Xsolla has released a new report examining the state of the mobile gaming industry this year.
It’s no secret that mobile is the world’s most profitable gaming platform, however it is still somewhat vulnerable to market conditions. Mobile ad spend is projected to reach $362 billion globally in 2023, representing the sixth annual year of growth, however this growth is slowing significantly. 2020, the first year of the pandemic, saw 26.3% growth, while year-on-year growth in 2023 is expected to hit 7.4%. Meanwhile the last six years have seen ad spend increase at a compound annual growth rate of 18.5%.
Despite recent turbulence in the country’s market China remains the world’s biggest mobile-first nation, with user spend projected to hit $42.4 billion, according to Adjust’s 2023 Mobile Market Report. This is followed by the USA ($24.02 billion), Japan ($13.1 billion), South Korea ($5.28 billion), and Germany ($2.47 billion).
Xsolla notes that regulatory changes regarding user privacy has impacted revenue streams for developers throughout the mobile industry, and forced developers to reevaluate their monetisation strategies. 66% of countries worldwide have privacy legislation in place, including mobile-first markets such as China, India, and Brazil. A further 10% of countries are drafting legislation while 19% currently have no legislation in place, including several countries in the key MENA region.
The changing privacy regulations have also had a significant impact on targeted advertising, with even industry giants such as Apple being forced to adapt, with developers struggling to bring their games to the attention of their target audience or obtain actionalbe information of their users.
From hypercasual to hybridcasual
Perhaps the hardest hit of all genres is hypercasual, which has historically relied heavily on in-app advertising for monetisation. With trends in monetisation shifting towards in-app purchases, hypercasual games have seen a decline in popularity as they struggle to adapt, while both hybrid and casual games have surged in terms of both sales and downloads. Despite this, in-app purchases have also seen a decline in popularity, producing reducedprofits, suggesting that developers of free-to-play may struggle should they rely solely on any one monetisation stream.
Independent developers also face additional hurdles, with Xsolla noting that the regulatory changes necessitate engagement with third parties to ensure compliance with the regulations,
Despite these challenges, ad monetisation remains a core concern for developers in the mobile industry. Adopting a direct-to-consumer strategy with an emphasis on user engagement and community feedback has proven to be an effective method of garnering the necessary information to effectively advertise while remaining in compliance with regulations.
Furthermore Xsolla predicts stricter privacy regulations in the coming years, with Apple and Google potentially introducing new restrictions on data collection and storage restrictions, which will require developers to adapt to new rules on the fly.
Despite these changes, the long-term outlook for the mobile gaming industry remains positive. In particular, web stores have become increasingly popular as a means to avoid platform commissions, allowing game makers to retain a higher proportion of revenue.
Additionally, there has been a steady shift towards a hybridcasual business model, as well as the development of social mechanics, allowing users to engage with mobile games in new ways.