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The first few years of the iOS App Store were, to use Silicon Valley’s most loathsome buzzword, disruptive. Game companies that once had only a faint footprint, like King (founded 2003) and Rovio (2005), or didn’t exist at all, like ZeptoLab (2009) and Supercell (2010), became bona fide juggernauts, pulling in billions of dollars in revenue.
It’s less clear, though, whether the next Kings and Supercells will be able to climb the charts in the maturing market. Install ad costs are rising and the companies that already have both dough and visibility are spending both to keep those installs and in-app purchases flowing.
Case in point: Supercell, which grossed $5.15 million on one day in February this year, according to screenshots taken by a Syrian hacker. The Finnish company currently has three apps in the iPhone top-10-grossing chart: Clash of Clans, Hay Day and the newly released Boom Beach; the success of the first two paved the way for the third.
King similarly has three games, Candy Crush Saga, Farm Heroes Saga and Pet Rescue Saga, in the top 11. According to its IPO filings with the SEC, the company spent $376.9 million on sales and marketing in 2013.
Those empires will not topple easily, said Keith Katz, co-founder of mobile game incubator Execution Labs. Games need “incredibly good viral channels” built-in at launch to spread on their own, and the companies that can afford to test their games’ virality ahead of launch have (surprise!) either deep pockets or already-popular games.
Without the money or clout to test effectively, some games try to buy their way up by spending heavily on those paid install ads. But in a talk at this year’s GDC, Benchmark partner Mitch Lasky said the fact that the established winners can spend so much on user acquisition makes relying on install ads a risky strategy for new companies.
“You just cannot create sustainable competitive advantage around the flywheel of paid acquisitions, because there’s always someone willing to run their model closer to the bone than you,” Lasky said. “As Jeff Bezos said, your margins are my opportunity.”
One alternative that often comes up in discussions with developers is trying to get featured by the App Store’s editors, which has been shown to juice downloads. However, the calculus there may be shifting as well. The Wall Street Journal reports that EA and ZeptoLab negotiated two- and three-month App Store exclusivity deals for Plants vs. Zombies 2 and Cut the Rope 2, in exchange for prominent featuring of the games in the store.
Even if, as the article suggests, games don’t directly drive hardware purchases, this sort of deal is a no-brainer for both parties. The developer gets more downloads on the best-monetizing mobile platform, and Apple gains the perception, at any given time, of having more, better, newer stuff than its chief rival, Android. It may be bad, though, for the small game company that wants to get featured but doesn’t have a hotly anticipated sequel in its pocket.
Cupertino has a solid track record of promoting paid independent games, even though the prevailing business model on the App Store is free-to-play, with an eye toward weird and artsy titles. Last month, it launched an “Indie Game Showcase” to spotlight iOS exclusives from Simogo, but Gamasutra reports that the benefits of the showcase wore off quickly.
For indie game makers, then, there are three options left if paid installs and featuring won’t work: Form an alliance with other developers to cross-promote each other’s games; work with a publisher to get better marketing and App Store visibility; or, maybe, just aim lower.
Katz said that the next unknown games may be better off trying to make a go farther down the charts rather than squaring off against Candy Crush and Clash of Clans. The mobile install base is large enough that there’s plenty of money up for grabs farther down the long tail.
“I think money is flowing down the charts,” he said. “And I don’t think that was always the case.”