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#1:  Huuuge Games Celebrates Its Most Profitable Quarter Ever

Huuuge Games recently announced its Q3 earnings, which reported record high profitability with EBITDA of $24.5M (a 32% margin), and the prevailing narrative in the media is that the company is seeing huuuge growth (forgive the pun!). In our April 21st update, we wrote about the appointment of Rob Cousens as co-CEO, the struggles Huuuge was facing, and how its “Build & Buy” strategy was faring. Is this Q3 result an indication that the tide is turning, or is it merely smoke and mirrors for Wall Street? Let’s find out.

This chart of Huuuge Games’ quarterly revenue and EBITDA shows that, like many other publishers, it enjoyed a nice pandemic revenue bump which has since fallen back to pre-pandemic levels. The massive dip in EBITDA in Q3 and Q4 2020 was due to investment into new products and marketing spending for its new franchises, such as Traffic Puzzle and Star Slots (part of its Build & Buy strategy). “New” here is relative as Traffic Puzzle was released in April 2019 and Slot Stars in January 2020. The company uses this term to differentiate from its core products — Huuuge Casino Slots and Billionaire Casino Slots, which were released in 2015 and 2016, respectively.

What we see is that revenue has remained relatively flat even after its big investment in 2020. Meanwhile, EBITDA is trending up; putting these two things together leads us to believe that Huuuge’s Build & Buy strategy is not working and the company is shifting towards optimizing for profit instead. This pivot in strategy was highlighted in a Q2 earnings slide, as seen below. Notice the steady reduction in UA for its core franchises since Q1 2021, which has historically formed a large chunk of Huuuge’s cost of revenue. In other words, Huuuge is simply choosing to be more profitable since reinvesting into UA growth isn’t providing the same level of ROI it used to — not exactly the same positive spin the headlines would have you believe.

How has Build & Buy failed?

• There have been no new acquisitions since Traffic Puzzle in April 2021 (though it did recently invest in Flick Games).
• There have been no successful in-house releases since Slot Stars in January 2020. Its latest game, Dominos Party, launched in June 2020 and has crawled to a lifetime revenue of $330K.
• Its most successful published game, College Love Game, has only reached $1M in lifetime revenue since being launched in August 2020.

Traffic Puzzle remains Huuuge Games’ only opportunity to grow, and it has recently been making architectural changes to the game in order to spearhead that growth. It is also doubling down on the IP, building it up into a multi-product franchise, with the new addition expected in Q2 next year.

Why invest in Traffic Puzzle? As we can see below, Traffic Puzzle has strong early engagement comparable to Candy Crush Saga but fails to retain players over the mid- and long-term. It also does not monetize as well, with an RPD of $3.38 vs $7 for Candy Crush Saga. Hence, the plan to improve Traffic Puzzle’s retention, monetization, and social layers should mean that, if it is executed well, Huuuge will be able to find significant upside in Traffic Puzzle.

In last week’s update, we mentioned that using a casino playbook on a casual game may not work due to the difference in demographics. Here, Huuuge does have an advantage, as according to data.ai, Traffic Puzzle’s demographic skews towards female (~63%) and older (~53% are over 45). This maps pretty well to its top product, Huuuge Casino, which also skews towards female (~53.6%) and older (~63% are older than 45). If you’ve played Traffic Puzzle, this wouldn’t be a surprise, as even though it is Match-3 by genre, it is much more cerebral since you have to take into consideration directionality when making your moves.

According to the information above, it appears that Huuuge has put its Build & Buy approach on pause, at least for the short-term. On the “Buy” side of things, the M&A market has slowed down considerably, with H1 2022 seeing half the number of deals as the year before, as seen in this chart from a report by InvestGame. On the bright side, Huuuge does have a healthy cash position of $188M (nearly half of its market cap) which it could use to make future acquisitions when market dynamics are more amenable.

For now, Huuuge is concentrating on maximizing the profit on its core titles and focusing all of its growth efforts on Traffic Puzzle (publishing was noticeably absent in the Q2 earnings presentation). Time will tell whether Huuuge can carry out this strategy and expand, with Traffic Puzzle as the spearhead. We’ll be watching.

Game Launch Radar

#1: Relic Strike

• Publisher: Square Enix
• State: Early Access
• Territories: New Zealand and Australia (Android Only)
• Classification: Casual - Arcade - Shoot ‘em Up

• Quick thoughts:

  • This is Square Enix’s take on Archero, and it takes the same formula while adding a sprinkling of innovation on what is now becoming a subgenre of its own (Archero-like?). Unlike its source of inspiration, you have three party members that you switch between, which introduces greater tactical depth to the gameplay. Each character also has a special move that needs to be charged up by attacking and is triggered via double tapping. You can check out the gameplay video here.
  • Other twists that have been added are an idle component, with characters continuing to earn rewards while the player is offline, as well as a saga map. Whether all of these changes will breathe life into what is a tired subgenre is still up in the air. In my opinion, there needs to be greater structural changes to the game, including a deeper metagame, and it’s unlikely that this title will buck the trend of failed Archero clones.

#2: Torchlight: Infinite

• Publisher: XD Inc.
• State: Open Beta
• Territories: Global
• Classification: Midcore - RPG - Action RPG

• Quick thoughts:

  • XD has billed this as the anti-Diablo-Immortal and is selling the narrative that it is not pay-to-win and will have less egregious forms of monetization. There are many sponsored posts on social media, such as this one from Rhykker and this one from TheLazyPeon, that claim it has no predatory microtransactions. You can check out the gameplay video here.
  • Recently, that narrative has been falling apart. An analysis by McFluffin Gaming has refuted these claims, estimating that ~30% of a character’s power comes from the pet system (upgraded via a gacha mechanic) and that players will need to spend around $30K to maximize their pets. This analysis has been picked up by popular streamer Asmongold, and we might see the same happenings as when articles about Diablo Immortal’s monetization tactics exploded over the internet. It has caused content creators to scramble to make new videos explaining this misconception, like a newer video from Rhykker that retracted his previous statement.
  • Reviews of the gameplay are also mixed, with some cautiously optimistic and others slamming how lackluster its combat feels (a no-no for ARPGs). This combination of purposeful misdirection and unsatisfying gameplay means that Torchlight: Infinite has an uphill battle to convince players to switch from Diablo Immortal to a game that feels worse and has the same “predatory” monetization systems.

Other Game Announcements

• XD’s T3 Arena is now available on the Google Play Store. It was previously exclusive to the TapTap store. Link
• Mario Kart Tour has been downloaded over 200M times and earned over $220M to date. Link
• Square Enix’s Final-Fantasy-themed battle royale, Final Fantasy VII: The First Soldier, will close down in January 2023. Link
• Ragnarok Begins, a side-scrolling MMORPG in the Ragnarok universe, begins closed beta testing. Link
• Candy Crush Saga celebrates its 10 year anniversary with a 24-hour exclusive reveal of Meghan Trainor’s latest single. Link
• The South Korean government increases the age classification of Blue Archive by Nexon and Fate/Grand Order by Netmarble from 15+ to 18+ due to its sexual content. Link

Company Announcements

• Riot Games acquires Wargaming Sydney to leverage its expertise in live operations infrastructure. Link
• Take-Two closes Playdots just two years after acquiring the studio behind Two Dots. Link
• Playstudios acquires casual game developer Branium for $70M. Link
• Homa raises $100M in a Series B to scale up its business. Link
• Huuuge Games celebrates its most profitable quarter ever. Link
• Sandsoft Games opens up flagship studio in Riyadh. Link
• Savvy Games Studios hires Ubisoft veteran Peeyush Gulati as VP of Production. Link
• Turkish Studio Umuro raises $1.7M from investment firm Keiretsu Forum Turkiye. Link
• Anuj Tandon, the head of corporate development at Krafton India, leaves the organization. This comes after the company's Head of Publishing left earlier this year. Link
• Former Square Enix mobile developer Square Enix Montreal rebrands to Studio Onoma, following its acquisition by Embracer Group. Link
• Colopl, the Japanese developer behind Disney Tsum Tsum, opens Android pre-registrations for its anime-themed golf game, Neko Golf. Link

Ecosystem Announcements

• FunPlus and KingsGroup face a class action lawsuit against their false discount schemes in State of Survival. Link
• 20 mobile studios will be donating a portion of their UK profits to charity Special Effect. Link
• NetEase makes an investment in third-party game art company Star Painters. Link
• Tencent is ordered to pay Moonton 220K Yuan ($31K) in damages after being found guilty of defaming the company. Link
• The UK regulator Competition and Markets Authority raises significant concerns regarding the Activision Blizzard and Microsoft deal. Link
• Iran blocks Clash of Clans in fears that users are using its chat feature to coordinate protests. Link
• Esports is removed from the 2026 Commonwealth Games as a medal event due to concerns regarding doping and lack of interest. Link
• Netflix’s ad-supported subscription tier will give free ad-free access to its games library. Link
• Apple Search Ads tripled its market share as incumbents such as Google and Meta struggled. Link

Content Worth Consuming

• For The Game - The Ascent of Gaming, a Unique Opportunity for Brands (Dentsu): “Applying eye-tracking technology to an in-game advertising campaign for a leading food brand, the research aimed to measure the attentive seconds per 1,000 impressions, a composite measure factoring percentage of impressions seen and average view time. As shown on the opposite graph, intrinsic in-game advertising attentive seconds per 1,000 impressions were similar to social platforms in-feed video ad formats and outperformed social platforms in-feed image ad formats. Only full desktop skin performed significantly better due to the far greater size of the format. Nearly one in five participants were able to recall the brand on a spontaneous level whilst 1/3 of participants successfully recalled the brand when prompted.” Link
• Reaching A +40M Playerbase: Advice From Trihex Studios (GameAnalytics): “Unless you’ve been living under a rock for the last few years, you’ve probably heard of Roblox. It’s a gaming platform with over 30M games – which it calls experiences – 52M daily active users (DAU), and 12M creators at the time of writing. One of the keys to its success is that it makes it exceptionally easy to create and release games on its platform. We spoke with Tae Kim and Eric Park, co-founders of Trihex Studios and the minds behind Redcliff City, one of the most popular titles on Roblox, which has, this year alone, amassed a community of more than 40M unique players. During our conversation, we asked them what mobile developers could learn from Roblox and how they could make the move over to the platform.“ Link
• Why Renovation and Construction Elements Are Becoming More Popular in Casual Games (GameRefinery): “If we take a look at the main player motivations for casual games, we can see that completing milestones (mastery) and customization and decoration (expression) are two of the main drivers. Construction and renovation elements in casual games directly appeal to both of these key motivations. Players can express themselves by renovating and decorating a game environment (usually a room or property) with specific pieces of furniture to their individual tastes. Once the players finish decorating, they get to reflect on what they’ve achieved (usually a much tidier and better-looking environment!) and feel a sense of accomplishment.” Link
• Clash Quest, The Unofficial Postmortem (Deconstructor of Fun): “After 16 months in soft launch, Supercell’s Clash Quest has reached the end of its run. The game has not achieved the business objectives set by Supercell, and it will shut down. Following an excellent postmortem by Laura Taranto, Javier Barnes, and Anette Staloy, host Ethan Levy sits down with the writers to discuss what went wrong and potential areas of improvement for Clash Quest. We discuss the writers’ experience playing and interacting with the Clash Quest community over the past year and a half, what they enjoyed about the game, and why they think the game was not able to meet its retention and monetization targets.” Link