Top News

#1:  Playstudios Acquires Mobile Casual Game Studio Brainium

Playstudios recently acquired casual game developer Branium, which is its first acquisition of a studio outside of casino. The acquisition entails $70M in upfront cash and is contingent on the studio's performance up to December 31st, 2022. Brainium is behind several ad-heavy titles from the tabletop genre (Mahjong, Solitaire) and word subgenre, and it competes in the same space as the successful Tripledot Studios and MobilityWare.

This latest investment has been a long time coming for Playstudios. As discussed in our May research essay, most of the company's revenue comes from the slots subgenre where growth has been stagnant for the past two years.

The top players in the segment have been moving away from slots and investing in other genres, primarily casual. In light of that, Playstudios had already made some small attempts at portfolio diversification last year with the launch of My Vegas Bingo and the acquisition of Tetris, but nothing at the level seen in other casino companies. The acquisition of Brainium marks the first big step in Playstudios' growth beyond casino, but what is the rationale behind the decision, and what challenges will it face?

PlayAwards Expansion

Playstudios’ growth strategy relies on its cross-app real-life rewards system, playAWARDS. As the system incentivizes cross-play between different apps, expanding it out of casino could bring new, profitable users to the company's portfolio.

Brainium brings in a large number of active users, almost as many as the sum of Playstudios’ other apps. Brainium's users are not your traditional slots players and are slightly older. Nevertheless, there is still a good affinity between the tabletop games they consume and slots games. These users are also more likely to be enticed by PlayAWARDS' current benefits. Playstudios believes that there is a good synergy between Brainium products and its apps and that adding Brainium to the PlayAWARDS portfolio will generate value. However, as we’ll discuss in the next paragraph, we can foresee some clear risks.

The active users from Brainium are probably its biggest asset, yet Brainium has almost the opposite strategy compared to casino games — it has strong organic traffic and monetizes almost exclusively with ads. We could see this leading to challenges in successfully expanding PlayAWARDS:

• The users coming from Brainium apps will most likely not be spenders. Playstudios’ casino apps economy and ads monetization are not tailored to such users. They might churn before even being introduced to rewarded ads.
• Casino apps have high CPIs, and users coming from Playstudios’ core apps are probably expensive. When casino players are incentivized to go to other Playstudios apps, there is always a small chance that they might invest fewer resources in the main app. The revenue these users would generate in Brainium apps would be marginal and not compensate for the loss.
• Brainium games have economies that are more lenient to non-spenders. For that reason, players progressing in those games and winning PlayAWARDS points generates less value to Playstudios than its other casino apps.

Brainium’s Portfolio Growth

Brainium apps already boast a high number of active users and higher stickiness than the rest of the Playstudios portfolio (36% vs. 23%), and the success of MobilityWare and Tripledot points to a segment with high potential. However, a quick comparison between Brainium's biggest app, Solitaire, and the game's biggest competitors shows there is still space to grow.

Playstudios believes it can help Brainium grow its userbase by acquiring new users. Right now, Brainium has approximately 40% EBTIDA margins, giving it plenty of room to increase costs for user acquisition. This is an area where Playstudios can help as it brings in money and expertise from slots.

Brainium’s apps seem to have high engagement already, but there is still an opportunity to uplift ads monetization. At the moment, the apps are quite simple and lack features like daily rewards, missions, and events. These features could add ad placements for daily rewards and help improve ad revenue. Playstudios can leverage the learnings from slots apps to design new features in Brainium apps. Still, the company lacks expertise in ads monetization and might struggle to optimize the placement and frequency of rewarded ads.

In conclusion, the acquisition of Brainium falls in line with Playstudios’ aspirations of expanding its cross-app system. Brainium has apps with potential for ads revenue growth, which can diversify Playstudios’ revenue streams. In order to succeed, Playstudios will first have to learn to navigate in a different type of genre and monetization strategy, which has its risks.

#2:  Take-Two Closes Mobile Studio Playdots

In some unexpected news, Take-Two Interactive has confirmed that it is closing down its New York mobile studio Playdots in what is the company’s first post-Zynga acquisition action. The closure will affect the entire studio with its 65 employees beginning January next year, according to a notice filed to the New York State Department of Labor. While the move may come as a surprise, considering that Take-Two acquired Playdots just 2 years ago for $192M, we actually called this out in our May 26th market update, stating:

“Social Point, PlayDots, and Nordeus have all launched unsuccessful titles within the past three years in an attempt to diversify beyond their core games. With the Zynga acquisition, these studios may be pressured to deliver results sooner rather than later in order to stay relevant within the organization.”

But the question remains, why close Playdots? A surface-level check of its KPI shows that while downloads are below their 2014 peak, both downloads and revenue have been trending upward. This is primarily due to its flagship title, Two Dots, which is responsible for 74% of the company’s downloads and 94% of its revenue.

The choice becomes even more puzzling when one considers Two Dots' performance, as the game appears to be in good shape, with both downloads and revenue increasing after the acquisition. There is undoubtedly more to dig into here.

According to Data.ai, the US is Two Dots’ most important territory and is responsible for 37% of downloads and 73% of revenue. The key insight here, though, is that a large number of Two Dots downloads come from paid acquisition. We can see in the chart below, which compares organic vs paid US downloads, that the majority (66%) of the downloads are paid installs on iOS.

To determine whether Playdots is getting a good return on its advertising spend, we will contrast Two Dots' RPD with industry-wide CPI averages. Data.ai estimates Two Dots’ RPD to be $3.31 (Candy Crush Saga's RPD is $28), and the average CPI for casual games in North America, according to this analysis from Liftoff, is $3.32.

While these are just estimates and averages, the data points to the likelihood that Playdots is not seeing a good return on ad spend and may not even be recouping the cost of acquisition. The company also has failed to launch any successful products since Two Dots, and its latest game, Garden Days (released mid 2020), has only managed downloads of ~100K and a revenue of ~$136K. The iOS version has also recently been pulled and re-released under Apple Arcade.

Add all these things together, and the reason why Take-Two has shuttered Playdots becomes clear. Its flagship product is likely not profitable, and it has failed to release a successful replacement. It’s important to note that while Playdots, the company, is no more, Two Dots, the game, will live on and be handled by another Zynga studio. This indicates that Take-Two believes that there is still value to be found in Two Dots, but Playdots is not the one most capable of finding it.

The closure of Playdots so soon after the Zynga acquisition must have caused shockwaves to the other two companies under T2 Mobile — Social Point and Nordeus. We can see a future where they are folded under the Zynga umbrella for centralized management of the entire mobile portfolio. In the current, challenging UA market, being able to offer greater oversight over UA budgets, as well as better sharing best practices in a more streamlined org chart, could result in superior performance. The days of being in cruise control while Take-Two is focused on console and PC are over, and the eye of Zynga will be upon them.

Game Launch Radar

#1: Murder by Choice

• Publisher: Nordcurrent
• State: Hard Launch
• Territories: Wordwide
• Classification: Hidden Objects

• Quick thoughts:

  • Nordcurrent is a Lithuanian game developer well-known for its time-management titles (Cooking Diary and Happy Clinic), but it has also published some hidden object games. Murder in the Alps was its most recent one, and it enjoyed moderate success.
  • Murder by Choice is the company’s newest addition to the category and was soft-launched in July 2020. You can watch a video of the gameplay here.

  • The game features a similar recipe to Murder in the Alps:

    • There are no timers in levels. Challenge comes with problems that players have to solve in the hidden object scene.
    • There are elements from the interactive story subgenre.
  • The most significant change from Murder in the Alps is the introduction of monetization in the form of hints. This is a nice addition that is also present in most of the competitors. Besides that, the game is still very similar to its predecessor and lacks most of the features expected in the segment. However, it is still early days, and live-ops and features could be added later on.
  • We believe that Murder by Choice will not try to compete in the June's-Journey-dominated hidden object segment, and it's more likely just trying to build on top of the moderate success experienced with Murder in the Alps.

#2: NBA Clash

• Publisher: Nifty Games
• State: Soft Launch
• Territories: 16 selected territories, including the Philippines, Italy, and the US
• Classification: Mid-core - Sports - Arcade Sports

• Quick thoughts:

  • Publisher Nifty Games was founded in 2018 and is focused on creating officially licensed mobile-first sports titles. According to Crunchbase, it has raised $58M over 5 funding rounds, giving it a good runway to achieve its goals. NBA Clash is its second title, following NFL Clash.
  • The game was actually soft-launched in the UK a year ago, but there have been significant changes to its gameplay since. It initially played more like Clash Royale on a basketball court, with players dragging cards on to the court to spawn characters there. You can watch how the original gameplay worked here. It seems to have not resonated with the audience, as gameplay has since been revamped and is now more inspired by Tennis Clash. Characters move automatically and are commanded to pass, shoot, and dribble via tapping, swiping, and dragging. In theory, removing the control of movement should reduce the number of inputs a player needs to give and thus be more friendly to casual players. In practice, though, having to tap on small moving characters on a basketball court feels fiddly, and I kept thinking that it would have been nice to have direct control. This is in contrast to Tennis Clash where the swipe controls felt absolutely natural, and the lack of direct character movement was not missed at all.
  • With an official NBA license, NBA Clash should be a welcome addition for fans of the sport. The question will be if the simplified controls will benefit the game by opening it up to a more mass-market audience, or if it will instead alienate sports game players who are used to direct control. If the performance of its older sibling (NFL Clash) is any indicator (~1M lifetime downloads and $340K in revenue), it might end up being the latter.

Other Game Announcements

• Battle royale game Stumble Guys is making almost half a million dollars every day. Link
• Two months in, Survivor.io passes $75M from 37M downloads. Link
• Team battler Mortal Kombat: Onslaught is coming in 2023. Link
• Cookie Run: Kingdom finally launches the highly anticipated BTS collaboration “Braver Together.” Link
• Ragnarok Begins is open for pre-registration. Link
• Two weeks after vanishing, X-Hero is back as the top US iPhone game. Link
• Dragonspire, an anime-themed cooperative roguelike, is coming to mobile and Steam next year. Link

Company Announcements

• Former Overwatch boss Chacko Sonny is to lead new Netflix studio as Verdu talks cloud gaming. Link
• CMA filings reveal that Microsoft intends to create its own 'next generation game store' for mobile. Link
• Turkish mobile developer Magic Games secures $5M in seed funding. Link
• Odyssey Interactive scores $19M for Omega Strikers launch. Link
• Swedish developer MAG Interactive celebrates another strong financial year. Link
• Metacore Games grabs double gold at the 2022 Ogilvy Awards. Link
• Supersolid is to launch a flurry of new games after hitting 10 years and 10M downloads. Link
• Fingersoft expands executive team with new hire. Link

Ecosystem Announcements

• CMA calls on the public for its views on Microsoft's acquisition of Activision Blizzard. Link
• The mayor of London renews pledge of £1M for video games sector. Link
• Data.ai reports $1.54B spent per week on mobile games in Q3 2022. Link
• FTC plans to regulate "deceptive" ads that target children’s insecurities. Link
• ByteBrew raises $4M for integrated mobile game analytics platform. Link
• AviaGames CEO and founder Vickie Chen is celebrated as an Industry Leader and Female Executive of the Year by Forbes China and Stevie Awards. Link
• Latest lawsuit against Activision Blizzard alleges sexual harassment, sexual battery, and blackmail. Link
• Turtle Beach unveils Xbox-style Android cloud gaming controller. Link

Content Worth Consuming

• Call of Duty: Online Is Dead. Long Live Call of Duty: Online! (Deconstructor of Fun): “Most people in the western hemisphere may not be familiar with Call of Duty: Online (CoDO), a project kicked off in 2010 and announced in 2012 as a partnership between Activision and Tencent, with Activision in charge of development, and Tencent as the Chinese publisher of record. The game was developed by Raven, one of the historical CoD mainline studios, and Activision Shanghai, a local team assembled for the project. The mandate was simple, if daunting: to replicate Call of Duty’s worldwide success in China. In order to achieve that goal, the game had to overcome two major challenges: it had to be free-to-play and it had to appeal to the Chinese audience.” Link
• Ep. 100: Mastering Retention (Mastering Retention): “This week’s installment of Mastering Retention is a special one, as Tom celebrates the 100th episode with the help of Yosi Tal (Senior Product Manager at Papaya Gaming). The two of them commit the entire episode to the topic of retention. They discuss features and emotions that drive retention, segmentation, player progression goals, maximizing the first-time player experience, and so much more!” Link
• MROI - A Time-Based Metric to Measure UA Performance (Pollen VC): “In terms of making informed budget allocations across different UA opportunities, most UA managers focus on the absolute ROAS achieved and do not put a sufficiently strong focus on time to measure the outcome. Without the context of time, ROAS and LTV measurements are somewhat irrelevant. UA managers, together with their finance teams, need to be able to compare different UA opportunities on an even playing field. This may be across different games in a portfolio, or different potential campaigns with different return profiles in different geographies.” Link
• Don't Do That: What to Avoid When Soft Launching a Game (GamesIndustry.biz): “All the way, Love & Flowers was made instinctively. The only subject analyzed by the market research was the settings. Having found no analogues of the original idea, the team decided to stick to a flower shop without knowing about its target audience and the features of the genre. As a result, a small team of seven to eight people took up a very challenging task in a very demanding genre in terms of content and deep meta. Such an approach may have seemed quite disputed right from the start. Speaking about our mistakes as a publisher: releasing a compatible product requires long and thorough development, and we didn’t manage to get this idea across to the team on time. They were really enthusiastic about making a great game with a fresh approach, but the lack of proper analysis led to a number of mistakes.” 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