Gaming is lost, a lack of data may be to blame
Adapting to the future takes information
This one is going to sound a little ranty. In 2021, when the smarties at Nielsen (I’d share their stock ticker here except the struggling company was taken private, again, in 2022) decided to close down our 2018-acquired SuperData Research, the $200B gaming industry was thrust into an information void. Now, let me be clear and say that there are many market intelligence providers in gaming, and that SuperData certainly had its share of margin of error, but to date nothing has replaced my alma mater with a similarly comprehensive and detailed solution. And gaming as an industry is paying the price.
Since that fateful day, people regularly reach out to me lamenting the dearth of holistic information that we had established as a standard for the market. “You weren’t always spot on, but you were the best.” What Superdata did, and what the industry is completely lacking now, was provide apples-to-apples cross-platform competitive and market intelligence, bottoms up from title performance to genre and market macro figures. And we did it with deep analytics across monthly active users (MAU), average revenue per paying user (ARPPU), conversion rate, and total revenue.
Having this kind of competitive data across the ecosystem was vital, which is why we worked with every major gaming company on the planet, in addition to media companies, hedge funds, telecoms, sports leagues, hardware providers, consumer brands, governments, etc. As the largest media category on the planet, everyone needs to understand gamers and gaming. And for those in the games industry, comparisons are crucial for making decisions.
King for a day
Detailed competitive intelligence is required to turn the ship in the right direction and assess how you’re doing. This is true even for games that are performing the best. When you’re the top of the top, it’s easy to get comfortable and think that you don’t need to look closely at the plebes around you. But you have to be able to answer:
Why are we performing the best?
How far are we above our competitors?
Are there signs of weakness in our underlying health metrics?
Where will our next growth come from?
Because most games are king of the hill for only a short period of time. Take, for example, Candy Crush Saga. The title was one of, if not the most popular mobile game during its heyday, but an examination of its underlying performance metrics showed a rickety beast that was poised for a downfall. Like many pre-IPFA mobile games, the title was able to do a really good business of paid user acquisition. This meant more gamers coming into the game and spending money, but not as well as the earlier core gaming crowd. On a chart of Candy Crush Saga performance, MAU was up, revenue was up. Awesome, right? But looking at ARPPU and conversion rate, both of those were nose-diving.
This was a classic gaming curve: new users you pay to come in aren’t as likely to spend, and spend less when they do—compared with users who found the game more organically and, we can assume, really wanted to play it. And typically these “juiced” new accounts don’t last very long, and the game’s macro performance starts to slide. Eventually, Candy Crush had nowhere to go but down, and the title’s performance slumped quite dramatically over a short period of time.
If you’re in the #2 or #3 slot behind Candy Crush, being able to examine these KPIs (key performance indicators) and then act upon them at the first signs of slippage can make or break your future success. Suddenly, you can capitalize on a horde of players who are getting bored of one game, but may be perfectly primed for your similar-but-different title. But you can only know that by seeing the underlying health metrics like ARPPU and conversion rate.
Deep insights for deep strategy
Having fine tuned market and competitive intelligence is how the world’s biggest games thrive. Traditional gaming is an inherently private and walled garden experience—even companies that report publicly are mum about many of these underlying KPIs, speaking only to things like downloads, registered users, or total revenue.
This means most developers are without benchmarks to measure their own performance or understand how the decisions they make are working or not working.
Take an example we’d see a lot at SuperData:
If you make an in-game design change to your console shooter game intended to optimize ARPPU and see a 12% month-over-month increase in ARPPU, how do you know if that’s good? How do you measure the impact of those (likely) months of development time?
Without context, you may not know, for example, that the console shooter market’s average ARPPU rose 6% in the same period, meaning your design change was worth only 6% benefit on top of a macro seasonal trend (unless you happen to be the largest game in the market).
Or you may not know that your closest competitor actually saw a 20% increase MoM in ARPPU, meaning your game actually underperformed relatively.
Without the barometer to let you know how you’re doing in comparison to the genre, market, or your closest comp titles, you may end up wasting time on pursuits that don’t matter, or abandon efforts that, in context, are actually proving to be more successful than you think. Data keep developers from going down rabbit holes and burning capital on mediocre things, but also lets you double down on what’s really working.
Data play a major role in user acquisition, too. First and foremost: what can I afford?
UA costs vary by platform and genre, and developers need to make decisions about UA based on the spend and lifetime value (LTV) of their audience. For example, a $3 cost per install on a game that has an LTV of $120 is pretty good, but if that LTV is $20, your margin will suffer.
But data are also important for even understanding when to engage in UA campaigns. The games market sees a standard dropoff every summer as kids go to camp, people spend more time outdoors, and fewer titles launch. That is likely a pretty bad time to spend a ton of money on gamers who may not even be around to play for that long.
What happens on PC doesn’t stay on PC
The games industry has become increasingly cross-platform in the last 10 years. Games that start on console or PC sometimes develop mobile versions. Some gamers themselves play on more that one device (e.g. PC or console at home, mobile while commuting). In the age before such cross-platform fluidity, it was feasible for developers to stay laser-focused on only what was happening in their ecosystem. That is no longer the case.
There are a finite number of gamers with a finite spending power, so everyone is fighting for their slice of a relatively stable pie. If you’re winning, it’s because someone else is losing. Back in the day, the launch of Call of Duty on Playstation could eat the lunch of Battlefield on Playstation, but not particularly bother mobile games at all. However, at SuperData, we regularly saw, for example, how a massive new title launch on PC would steal away users and dollars from many console games as users shifted their time and spend to the other platform for a while. (Think about who was just destroyed by Palworld’s meteoric rise.)
It’s not ok to not know what’s happening on all platforms, since the potential impact to your game can come from anywhere. But it doesn't always last. If something dramatic happens to your game and you understand why, then you may be in a position to worry less about it, or otherwise find a way to react and counterbalance. WIth the right cross-platform information, you can, for example, avoid wasting UA dollars during a time when they’re likely to do very little because all eyes and dollars are on another game on another platform. It can shift the doom-and-gloom to a wait-to-react if you have a historical understanding of how impactful and how short these types of interruptions tend to be.
The current market
Now for the spicier take. Over the last two years gaming—like tech overall—has seen tremendous layoffs, studio closings, VC funding pullbacks, and game cancellations. It would be outlandish for me to say that this is only because of a lack of data. It’s a mix of greedy “rightsizing” following big COVID-era booms, a slowing of the games industry’s overall growth, and a lack of investment in new content.
But data underpin all of the above. Publishers who don’t have a good sense of how well they’re doing relative to the market or closest competitors are hard pressed to double down on investments. VCs who no longer have meaningful comps for new studios—particularly in new categories—struggle to evaluate the potential. And game makers and brands are struggling to understand the ROI and magnitude of increasingly fragmented opportunities, such as Roblox worlds, UEFN islands, etc.
Look at EA, who recently announced record profits in 2023, and who have the second highest average sales per employee amongst traditional game publishers (and the only company that saw this average rise since pre-pandemic times). The company just laid off 5% of its global staff and canceled upcoming games from Respawn, its only division really making money other than the EA FC team. Of course this is primarily greed; short-term thinking driving short-term stock pumps, but it’s also a position that is made—and then rewarded by Wall Street—based solely on the known world around EA, not what’s trending, not where it should be investing for the future. That requires data.
Would EA, for example, slough off 5% of its hard-working and committed staff if it knew that its best route for the future was increasingly around UGC? Would EA reallocate resources if it knew that Palworld’s staying power was so intense that it would need to make its own title in response to that? Again, I’m not suggesting that EA doesn’t have data, or that it doesn’t make data-driven decisions, but it’s undeniable that my former client is more in the dark now than it was 3 years ago, that’s just a fact.
The next era of gaming is going to require even more robust apples-to-apples comparisons. Gaming’s latest inflection point involves entirely new technologies and categories (AI-based games, metaverse, web3). Game developers and non-endemic companies will require the ability to examine, in detail, the potential white space in an increasingly competitive and fragmented landscape to decide where and how to apply their dollars, time, IP, and users. But until there’s a new universal barometer for the health of the ecosystem and games, I fear that decision paralysis could artificially limit how quickly the space moves beyond this bland malaise it’s been in.