Venture funding raised $553 million across 97 rounds in Q4 2022, representing an 83% year-on-year decline, according to Konvoy's 2022 Gaming Industry Report.
North America was identified as the largest VC market of 2022, generating $1.9 billion across 174 deals over the course of the year, representing a 64% fall in total deal value compared to 2021 which saw $5.4 billion over 192 deals.
The North American market saw VC investment raise $198 million over 34 deals in Q4, making it the year’s least active quarter. This represents a year-on-year decline of 89.6%. Notably, while Q4 2022 was the North American market’s smallest quarter in terms of VC investment, Q4 2021 was the biggest of the year in terms of both ($1.9 billion) and number of deals (71%).
Asia was the second biggest VC market of the year, with $1.85 billion over 243 deals.
In total, Konvoy reports that the gaming market rose 2.3% year-on-year to $184.4 billion. The group is forecasting significant growth in the coming years at a rate of around 8.94%. The market is set to exceed $201 billion in 2023, and reach $283 billion in 2027.
Despite this, Konvoy notes that 2021 represented an anomalous year for VC investment. This falls in line with other sectors of the gaming industry, which saw a significant rise in revenue due to Covid forcing consumers to seek out new forms of entertainment, with mobile gaming leading the charge.
Monetisation is getting harder
The report highlights the struggles facing mobile monetisation. While it concedes that mobile is the largest distribution channel for games, representing 64.4% of the 2021 gaming market ($116 billion of $180 billion), data regulation has imposed significant barriers on ad targeting. This has led to a higher cost-per-install.
Konvoy suggests that mobile game makers will need to compete in terms of quality, as opposed to how efficient and optimised their UA channels are.
Several genres of games may experience a greater hit due to the changes in monetisation strategies. Konvoy reports that hypercasual, which sees 94% of its revenue come from ads, will be hit particularly hard. Word (80%), board game (70%), arcade (67%), trivia (60%) and sport (56%) also see the majority of their revenue come from advertising, as opposed to in-app purchases, suggesting that recent changes will also come as a significant blow to these genres.
In contrast, genres which see a smaller proportion of ad revenue, such as RPG (19%), action (23%) and adventure (24%) may prove more resilient due to their higher focus on in-app purchases.
Only two markets see the majority of mobile gaming revenue come from ads: China (59%) and Japan (56%). While hypercasual leads the way in terms of downloads in Japan, the genre struggles to engage players long-term compared to others.
