What is the hype about hyper casual games?

Bite-sized, easy-to-play hyper casual games started picking up steam in 2017. Simple user interface and straightforward mechanics allow players to play anywhere, anytime, and even on the go, which makes hyper casual games attractive to many.

Recently, as large number of people have been encouraged to stay home due to the COVID-19 pandemic, many new players have entered the mobile gaming world as seen in our previous insight article (https://www.1upcapital.co/insights/how-corona-changed-gaming). Hyper casual games were surely among the biggest beneficiaries of this change, demonstrating 103% growth in installs and 72% rise in sessions (the number of times a user opens a certain app) between December 2019 and March 2020, according to a report written by Adjust and Unity.

Significance in the mobile gaming industry

So how important are hyper casual games and why should we pay attention to them?

Hyper casual games provide ample profitability and growth prospects, thanks to the ever-growing number of mobile gamers and the ad-driven characteristic of the category.

Monthly Average User Trend by Tenjin

After an unprecedented hyper growth in 2018, hyper casual games still showed continued rise in 2019 and in 2020 thus far. According to ironSource, among the 1.7 billion install growth in mobile gaming in 2019, hyper casual install growth accounted for 76.4% (1.3 billion installs), illustrating the sustaining popularity.

There are approximately 100 million daily game installs on average, and hyper casual games generate around 22 million of them. Taking hyper casual games' user base and their lifetime value (LTV) into account, this segment is estimated to generate $2.5 billion annual revenue.

Fun Race 3D

Moreover, 78% of the most downloaded new mobile games released in 2019 were hyper casual (up from 68% in 2018) according to Sensor Tower. At the top of the rank, Fun Race 3D accumulated 219 million global downloads in App Store and Play Store combined, and its developer, Good Job Games, accounted for three other titles in the top 20 list.

What is interesting about hyper casual games is that they are strongly ad-driven. Hyper casual games took up almost half of the available in-game ad inventory last year, and installs per thousand ad impressions (IPM) which demonstrate the supply effectiveness of an ad inventory, grew by 70%. Hyper casual games’ IPM is twice higher than that of dating apps and five times higher than that of strategy games. With the promising prospects of mobile gaming and mobile advertising, it is without a doubt that hyper casual games hold paramount importance to investors.

With this high quality and quantity ad inventory, hyper casual games can raise a huge chunk of their revenue from mobile advertising. Flappy Bird, one of the first viral hit hyper casual games back in early 2014, reported $50,000 per day in ad revenue at its peak.

Moreover, hyper casual games tend to have higher conversion rate and lower cost per install than other genre games, creating a huge room for profit by utilizing user acquisition funding and reinvesting in sophisticated ad campaigns. That is, hyper casual revenue could vary greatly depending on timely investment and the right user acquisition strategy, making this segment especially interesting for investors.

Drivers behind rapid market growth

So what all are behind this hype?

There could be numerous intertwining factors, but one significant driver is the increasing global demand for accessible entertainment. As hyper casual games appeal to a wide scope of global audience regardless of age groups, genders, and cultures thanks to a low barrier of entry for new players (free to play, simple mechanics, you name it), they scratch the itch of the growing mobile population looking for quick satisfying breaks.

Another compelling cause is the low barriers of entry for game developers. Hyper casual game development cycle is relatively fast and less costly compared to other types of games. This encourages more and more developers to jump into the scene, resulting in market fragmentation. This further leads to diversification and innovation, providing a great spectrum of high quality games to the users. 

Should we still invest in hyper casual games?

The hyper casual market is expected to reach $3 billion in size this year, 33% up from $2.25 billion last year. As the market is yet to reach its plateau, it is not late for investors to jump in and take advantage of this winning market.

Moreover, even if the current growth rate were to steady down, there are ample opportunities to monetize and profit, thanks to low CPIs, high conversion rates, abundant ad inventory, and additional in-app purchases.

1Up Capital helps game studios overcome the challenge of revenue payout delay from ad networks and helps them strike while the iron is hot. Well-devised ad campaigns fuelled by timely user acquisition funding will boost the returns vastly for our partner studios and investors.