Top News
#1: Playtika Invests $25aM in Turkey’s Ace Games
Playtika finalized a $25M minority investment in the Turkish mobile game company Ace Games. Though unlike most minority investments, information from the press release suggests that Playtika may be slightly more hands-on in the relationship, as evidenced by two key statements made:
- From Playtika CEO, Robert Antokol: “The talented team at Ace has built a best-in-class and innovative product on the ‘Match-3 and Meta’ game model. Playtika can greatly complement Ace with our LiveOps and Digital Studio capabilities, leveraging our enhanced monetization and game operations leadership in mobile gaming.”
- From Ace Games' founder, Hakan Bas: "Playtika can greatly complement Ace with our LiveOps and Digital Studio capabilities, leveraging our enhanced monetization and game operations leadership in mobile gaming.”
The “LiveOps and Digital Studio capabilities” clearly refer to Playtika's Boost Platform, which we covered in our September research essay. Playtika uses this platform, which includes live-ops, UA, and automation, to extend the life of not only its own games, but also the games of other acquired and partner studios. And the platform is proven given the scale that games like Solitaire Grand Harvest, June's Journey, and Bingo Blitz have achieved over time. Ace Games’ products are likely next on the list.
In terms of why Playtika considered the minority investment, there are a few points. First, Peak Games co-founder, Hakan Bas, leads Ace Games. Other key team members are also highly proven industry veterans from other casual game studios, such as Dream Games and Playrix. All this knowledge and experience will not be leveraged for the development of just one game but likely an expanded portfolio of titles in the future. In other words, it’s a safe bet on paper from the team behind the company lens.
Second, Ace Games' portfolio consists primarily of Fiona Farm, and it is performing quite well! The game is similar to Lily's Garden but with a Blast core gameplay, various Puzzle & Decorate metagame features, and topped off with farming elements to additionally expand the metagame. Here's a video of the gameplay. Hakan Bas is most definitely reinvesting a lot of his Peak Games knowledge around building and scaling top-grossing games like Toy Blast and Toon Blast back into Fiona's Farm, and the game is showing very promising results so far, although it is still in its early stages:
- Revenue is steadily increasing despite relatively constant downloads. That of course points to revenue growth being driven by better in-game user monetization versus revenue scaling through downloads scaling.
- The game’s RPD is already rivaling that of its key competitors in the first month, which means Ace Games now just needs to figure out the right scaling formula (potentially with Playtika).
More broadly, it would be good to ask why Playtika is even allocating cash to outside minority investment deals versus reinvesting the same internally (in new game development, for example)?
As evidenced by its most recent earnings report, the company has clearly struggled to grow revenues aggressively after going public. The post-IDFA era has had a significant impact on Playtika's traditional casino portfolio (due to reduced UA targeting and retargeting capabilities), which is why its casual portfolio has grown in revenue share. Additionally, Playtika has generally struggled with launching new hit games through both its own and acquired studios. One of the last big releases was Switchcraft, which hasn’t panned out as Playtika probably hoped for.
Overall, Playtika is struggling to grow organically, and therefore needs to explore more inorganic growth opportunities. Based on all the data above, our guess is that Playtika truly believes in Ace Games’ flagship app, Fiona's Farm, and is confident in its abilities to help massively scale the game over the long-term through its Boost Platform.
It should also be noted that Fiona’s Farm not only has promising early metrics but also positions itself in a market that has yet to be fully explored — Puzzle & Decorate meta with a Blast core. In other words, very few Blast games include meta-mechanics, which is precisely the gap Fiona's Farm is trying to fill.
However, except for Lily's Garden, the Blast meta games on the market right now generally have lower long-term RPDs versus their Match-3 counterparts. While Lily’s Garden tells us that it doesn’t need to be that way, it is worth keeping in mind that Blast meta games are generally unproven in the market. In other words, it’s definitely encouraging to see Fiona’s Farm’s strong early metrics, but it remains to be seen if both Ace Games and Playtika can scale the business successfully long-term.
With that backdrop, another key question to ask is, why Playtika only considered a minority investment at this point versus a full acquisition, as it has done with other companies in the past? We can only speculate of course, but here is our thinking: looking at Playtika’s previous acquisitions, it has generally showcased a trend of purchasing highly proven game studios with at least one long-term cash cow title. This can be seen in its acquisitions of Supertreat, Wooga, and Reworks. Ace Games needs some time to get to this point.
Another potential reason could just be Ace Games not willing to relinquish control so early in its journey. That said, agreeing to a minority investment deal could be a great way to already have a potential exit plan option on the cards. If things run smoothly, an investment now could open the doors for a complete acquisition in the future.
Finally, why would Ace Games select Playtika as a partner? We’d guess it’s a mix of Ace Games wanting to accelerate faster than the competition and find a more hands-on investment partner that brings more than just capital to the table. Ace Games raised a seed round of $7M, similar to Dream Games, and this $25M minority investment could’ve very well been a Series A in some regards. On top of that, Playtika brings its Boost Platform — proven experience with live-operating and scaling games in similar genres — and a potential long-term exit strategy to Ace Games’ table. All of that sounds like a huge value add versus raising a traditional Series A from VCs and diluting the cap table purely for access to growth capital.
Having said that, this is still a small investment in the larger scheme of things, it’s still quite early, and there is a lot of ambiguity about whether a full acquisition will materialize in the future. Meanwhile, Playtika and Ace Games will have to put their new relationship to the test before deciding whether to tie the knot in the future.
#2: Zynga’s Rollic Buys Popcore
Rollic, Take-Two Interactive's hypercasual business, completed the acquisition of Popcore, a German hypercasual studio, on November 17th, 2022. Although no transaction prices were disclosed, Popcore's position as the market's 22nd largest hypercasual studio would make it the largest acquisition by Rollic to date.
Popcore specializes in the hypercasual puzzle segment and has also experimented with hybridcasual games. Scavenger Hunt, its most recent title, is a hidden object game that blends features of hypercasual games (simple gameplay, low-budget production) with aspects of casual games (deeper metagame, IAP + ads hybrid monetization, live-ops). The game is currently the top downloaded game in the hidden object subgenre and is Popcore's top-grossing title on a net IAP revenue basis.
This acquisition pretty much solidifies Rollic’s position as the fourth largest Hypercasual company (by downloads), and the move has some key underlying advantages.
As we discussed before, although Rollic experienced tremendous growth following Zynga's acquisition, it does appear to be slowing. Over the past year, it only released 17 new titles (slightly low versus the pace at which new titles are tested and released by the top 3 hypercasual publishers). This has resulted in declining downloads and consequently ad revenues.
Of course, this downward trend isn’t the best way to stay relevant to Take-Two Interactive long-term. Therefore, Rollic is likely under some pressure to find new ways to generate both downloads and revenue growth at similar pre-Zynga-acquisition levels.
The organic growth path would basically involve releasing more hypercasual titles and/or following market trends in a post-IDFA world and evolving into a hybridcasual games publisher. The latter is a path that many hypercasual publishers are starting to put more focus on, as can be seen with Voodoo’s studio expansion moves and Homa Games’ new game releases. Rollic too has tried its hand at hybridcasual with Blob Hero, as discussed in our September update. While it resulted in a spike in IAP revenue at the time for Rollic, one game isn’t enough, and neither has it sustained IAP revenues in the same way other successful hybridcasual titles have, such as Archero, Mr. Autofire, Art of War, or Surivor.io. Therefore, there is a need for Rollic to quickly find the talent that can produce, release, and live-operate such hybridcasual games going forward, since the skillset required there doesn’t fully overlap with the one to be a successful hypercasual games publisher.
A quick way to find proven hybridcasual talent is of course through M&A, so Popcore seems like the right fit through that lens, and Scavenger Hunt is showing the early success to back it up. Further, acquiring Popcore also means acquiring downloads and a large userbase (currently estimated at 20-30% of Take-Two’s entire mobile presence) whose data can be shared, and players can effectively be cross-promoted between titles.
Overall, it remains to be seen whether Popcore can scale its hybridcasual efforts even further following the Rollic acquisition and help contribute Rollic’s overall growth within Take-Two in the coming quarters.
Game Launch Radar
#1: Talking Tom Time Rush
- Publisher: Outfit 7
- State: Soft Launch
- Territories: Thailand, Israel, Colombia, Ukraine
- Classification: Casual - Arcade - Platformer (Endless Runner)
Quick thoughts:
- Talking Tom Time Rush was supposed to be a sequel to Outfit 7’s previous platformer (more accurately, endless runner) game — Talking Tom Gold Run — which performed okay-ish although being pretty popular initially.
The gameplay of Talking Tom Time Rush is very similar to Talking Tom Gold Run, with some slight additions:
- It features a collectibles album and loot boxes, similar to My Talking Angela, leading to unlocking new characters.
- Score from matches played feeds into a progression bar mechanic with milestone rewards. This could be slightly tweaked in the future to include a light version of a battle pass mechanic.
- A less positive addition is the excess of interstitial video ads that are shown to players between matches right after the end of the onboarding. This is in stark contrast to other top endless runner games, such as Subway Surfers or Minion Rush.
- You can see a video of the gameplay here.
- More broadly, Outfit 7 launching Talking Tom Time Rush clearly indicates how it wants to continue doubling down on its Talking Tom IP expansion strategy, through taking bets on various IP genre fits in hope of finding a new major success.
- The endless runner subgenre is an obvious bet, but it is also a very poorly monetized subgenre, and games almost necessarily need large DAUs to justify a long-term business. It remains to be seen whether Talking Tom’s IP and Outfit 7’s in-house UA expertise can help with driving those large DAU numbers.
#2: Sword Art Online Variant Showdown
- Publisher: Bandai Namco
- State: Hard Launch
- Territories: Worldwide
- Classification: Midcore - RPG - Action RPG
Quick thoughts:
- Bandai Namco has launched Sword Art Online VS to celebrate the 10-year anniversary of the anime series. The mobile game is a new addition to the universe of Sword Art Online titles, both mobile and console, that Bandai Namco has launched in the past. As expected, the game targets the Japanese market.
- Similar to Honkai Impact 3rd, the game is a gacha-based action RPG experience where combat happens in an arena. The iOS RPD for Sword Art Online in Japan is expectedly much lower than that of Honkai Impact 3rd — $1.45 vs $45 — which pretty much showcases the long way this game has to go on its product optimization roadmap.
- Unlike Honkai Impact 3rd and other competitors, the game has problems with its performance outside of matches, and it can crash multiple times, so most of the reviews at the moment are focusing on this aspect.
- The game is still very bare-bones, as it lacks a deeper feature set (multiplayer game modes, competitive components, battle pass, etc.), but we’ll have to wait and see how the team develops the product going forward.
- You can watch a video of the gameplay here.
Other Game Announcements
- Japanese hit Memento Mori has earned over $40M in its first month. Link
- Too Hot To Handle leads Netflix’s December lineup. Link
- Hungry Shark franchise hits 1B downloads. Link
- Krafton reaches November update for New State mobile. Link
- Netmarble marks Seven Knights 2’s first anniversary with more special events. Link
- World of Tanks Blitz sees top Hollywood talent team up to promote Holiday event. Link
- Rovio adds first new Angry Birds character in seven years. Link
- Call of Duty Warzone Mobile surpasses 25M pre-registrations. Link
- Roblox is set to introduce age-appropriate recommendations with its new patent system. Link
Company Announcements
- Space Ape is ending development on Boom Beach: Frontlines. Read our research essay on Boom Beach: Frontlines to find out why.
- Four Square Enix Montreal games are shutting down in January. Link
- Riot axes Wild Rift Esports plans outside of Asia. Link
- Formation Games is a new studio with talent from the worlds of game dev and soccer. Link
- Devsisters saw declining revenue in Q3 as the market continues to normalize. Link
- Huuuge Games’ EBITDA is up 38.7% and ARPDAU is up 15.7% as active players spend more. Link
- Pearl Abyss sees revenue rise in Q3 2022, above Q3 2021. Link
- Netmarble celebrates 14.4% year-on-year increase in revenue. Link
Ecosystem Announcements
- The UK’s market regulator is investigating Apple and Google’s “effective duopoly.” Link
- FTC is reportedly considering a lawsuit against Microsoft Activision deal. Link
- Twitch updates measures to clamp down on child grooming. Link
- Tax credit to support game development launches in Ireland. Link
- Microsoft and Sony attempt to woo China's mobile devs with new investments. Link
- Bucking the downturn: Q3 daily active users and downloads are both on the up. Link
- Asia Pacific to generate 48% of 2022's global gaming revenue. Link
- Google Cloud partners with Indian startup SuperGaming to offer gaming engine to developers. Link
Content Worth Consuming
F2P Game Monetization: Good vs. Evil (GameMakers): “We discuss F2P monetization: good vs. bad practices, what is considered predatory, and what are the trends and likely future business implications. Our speakers include Eric Kress, Principal at Gossamer Consulting and popular podcast host on This Week in Games for Deconstructor of Fun; Tim Morten, CEO at Frost Giant Games, building an F2P RTS game, Stormgate, and how it will tackle F2P monetization; Ed Zobrist, lecturer at USC and former Head of Publishing at Epic Games. Finally, I also talk about how I am thinking about F2P monetization at Lila Games as we build an F2P shooter game, and from my experience having led development on the former #1 top-grossing 4X game King of Avalon.” Link
- Survivor.io & Top War: UA creative strategy masters (Matej Lancaric): “Survivor.io is evolving its creative strategy. Where do they get the inspiration? What is their creative strategy? What do others do after global launch?” Link
- Why Marvel Snap became a hit and for how long will it remain one? (Deconstructor of Fun): “It’s been a few weeks already since Marvel Snap was released globally, after a brief soft launch of 3 months. It quickly became one of the most downloaded games in multiple countries, including the US, which is no small feat for a collectible card game (CCG).” Link
- How Mobile Game Developers Are Using In-Game Collaboration Events to Boost Player Retention (Game Refinery): “If you’re looking for ways to improve player retention for your mobile game, hosting a collaboration event with a well-known franchise as part of your LiveOps might be the answer you’re looking for. Not only are collaboration events a great way to engage players, but they’re also a great way to boost your game’s monetization through the addition of new content, such as event-exclusive cosmetic items and collectibles.” Link
- Dramatic composition in midcore video creatives (Azur Games): “Storytelling, three-act structure, and archetypes are the chief tools of classic dramatic composition that have long since been used in advertising and cinema. But will they function when making performing video creatives for the mobile games market? Let’s observe the trends, methods, and tools that I apply in my work.” Link
- Special Edition: The Ultimate Game Economy Discussion (Mastering the Retention podcast): “Tom Hammond, CEO & Co-Founder of UserWise (https://userwise.io), chats with Javier Barnes, Kaitlyn Kincaid, and Hadrian Semroud about everything game economy design.” Link
