The mobile market continues to evolve rapidly, driven by shifting user behaviors, technological advancements, and emerging economic trends. In a recent podcast featuring Lexi Sydow, Director of Corporate Marketing and Insights at Sensor Tower, several key insights were shared about the current state and future of mobile gaming, mobile marketing, and the dynamic between apps and games.

This blog post delves into those insights to provide a comprehensive overview of the mobile landscape.

Sources:
Sensor Tower State of Gaming 2024
Data.ai Mobile App Market Forecast 2030

Mobile Market Trends

The mobile market has experienced notable shifts, particularly in download trends and revenue generation. Overall downloads have declined on both iOS and Android platforms, with Play Store downloads seeing a more significant drop.

2023 was a challenging year for the mobile gaming market. A year-over-year comparison shows a downturn in total worldwide downloads across both major stores.
These macro-level declines are predominantly driven by the business performance of games on Android. A deeper exploration of micro-trends reveals a more complex picture, with notable outliers and winners in some genres, regions, publishers, live ops and marketing practices.

The decline of the mobile games industry is influenced by various factors, which we can really bundle into three:

Firstly, post-lockdowns people are spending more time on outdoor activities and consuming more media on platforms like social media and streaming services, affecting gaming engagement, especially on mobile devices.

Secondly, consumers' disposable income is being wiped out by the combination of inflation (everything cost more than just a couple of years ago) and higher interest rates (house, credit card, and car payments).

Thirdly, we’re experiencing global deterioration of geopolitical environment, which indirectly (and in some unfortunate countries directly) impacts consumer spending patterns.

Genre-Specific Winners:

Puzzle Games Prevailed: The genre fell by only 6% YoY in downloads and gained 10% in IAP revenue, thanks to new games like Block Blast and Royal Match, and established hits such as Candy Crush and Gardenscapes. Puzzle remained strong by focusing on retaining its current user base through events and live operations. This strategy proved to be one of the most effective of the year, demonstrating the importance of keeping existing players engaged.
Casual Games went Hybrid: These are tailored for a broad audience with straightforward mechanics, usually aim to sustain player engagement to boost revenue via ad monetization. The genre lost 10% in downloads as hypercasual games continues to decline in post-IDFA era. At the same time, revenues for hybridcasual games went up by whopping 30%. The trend highlights a growing success in monetizing casual players, contrasting a revenue decline for genres targeting the Mid- core audience.
Racing Games: In contrast, racing games have shown modest growth, especially in regions like India and the Middle East, suggesting emerging markets' potential for specific game types.
Casino and Puzzle Games: Casino games, driven largely by titles like Monopoly Go, have surged nearly 20%, while puzzle games, bolstered by longstanding hits like Candy Crush and newer successes like Royal Match, have grown by approximately 10% .

Genre-Specific Losers:

Arcade, Action and Simulation Games crushed by CPI increase: These genres have seen substantial drops, around 16% year-on-year, indicating a decline in user interest or market saturation. These genres, traditionally fueled by Hypercasual downloads, are the most affected in part because increased CPI (Cost Per Install) affects smaller margin games the most.
Core Games: Historically, Mid-core players invest more time and money into games than Casual players, but their preferences make them harder to connect with as an audience. RPG and strategy games have seen a decline of around 10% in revenue, reflecting challenges in targeting new users who would monetize at previous levels. At the same time, we’ve seen a strong push for off-store payment with platforms like Xsolla onboarding clients across the industry.

Mobile Marketing Trends

Mobile marketing has become increasingly sophisticated, with a growing emphasis on building lasting user relationships and leveraging user-generated content. This trend is evident in the rise of platforms that prioritize authenticity and community engagement, such as TikTok and Instagram, which have integrated more live streaming and video-first content.

Mobile games command a dominant 67% share of global gaming ad spend, with PC and console games trailing at 28%. Across top social media platforms, YouTube leads in the US, earning 49% of total gaming spend.

At the same time, the mobile gaming market in 2023 saw a 10% decline in downloads year-over-year, largely due to rising user acquisition costs, highlighting the challenge publishers faced in connecting with target audiences post-IDFA.

In today's market, where digital advertisers face many challenges in effectively reaching their target audiences, the trend is shifting towards catering to casual gamers. Mid-core games are beginning to feel the impact of this shift as is evidenced by the -9% decrease in worldwide revenue. This is what we refer to as the "casualization trend."

A notable consequence of this trend is the rise of the Hybridcasual product model, which has seen an impressive 30% YoY increase in revenue. This success is because of the model's blend of Hypercasual visuals with engaging gameplay, complemented by Mid-core elements like extended progression systems and monetization strategies.

The decrease in revenue within mid-core and casino titles is a trend that is often debunked by the success of web stores. Yet the data on how much of the revenue is offset by webstores is scarce. So the question remains, whether webstores are helping the market to grow or are they slowing the pace of decline. Either way, they are still net positive for most mid-core and casino publishers.

Key Marketing Trends:

Reengagement campaigns

Brands and IPs offer a new frontier of opportunities for games: In the post-IDFA era having a broad appeal is the winning strategy. This is why publishers have embraced brand collaboration. Scopely’s Monopoly Go is the prime example. But

Reengagement campaigns: Gardenscapes is a primary example of a game that nearly tripled its downloads while seeing a considerable boost of over 60% to topline revenue.
Celebrities and influencers make waves in creative strategy whether it was Mr. Beast and Stumble Guys, Candy Crush with Jonas Brothers, or the all-mighty Haaland in Clash of Clans.
YouTube emerges as a key advertising channel for Mid-core and Core games, though it falls short in reaching Casual gamers. However, Hypercasual and Hybridcasual developers have successfully utilized Google Ads on YouTube to reach their target audience effectively.
TikTok's short-form video format aligns well with Core gamers. Despite the success of numerous Hypercasual and Hybridcasual publishers with TikTok campaigns, they are only reaching a fraction of their potential audience at the moment.
Facebook and Pinterest reach the predominantly female Casual gamer demographic better than any other.

Mobile games have finally embraced IPs, brands and celebrities. All it took was Apple's privacy changes.

Apps vs. Games

The balance between apps and games in the mobile market is shifting. Historically, games have dominated app store revenues, but this is changing as non-gaming apps catch up. By 2030, it is projected that apps will surpass games in revenue, with significant contributions from video streaming, dating apps, and other subscription-based services.

With the current speed, apps will be the dominant source of revenue on mobile, not games as it was since the inception of the app stores. Source: Data.ai

As the consumer’s disposable income decreases, so does spending on games. Yet app revenues keep on climbing showing no elasticity of demand.
Source: Data.ai State of the Industry Report

To summarize it all, games are being pushed by Apps on two fronts:

1. As consumers' disposable income decreases, they prioritize spending on apps that for many have become essential utility services instead of just entertainment products. Spotify, Tinder, and Netflix subscriptions are almost inelastic. Unlike purchasing battle passes in your favorite shooter.

2. The real squeeze is time as consumers open their TikTok and YouTube apps rather than fire up games. Games are being left at the bottom of users' waterfall for killing time. Today we don’t have the full force of ad channels to combat this trend with creativity, targeting, and advertising budgets.

While it’s easy to dismiss this trend from a game developers perspective, the fact is that investors are not dismissing it so lightly. You’ve likely heard “gamification” being used once again frequently. And you’ve likely seen app companies actively hiring folks with product and design expertise from free-to-play games.

What this all means is that apps will only become more engaging and better monetizing in the next few years. These companies will attract better gaming talent and more investment Dollars to further expand their market share. Question is, what will happen when apps cross the 50% threshold and officially drive the mobile market growth? Will the platform support games or just abandon them all-together?

Download and Revenue Distribution:

Steady Download Rates: Approximately one-third of all mobile downloads have consistently been games, a trend expected to continue through 2030.
Revenue Growth in Apps: While games accounted for the majority of mobile revenue historically, apps are projected to achieve near parity by 2030, with a forecast of $145 billion for apps versus $143 billion for games annually .

Future Outlook

In 2023, the mobile gaming industry saw declines in downloads and revenue as the numbers normalize to the pre-lockdowns era. Particularly Google Play is being hit by the decline even though App Store is the one trailblazing privacy. Despite this, some market segments managed to grow.

Live Operations and focusing on existing users proved effective for casual genres, showing the value of engaging existing players to avoid paying rising user acquisition costs. Many mature titles saw considerable increases in downloads as publishers focused on re-engaging audience over taking a risk with new games with unproven LTV (lifetime value) and CAC (customer acquisition) curves.

Hypercasual games faced significant drops, as their razor thin marings were hit by increase in CPIs due to the IDFA depreciation. At the same time, Hybridcasual games showed resilience, benefiting from hybrid monetization strategies.

The mobile games industry is moving towards casualization, with Mid-core games struggling to connect with their audience due to advertising challenges. Casual games are dominating in Europe and North America, while Mid- core titles are preferred in Asia, the Middle East, and Latin America.

Looking ahead, the mobile market is poised for further transformation. Increased global competition, particularly from Chinese firms expanding internationally due to their home market being aggressively regulated, will likely drive innovation and diversification in both game development and app offerings.

Additionally, the continued evolution of mobile marketing strategies towards more authentic and community-driven approaches will reshape how brands interact with consumers, fostering deeper engagement and loyalty.

In summary, the mobile market remains a dynamic and rapidly changing landscape. Developers, marketers, and businesses must stay attuned to these trends to capitalize on emerging opportunities and navigate the challenges of a highly competitive environment. As we move towards 2030, the interplay between apps and games, alongside evolving marketing strategies, will define the future of the mobile ecosystem.