Serious business - Mobile World Live

Serious business

11 OCT 2012

Mobile gaming has, for a very long time, been the poster child of the apps industry. It is the category which leads the way in terms of downloads, and for a long time it has proved a lucrative market for a whole range of companies.

Indeed, as the boom created by the growth of the iPhone and Android OS drew more and more developers into the mobile apps market, the games sector already had a robust and mature ecosystem, built on Java titles for feature phones.

But a couple of stories from the last few weeks show that as the number of apps on the market continues to grow and grow, and the potential audience for new apps also climbs, this sector does not offer an easy ride even for the most established participants.

First-up, Zynga said it would take an impairment charge of up to US$95 million related to its acquisition of OMGPOP, maker of Draw Something – an app which achieved the rare feat of becoming a breakout hit.

The troubled company has parted ways with a number of key executives, amid reduced expectations for some titles, and delays in launching others.

And then Glu Mobile announced that while it is set to meet its financial guidance, its most recent set of launches have failed to create a stand-out hit, with its new games not reaching the same levels of success as its earlier debuts.

The thing is, Zynga and Glu are far from idiots. Both companies have had significant success in the past, and know their target audiences and their requirements of games exceptionally well.

But mobile gaming is a fantastically dynamic and competitive market. Business models can be disrupted swiftly – take as example the rise of the freemium model and in-app purchases, which has severely pressured those raised on the paid download model. And customer tastes can be similarly transient.

As John Vechey, co-founder of PopCap said in a blog post announcing job cuts and a restructure: “Free-to-play, social and mobile games have exploded in popularity. That happened fast. Surprisingly so.”

For Zynga, the company has the added challenge of having to meet high expectations based on its pedigree as a social games developer, despite its relative lack of experience in the mobile market. While it has acquired to bolster its presence in this space, the learning curve is sharp and, as a high-profile, publicly-listed company, it has to do its growing-up in public.

Mark Pincus, Zynga’s CEO, is reported to have said the company has to be cautious with its mobile strategy, because the market is not in a state where it is possible to launch a title and be reasonably assured of success. And as PopCap, Glu and Digital Chocolate will testify, this is not something confined to the new boys.

For bigger developers such as Zynga and Glu, launching a game is not cheap. On top of the development overheads, there are associated costs such as market research, marketing and advertising. And with the category being as fierce as it is, this makes any product launch a gamble.

But then, why should previous performance be an indicator of future success? Certainly having an established brand is useful, but products still live and die based on their appeal to consumers.

Perhaps the plan announced recently by Gree, to create relationships with independent developers at arms length, has something to offer. It can work with partners in the knowledge it will be there early for the launch of the next big thing – wherever it may come from – without suffering so much from the (inevitable) failures.

And for the indie developers, there are also benefits: remain independent, and therefore keep the entrepreneurial attitude and approach which fuels creativity, while having a larger partner on hand for support when it comes to launch.

What is clear is that the gold rush for mobile games companies is over. There is still money to be made, but the chance of achieving a break-out success is diminished – whether you are a start up or an established player.

Perhaps the best advice is: don’t stop buying the lottery tickets, yet.

Steve Costello

The editorial views expressed in this artile are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members


Steve Costello

Steve works across all of Mobile World Live’s channels and played a lead role in the launch and ongoing success of our apps and devices services. He has been a journalist...More

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