Mobile Gaming Industry Analysis: Past Performance and Future Outlook
The mobile gaming sector, while highly profitable, is not immune to decline. While there are predictions of significant growth in the coming years, it is important to analyze the industry’s past performance. According to a new report by AppsFlyer, the global app install ad spend has been influenced by various macroeconomic factors over the years.
Impact of Apple’s ATT Framework
One important factor affecting the mobile gaming market was the release of Apple’s ATT framework. This framework affected marketers’ ability to optimize their campaigns on the app store. They were forced to shift their focus from user level data optimization to aggregate data, resulting in a downturn in ad spend. According to Alex Gurevich, the managing director of Javelin Venture Partners, this shift raised customer acquisition costs by up to 60%, making it challenging for small merchants, online brands, and local SMBs to acquire customers efficiently. Although marketers have gained confidence in ATT with the implementation of alternative measurement solutions, activity on the app store has not reached previous levels.
Impact of Covid-19 Pandemic
The release of Apple’s ATT framework coincided with the Covid-19 pandemic, which caused a significant boom in the mobile market. People turned to their phones for entertainment, leading to aggressive user acquisition campaigns by mobile apps. However, this momentum could not be sustained after the easing of lockdown restrictions worldwide. AppsFlyer estimates that without the introduction of ATT, app install ad spend could have been even higher during this period.
The Downfall and Recovery
The report highlights that in addition to the effects of Covid-19, the latter half of 2022 experienced a global economic downturn and rising inflation rates. These factors had a significant impact on the mobile market, forcing many apps and games to cut their marketing budgets. Furthermore, the global shock caused by Russia’s invasion of Ukraine resulted in economic sanctions and market volatility. Businesses had to relocate, and supply chains were disrupted. Overall, the market fell by 5% compared to the previous period.
During the first five months of 2023, the market continued to decline, falling by 20% compared to the same period in 2022. AppsFlyer estimates that ad spend will drop by 6% this year, as the global recession shows no signs of ending. However, there is hope for recovery, with a projected 7% year-on-year growth in 2024 and a further 13% growth in 2025.
Regional Insights
According to the report, North America accounted for the majority (38%) of app install ad spend between January 2022 and May 2023. This highlights the value marketers worldwide place on the North American market, as well as the high average value of users in the region. Asia Pacific, a region with diverse mobile-first markets such as China, India, and Southeast Asia, accounted for 34% of the total app install ad spend, while Europe accounted for 20%.
Interestingly, Latin America and the Middle East and Africa, two of the world’s fastest-growing mobile markets, had the lowest share of app install ad spend at 6% and 2% respectively. This suggests that despite their potential for explosive growth, marketers still prioritize markets that already have a significant mobile presence.
Signs of Recovery
Despite the downturn, there are early signs of recovery in the mobile gaming industry. While some of the biggest companies in the mobile games space reported year-on-year revenue losses in 2022, notable names reported significant growth in the latter half of 2022 and the first quarter of 2023. Tencent, for example, experienced an 11% year-on-year increase in Q1 2023, compared to a 0.5% increase in Q4 2021 to Q4 2022.
Future Outlook
The report predicts that app install ad spend will reach $94.9 billion in 2025. This indicates the industry’s potential for continued growth, despite the challenges it currently faces.