I noticed this morning that Jelly Shift is still the Top Free game which reminded me of a story that one of my industry friends shared with me on what the IPM (installs per 1000 impressions) for that game was at the time of launch. I was quite shocked to learn that this game converts 50–100x better than any game I promoted in my career. This KPI alone also explains, in a simple way, why hypercasual is not going anywhere and why we see fewer hard-core games in the Top Free chart than ever.
Is IPM really the new LTV?
In the article about Matchington Mansion, Deconstructor of Fun explains well what IPM is and how it is the most critical metric for mobile games nowadays. However, this is only partly true. With mid/hard-core games (and apps in general), high IPM is not as relevant, as it might be a result of misleading messaging, fraudulent behavior or simply, poor targeting.
The result might be lower cost (CPI), but the quality of those users might be significantly worse as well (lower engagement or payer conversion). Low CPI itself is not a guarantee of success.
Why is hypercasual so different?
In simple economic terms , hypercasual games are commodities — products with massive addressable markets that don’t significantly differ in quality than other, similar products. That’s why, in this case, precise targeting is not necessarily as important as low CPI. Their customer is pretty much anyone who ever played a mobile game, regardless of age or income.
The pivotal moment in the industry happened when the average CPMs on mobile reached a point where it was possible to monetize games primarily through ads. The tipping point, however, occurred when Google and Facebook entered the rewarded video market, which is one of the most important revenue sources for these games. This event provided an additional 10–20% bump in average CPMs for casual games, which meant significantly more scale even with a fairly low ARPI.
If we use the CPI formula from above to compare a hypercasual and a hardcore game, it might be easier to understand how this works.
These are HUGE differences in LTV and, it’s almost hard to believe that these two products are equally competitive in a typical media buying auction. They are though and, as long as the product is casual enough (no need for cherrypicking users in the auction) the only thing there is left is to optimize is the cost. As we can see from the formula, the cost (CPI) is a function of CPM and IPM. Since the former is dictated by market trends, the only thing we really have to worry about is IPM. This is the reason why IPM is as essential for casual developers as LTV and why becoming successful in hypercasual means constant experimentation and publishing games on a monthly or even a weekly cadence. Remember, games, in this case, are a commodity, and they themselves are less important than the fact whether they convert users well or not.
Hypercasual is here to stay
CPMs will continue going up and work in hypercasual’s favor, as long as Facebook and Google keep growing their market share in the rewarded video/interstitial ads space. This means more ad revenue dollars for these developers, which will further incentivize them to build more games.
This market, however, is due for a major consolidation, and I expect that only those with deeper pockets/strong network effects will be able to scale their games massively. IP and live-ops monetization efforts will become more critical, which means that building these games might become more expensive and will take more time. But, they for sure, are not going anywhere.