Hi Everyone. In cased you missed Sunday’s newsletter, we announced some big news: Naavik is launching premium research! Our soon-to-be-launched research portal will start with two service offerings: 1) Blockchain Games, and 2) Mobile Arcade+. Every month — in both services — we’ll publish an institutional-level report that provides both a comprehensive market update and a detailed game deconstruction.
Each monthly Blockchain Games report will highlight everything notable that happened in the industry, as well as deeply deconstruct a particular project — including game design, economy design, token design, the future roadmap, potential challenges, our outlook, and key lessons.
The Arcade+ reports will be similar. Each month we’ll provide a market update but rotate through three key subgenres: shooters, arcade sports / driving, and what we loosely call hypercasual + other (think platformers, shoot ’em ups, tower defense, etc.). The deconstructions will focus on games that are innovating and succeeding in new ways.
Whether you’re making, publishing, supporting, or funding games and studios, these research services are for you. Importantly, once you’re subscribed, you’ll receive log-in credentials to the research portal where you and your team can access the full history of reports, which will grow over time.
The base price for each service will be $2,000 per month (or $20,000 per year if you purchase 12 months upfront). However, we’re currently looking for pilot customers who are willing to provide early feedback and shape the service. These pilot customers will receive a 40% discount over the first year and only pay $1,200 per month (or $12,000 for the year).
If you are interested in becoming a pilot customer for either of these research services (or both), please fill out this form. Also, if you have requests for other research topics, want to work together, or have other questions / comments, please fill out the form, too. Lastly, big thanks to everyone who already reached out; we’ll be in contact soon!
We’re excited to get this off the ground, help you better master the business of gaming, and share more updates soon.
Naavik Exclusive: Investing in Crypto Gaming with Gabby Dizon & Yield Guild Games
We recently sat down with Gabby Dizon, Co-Founder of Yield Guild Games. Yield Guild Games is a play-to-earn gaming guild that invests in NFTs from games and virtual worlds like Axie Infinity to allow players to contribute their time and effort to earn an income from these games. In this conversation, we discuss how Yield Guild Games evaluates investment opportunities, the company’s operating and governance model, the growing value of blockchain gaming, and the future of the play-to-earn space. This is an edited and abbreviated transcript. Enjoy!
#1: Idle Games Today and Three Big Future Themes
It’s been a while since idle games were a hot topic in the industry, right? They were all the rage during 2017-19 when Kolibri Games (previously known as Fluffy Fairy Games) launched and scaled Idle Miner Tycoon (IMT), the mobile F2P poster child for the genre. That success of course led to a slew of IMT copycats from established studios and startups alike, and this blue ocean has slowly turned into a very red one due to its relatively low entry barriers. After all, IMT was conceived in the apartment of a smart rag-tag bunch of students.
The above visualisation encapsulates how the genre has evolved since 2019. There are three key observations:
Downloads start to stagnate closer Q2 2020, and have continued to drop QoQ beyond that (peak lockdown period), even though the number of games more than doubled since Q1 2019. This is a clear sign of genre scaling issues.
The number of new games ~2x’d until Q2 2020, but only ~1.2x’d from then until Q3 2021. This means that new game launch velocity is dropping, indicating decreasing developer interest to build for the genre.
Revenues have steadily been rising, but more recently have started stagnating. What we can conclude is that live-ops driven revenue growth for older titles can only go so far when run on top of medium-depth meta systems.
In a nutshell, idle games as a genre seem to be cooling down quite significantly. But the more interesting question is why that is and what it means for the genre going forward. I see a few core themes.
#1: Inter-genre UA Wars Are Hurting Idle’s Growth
Since idle games generally appeal to more casual audiences, they also compete for audiences with the broadest genre of them all — Hypercasual. A hypothesis is that the post Q2 2020 downloads deterioration seems to correlate with Hypercasual’s continued growth through peak lockdown periods. And idle is not the only genre seeing a similar impact — the broader Puzzle and Arcade genres, which also lock UA horns with Hypercasual, showcase similar downtrends.
In other words, it’s possible that Hypercasual ate many competing genres’ lunches over COVID and made it quite hard for idle games specifically to continue scaling in various countries. Beyond that, there was also a Google Core algorithm update during May 2020, which is reported to have negatively impacted organic search discovery of many games across various genres.
COVID makes comps hard, and so it’s difficult to truly confirm either of the above hypotheses and whether this trend will continue into 2022. But the fact remains that idle has seen better download days and developers might need to change something in their UA strategy stack to reverse this reality. Developers also have the option of infusing the genre with significant product innovation, but that is almost always the harder problem to solve, which brings us to the next theme.
#2: Studios are Heavily Reskinning Games to Find a Scalable Hit
If there is one genre that fundamentally rests on economy design and balancing to deliver a great player experience, it’s probably Idle. An interesting and publicly known anecdote is how Kolibri Games co-founder, Daniel Stammler, rapidly iterated on IMT’s first session experience by hand crafting the numbers to make them “go up in just the right way”.
One upside of such a genre is that once an optimal economy model is designed, developers could theoretically slap on a bunch of different narratives, art styles, themes and production values to churn out differentiated products. That would result in a portfolio expansion strategy of idle game reskins, each of which appeal to different audience groups and associated preferences. In a red ocean, increasing shots on goal through such an approach could help with finding the next idle game hit that can scale. And in the worst case scenario, developers are left with a highly diversified portfolio of differentiated idle games that potentially stack revenue.
There are many studios applying this reskinning approach — broadly similar gameplay, different narrative, art styles, themes, and production values. But it’s probably Codigames, Kolibri Games, and East Side Games that are the most visible:
Codigames mostly focuses on theme changes and improving production values with its reskins.
Kolibri Games tries to innovate on the core gameplay experience to help with stronger differentiation that goes beyond narrative, art style, theme, and production value changes.
East Side Games changes up the narrative, which is usually bolstered by a relatively popular IP. Sometimes this also accompanied with gameplay changes that better fit the narrative.
Does the strategy work? Well, yes and no. All the above mentioned studios have been able to stack revenues to some extent with this strategy. Where the strategy stops working is when continuous studio revenue growth is dependent on being able to consistently and profitably acquire new audiences for all the reskins. This is especially important for idle games, which generally front-load monetisation and do not have deep enough meta systems to support strong revenue long-tails through heavy live-ops. And that drives some level of reflexivity to push out even more reskins. Of course, a few games like IMT and Trailer Park Boys: Greasy Money are long-tail outliers, but they also brought fresh experiences to the genre — a kind of innovation that is hard to consistently reskin. Check out this recent interview with IMT’s Product Director, Bruno Patatas, for further context.
What happens when a market gets flooded by reskins? Well, audience fragmentation and market saturation sets in. In other words, there are just too many options available for pretty much the same experience. While these reskins can cater to very specific audience niches, the chances of breakout successes are low when the fundamental experience mostly remains the same. That brings us to the last theme.
#3: Idle is Becoming Less of a Standalone Genre, and More of a Mechanic in Genre Mashups
The retention power of the idle mechanic is unmistakable. There is just something about seeing numbers go up that creates a very positive feedback loop of micro-dopamine hits and keeps players coming back for more. Other genres have surely taken note of that, and most are including the mechanic somewhere in their core experience to capture that retention upside. One example would be AFK Arena and Idle RPGs more broadly.
The other way developers seem to be using the mechanic is by continuing to center the core experience around how we know idle core games today, but further bolstering it with meta system mashups from other genres. For example, Idle Mafia (published by FunPlus) players use the idle mechanic to monetarily grow a mafia empire, and also use an idle RPG fighting mechanic with a gacha-driven upgradable character economy to grow the mafia’s turf and reputation. The game has been able to maintain very stable revenues over dropping downloads through 2020, and is now again trying to scale even further in the west.
Similarly, Trading Legend (published by 37Games) players use the idle mechanic to monetarily grow their tradable production lines, and also use many deeper meta game mechanics from RPGs and Sovereign Games to grow a family and legacy. Trading Legend specifically is currently scaling aggressively in the east; however, it remains to be seen whether the revenue long-tail emerges.
Taking a step back, what these games are essentially doing is mashing up the core idle experience with proven and fitting deep meta game systems and economies from other genres. That would allow these games to run heavy live-ops, create the revenue long-tail, and ultimately scale with UA. Said simply, the idle mechanic continues to proliferate into other genres, but will not be the only mechanic that defines them.
In conclusion, even though the current idle genre numbers aren’t impressively growing, reskinning strategies and genre mashups are keeping Idle’s flame alive. This is not very different to how many other mature genres evolve over time. But there is also never one right way to do things in mobile F2P. I’m looking forward to seeing truly innovative products that breathe new life into Idle because the genre feels ripe for a rebirth. (Written by Abhimanyu Kumar, and supported by product insights from Bruno Patatas, IMT Product Director at Kolibri Games/Ubisoft)
📚 Content Worth Consuming
How Istanbul became the Silicon Valley of the mobile gaming industry (Rest of World): “Over the last decade, Peak and other Turkish gaming studios have transformed Istanbul into the world capital of the “casual game” (otherwise known as free-to-play games) industry. Unlike AAA games, like Halo, Assassin’s Creed, or Final Fantasy, casual games are mobile-native, easy to learn, shorter to play and target the broadest audience possible. According to 2020 statistics, around 58.86% of all mobile game players are casual gamers. It’s estimated that the global market for casual gaming is worth more than $8 billion. In March 2021, six of the Apple App Store’s top ten mobile games in the U.S. came from Turkish studios...“ Link
Epic Games believes the internet is broken. This is their blueprint to fix it (Launcher): "To Epic Games CEO Tim Sweeney, people are tired of how today’s Internet operates. He says the social media era of the Internet, a charge led by Mark Zuckerberg’s Facebook, has separated commerce from the general audience, herding users together and directing them to targets of the company’s choosing rather than allowing free exploration.“Now we’re in a closed platform wave, and Apple and Google are surfing that wave too,” Sweeney said. “As we get out of this, everybody is going to realize, ‘Okay we spent the last decade being taken advantage of.'"For years now, he has eyed a solution: the metaverse. And steadily, over several years, Epic has been acquiring a number of assets and making strategic moves with the goal of making Sweeney’s vision for the metaverse a reality.” Link
What’s the real value of web-based payments for mobile games? (Mobile Dev Memo): “The promise of alternative payments processors is not to route existing revenue through a storefront in order to save some portion of the 30% platform fee — it seems unlikely that a great proportion of users that aren’t already monetizing this way will suddenly do so as a result of a link inside an app. The real value of these web-based alternative payments processors is that they can be bolted onto web-based storefronts that offer much more flexibility and dynamic curation than does the App Store. Developers should see this possibility as an opportunity to increase per-player conversion, or Average Order Value, through product personalization and dynamic offers. This isn’t possible in the much more rigid and inflexible platform stores, and it is the true potential power of alternative payments processors.” Link
Blockchain Gaming with Piers Kicks (Tomorrow with Rovio): “Crypto has everyone’s attention, but its opportunities across the gaming industry in particular are substantial. Piers Kicks is an expert in the ever-evolving crypto landscape, with a focus on opportunities across gaming, NFTs, and interactive media. Piers joins the podcast and shares his perception of the crypto space, thoughts on centralized versus decentralized markets, and the opportunities in the industry for players, creators and developers.” Link
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Thanks for reading, and see you next week! As always, if you have feedback let us know here.