Source: Ten Square Games

Established back in 2011, Ten Square Games (TSG) is a mobile games publisher based out of Poland. Interestingly, their name refers to the 10-square-meter apartment the company was started out of! It was founded by Maciej Popowicz and Arkadiusz Pernal, who had previous started the Nasza Klasa social network. Today, TSG is a publicly traded company on the Warsaw Stock Exchange and remains relatively under the radar versus other key industry players.

Since TSG’s May 2018 IPO, the company’s stock had quite a strong run and more than 5x’d by the end of 2020. While some of this can be attributed to the more macro gaming public market frothiness occurring over 2020, the stock has since them plummeted back to its early 2020 levels and TSG’s market cap is down -65% YoY. But, is all of that attributable to the general gaming public market correction that’s currently taking place or is TSG fundamentally struggling as a business? Let’s take a look.

If I was to summarise the issues with TSG in one slide, it’ll likely be the one below. There are three key takeaways here:

  1. Stagnating growth: Company bookings have generally remained flat since mid-2020, which likely means TSG is hitting a UA scaling ceiling across various key titles. Not only is IDFA rearing its ugly head again, but also “fishing/hunting” can be pretty niche themes on a global scale - and both are likely making TSG hit that UA ceiling faster.
  2. High concentration: 73% of TSG’s bookings are highly concentrated in one product - Fishing Clash, which has been TSG’s cash cow since they went public in 2018.
  3. Decelerating product performance: Fishing Clash has clearly been losing its steam over the course of the past year, and this can be seen below since Hunting Clash has been increasing bookings contribution while overall bookings remain flat. That said, Hunting Clash’s bookings trend has also generally remained flat over 2021, which might mean it’s hitting a UA ceiling of its own.

On the decelerating product performance point above, it should be noted that there are two contributing factors. First, UA scaling woes due to IDFA are likely significantly contributing to TSG’s inability to acquire new users. Due to their niche appeal and respectable LTVs, both Fishing Clash and Hunting Clash are dependent on whale-targeting UA tactics. As can be seen in the slide below, the marketing spend numbers have generally been dropping for Fishing Clash, which means they’re not able to hit profitability on their UA spending. And even though their ABPU (average bookings per user) has been slowly climbing, it is happening in conjunction with a dropping MAU, which means the game is reaching its core paying fan base faster.

Second, TSG reaching its core paying fan base faster also means that the products are struggling to retain newly acquired audiences for longer periods of time. While TSG does not publicly release any game retention figures, our data partner Sensor Tower can provide some insight. On comparing TSG’s games to Golf Clash (a best in class product), the medium to long-term retention difference cannot be more obvious.

Source: Sensor Tower

Interestingly enough, TSG’s games match (and even outperform) Golf Clash on an ARPDAU (average revenue per daily active user) basis, which means TSG is doing a great job at monetising its core audience through various live operation activities. This is not a point to brush over though, since it showcases one of TSG’s key strengths in the industry - high performing live operations. To put that in context, TSG was able to improve Fishing Clash’s ABPU by 40x between 2017 ($0.10) and 2021 ($3.59)! Hunting Clash has a similar story with a 25x increase in its first 80 weeks after global launch. That is no small feat, and the picture of Fishing Clash’s development roadmap below shows why.

Source: Sensor Tower

With all that context, what can the company do to combat this generally concerning business performance? I see four paths forward.

  1. TSG needs to focus on bringing its core portfolio back on track: Fixing fundamental medium to long-term retention issues with any product is never easy, but it is not impossible either. It is quite likely that TSG applied Fishing Clash’s product playbook to Hunting Clash, which is why we see similar retention and monetisation performance trajectories for both titles. There is clearly a retention problem in these products, and fixing the same will require a mix of redesigning the metagame, relooking at economy balancing and rethinking live-operations. The last of those three will probably be the hardest pill for TSG to swallow, given how proven they are with their live-operations formula. But, something clearly needs to change, and change fast.
  2. TSG should start considering revenue source diversification for its core portfolio: Both Fishing Clash and Hunting Clash are mobile-first products, but their high average age target audience definitely leaves the door open for having a desktop SKU. Companies like Scopely (with Star Trek Fleet Command) and Plarium (with RAID) are making similar moves, and it is a great way to side-step some of the IDFA issues. Further, TSG can consider boosting ad revenue contribution to its top line. Currently, TSG makes <5% of its revenue from ads. But there is no reason for fishing and hunting games to not have ads, and if TSG’s live-operations prowess is any indicator, ad revenue performance has a high chance of growing into a thick revenue line.
  3. TSG needs to accelerate investing into and launching new game projects, either through building original IP or IP licensing: Not only is this because of Fishing Clash’s decelerating performance, but also because TSG knows how build, live-operate and scale new games. It now needs a game plan to fight against IDFA and building/working with strong brands on strong IP is one way to do it. Further, new game projects would be a great way to reinvest all their learnings around how to operate effectively in a privacy-first world.
  4. TSG could additionally consider more M&A, and plug new teams into their live-operations and UA engine: While I wouldn’t rate this as the highest priority strategy (in part due to the current cash position and a pretty fierce M&A market), it nevertheless does remain an avenue with not insignificant opportunity to be gained. Most recently, TSG acquired Rortos (all cash deal) - the developer behind Airline Commander. And it also seems like they’ve plugged the product into their processes. Even though this might not be a majorly needle moving acquisition, TSG could consider doing more of these small bets (on both individual games and entire companies) and eventually build up a significant cash balance that is ready to deploy for a big move. Further, this will also allow TSG to buy more time and let their stock recover, which can then be used and currency in M&A dealings.

All in all, mobile F2P developers can learn a ton from TSG’s live-operations and UA excellence. But to move to its next stage of growth, TSG really needs to rethink many fundamentals across its product strategy. I feel if that doesn’t happen soon, there is a chance that TSG will end up being the one getting acquired.

This essay was written by Abhimanyu Kumar.

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