What problems do small mobile game development studios face - ZiMAD opinion

Yana Vesnina, M&A Manager at ZiMAD, told about the challenges facing young mobile game developers in her column.

Yana Vesnina

Introduction

ZiMAD is in contact with a large number of independent teams who share their new projects, including those in the early stages of creation.

This column is a kind of sammari of this experience. It mentions the problems that small studios-developers of mobile games – are most often facing now.

Common problems

Winding down investments

News about the closure of the daughters of gaming companies is increasingly appearing in the media. At the same time, there is less and less news about major investment deals.

This is a consequence of the economic slowdown. Almost all influential players of the mobile game development market are forced to react to it in order to adapt to the new economic realities. Costs are being optimized, primarily by reducing risky investments.

As a result, a situation has become common when a team with a high–quality prototype, which took more than a year to create, cannot receive funds to continue development. In the worst case, this leads to the dissolution of the team or staff reduction, as well as to fixing losses.

Resources for R&D development are also significantly reduced. There are fewer bold experiments, studios are focusing on proven mechanics as part of a risk minimization strategy.

Resource redundancy

Studying pitch decks, we often see a bloated staff in P&L (a report on how much the company spent and how much it earned) with all the burn rates and the cost of “cookies” in the office. At the same time, the competence of employees does not always correspond to the scale of the project. For example, hyper-casual studios are starting to make match3 with expensive graphics, and midcore studios sometimes try to break into a hyper-casual niche (hereinafter referred to as GC).

There are also administrative problems when the team, scattered around the world after the pandemic, is not well coordinated enough. As a result, the allocated budgets are burned due to inefficient management.

Underestimating the complexity and depth of the project

We often see teams copying core mechanics with content for a few days, not realizing that this is the tip of the iceberg, that real monetization is built through long-term operation.

Many developers do not have much experience in implementing complex features and understanding how the LiveOps system is built. This is especially true in relation to serious casual and especially midcore projects. As a result, there is no clarity on how to build monetization.

Incorrect KPIs

We noticed that due to the abundance of educational materials and webinars from GC publishers, many developers of casual and midcore games began to focus on the metrics of GC projects when working. They do not take into account that completely different KPIs are relevant for these niches. The necessary metrics, especially in terms of revenue per player and long-term retention, are unattainable with the GC approach and on cheap traffic.

Example: when testing, some casual game developers look at the CPI, and expect to see the coveted $1-2.5 and R1 above 35%, thinking that they will be able to bring R30 to mind during the development process. However, this is not quite the right approach for casual projects. Here it is better to think in advance about retention metrics, figure out which R30/ R60 you need to focus on.

Untested body kits

Another trend is the hanging of the bark with untested or inappropriate mechanics, peeped in other genres, simply because other companies on the market do so.

It is important to understand: this will not necessarily improve the metrics, but it is guaranteed to lead to a multiple complication of development and an increase in the cash gap (remember that the core itself may be far from ideal).

Increasing the cost of traffic

If the niche is crowded, then even with a good project it is difficult to get a competitive CPI. Most likely, it will be high on tests. And the problem, as a rule, is not that the project is weak, but that all the cheap traffic has gone to competitors.

For example, we see that in the niche of GK games, cheap traffic is starting to run out.  Large GC publishers, understanding the situation, change their focus. Now they are increasingly working in the niche of casual games. In particular, they buy casual games and casual studios in search of a new audience.

Misunderstanding of the policy of Storov

The stores have strict rules regarding promotion, monetization and advertising. Ignoring them leads to account blocking.

Example: some teams are engaged in the development of casual games, but children are chosen as the target audience for them. They believe that they will be able to promote and monetize projects with such a target audience in the usual way. That’s not so.

False confidence

If it is possible to draw some distant conclusions for a GK game after a test for several thousand users, then for the casual genre this is too small a sample to be sure of the success of the game. Especially when you need to check the monetization metrics. To get at least the first 100 payments, you need to attract 5,000 high-quality users or even more. Such tests obviously cannot be limited to one iteration.

For example, studios come after a $300 test in the merge genre with the confidence that the attracted 1000 users show relevant indicators. But to build a hypothesis, this is a very small sample in the casual genre. To confirm the marketing figures and further development of the project, a budget of at least $ 5-10 thousand is required. Most often, not one round of such testing is needed, but two or more (to consolidate confidence that the game has potential and it is worth continuing development).

What to do?

Choose the right niche, reliable mechanics and the right KPIs

When choosing a niche, use all available marketing tools, study as many materials on the topic as possible and conduct a thorough SWOT analysis.

At the same time, remember: a large number of installations at a certain time interval at the moment does not guarantee that an analogue of this game will be in demand in a year. If the genre is overloaded, then even a strong project will quickly reach its limit in terms of installations and income, having no chance to recoup development costs.

Untested mechanics are another common cause of failure. Some teams follow too unexplored paths and make complex mechanics that the market is not familiar with yet. As a result, the player does not understand how to play, throws it at the very first stages. As a rule, this can be judged by a very low retention.

Optimize team and development speed

Correlate financial and team resources with the reality of the market and the experience of your team. Optimize its composition and achieve maximum speed and efficiency in development so that the game does not lose relevance even before release.

It is not worth gathering a team of 10-20 people to make a complex project without many years of experience and understanding of the specifics of the genre.

Rely on a genre that you and your colleagues understand (provided that it is not overflowing yet).

You need to understand that the more people in the staff and the longer the development time, the more income should be in order to recoup the costs. Each game has its own earnings ceiling, many genres can generously recoup the work of several specialists, but they will turn out to be unprofitable if you put a large team (even if it helped provide a completely different level of production).

At the same time, some genres “burn out” faster than others. The market is quite transparent, and when a hit appears, it is seen by hundreds of teams who are thinking how to repeat or improve it.

For example, in 2020-2021, tile-match with a simple meta in the form of decor was on the wave of hype, but by the time many teams began to send their developments to publishers, these projects were no longer very relevant to the market.

It is impossible to predict everything, but it is necessary to look at the perspective at once: what resources can be reinvested, how many people are needed in the team at the early stages, how to form a clear, but at the same time convenient schedule for everyone.

It is also important to clearly understand the level of your team. If game designers have never made games with ARPU more than $2, then you should not expect that their new ARPU product will be more than $10.

Think through monetization from the start

It is necessary to think about the monetization of the project already at the stage of working out the idea, so that the potential partner understands what can be expected from the project. For the publisher, the same information will be necessary to adopt the right strategy (with the right budgets to promote the game in a particular segment).

The type of monetization should correlate with the chosen genre.

Of course, sometimes developers go against the laws of the genre. For example, we were once sent match3-a game whose monetization was entirely based on advertising. There were also reverse cases: simple puzzles with only IAP and no ads.

There are few successful examples of such unusual combinations. Therefore, if advertising monetization prevails in a niche, then, most likely, it will not be possible to introduce IAP into the game from this niche.

Final tips and conclusions

1. Study as many materials on the topic as possible and conduct a thorough SWOT analysis.
2. Correlate financial and team resources with the reality of the market and the experience of your team.
3. When starting a project, do not postpone the retention metrics tests for later.
4. Test the project on a sufficient number of audiences to get relevant metrics.
5. Do not delay the development of the project so that the game does not lose its uniqueness.
6. Think about the monetization of the project in advance so that it correlates with the niche and genre.