming has been an amazing success story. It grew from $18 billion in 2013 to $68 billion in 2019 according to Newzoo, nearly as big as console and PC gaming combined. In 2020 the growth accelerated swiftly as the pandemic hit, lockdowns started and people looked for ways to entertain themselves from home. The market grew 13 percent that year alone. Companies that were able to push more and more quality in-game events (or Live Ops) fared best as they offered an evergreen experience to an audience in dire need of escapism.

As the market rapidly expanded, investor money also poured in to take advantage of this fast growing market. In quarter one (Q1) 2021 $2.4bn of private investment went to the video games industry, a fourfold increase compared to Q1 2020 (according to InvestGame). Cheaper money partly fuelled the growth of the sector but also bred inefficiencies. This resulted in a lot of companies experiencing growth due to inflated marketing budgets rather than strong business practices and performance metrics.

The Great Softening - “Build it they will come” no more

The unprecedented growth suddenly ground to a halt in 2022. With the post-pandemic boom peaking and the economy slowing down amidst a cost of living crisis and increasing interest rates, the cash flow from both players and investors dried out. The mobile gaming market contracted by more than five percent in 2022 (six percent according to Newzoo and nine percent according to Sensor Tower).

Industry forecasts by market research companies have all been revised down significantly with Sensor Tower dropping its 2023 forecast by 20 percent to $93B and Newzoo reducing its 2023 prediction down by 10 percent to $96B. Investment activity was also down sharply, dropping more than 90 percent in the third quarter of 2022 compared to the average of the six previous quarters according to InvestGame.

The hard reality we are currently contending with is that our industry is now mature. One could think about it as a Great Softening. Growth simply isn’t going to come as easily anymore as top-line expansion slows dramatically. The old adage “If you build it, they will come” no longer applies.

I witnessed a similar turning point early in my career within the telecoms sector in the late 2000s and early 2010s. As a strategy consultant, I worked with network operators around the globe. From expanding developing markets where all competitors could grow double-digits every year with minimal effort, to mature developed markets where one company’s growth came at the detriment of another.

The parallels between the telecoms sector of the late 2000s and the mobile gaming sector now are uncannily similar. We are experiencing a perfect storm. The economy is recovering from a major crisis, protecting margins is ever more important to satisfy shareholders and acquisition costs are sky high as competition is at its fiercest to capture and keep loyal customers. It appears that the mobile games sector has reached this turning point too. Just like the telecoms industry then, growth will require businesses to protect and take share in one’s vertical like never before.

The Great Softening - winning through excellence

So how exactly can we deliver growth within a mature market? Take a look at the steps followed by the telecoms industry to recover:

  • Focus on quality - i.e.: players will move on if a game offers a below-average technical performance (e.g. slow loading times)
  • Innovate with your marketing - to capture market share you need to target new audiences, don’t just target your core audience. Identify adjacent audiences and adapt your creatives accordingly
  • Offer the commoditised features - users are a lot more sophisticated nowadays and know what to expect from a good game. They expect their daily login calendar, daily quests, events and sales, and they will move on if a game under-delivers
  • Bundle things together and differentiate your offering - whether it’s mashing up two genres for a new game or bringing a casual meta feature to an RPG game, do not hesitate to innovate and offer a varied experience
  • Create loyal customers - think about users - especially those who pay - as demanding mature consumers with expectations. Reward them for their loyalty and offer best-in-class customer service.

As can be seen in the examples above, every department from tech to customer service has a role to play to help a games company sustain growth. A successful game company can be compared to an orchestra, a single musician playing poorly can impair the entire symphony. The winners in today’s challenging market conditions will be the ones who strive to excel at every core function that makes up a game company, be it tech, product, design, data, customer service, art, marketing, and beyond.

Warren Buffett once said, “Only when the tide goes out do you discover who's been swimming naked”. Don’t be surprised if you see a lot more companies in their birthday suits in the next few years.

Product Madness is currently hiring for a number of open positions, so it you’re interested in joining the Madness click here. regularly posts content from a variety of guest writers across the games industry. These encompass a wide range of topics and people from different backgrounds and diversities, sharing their opinion on the hottest trending topics, undiscovered gems and what the future of the business holds.