This analysis is written by Abhimanyu Kumar and Michail Katkoff.

Unless otherwise specified, all the data has been provided by the wonderful services of App Annie and references global figures.

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Roughly a year ago, in the midst of a hypercasual boom, a bold prediction was made on Deconstructor of Fun - The Hypercasual Party, as we know it, Will End. To be clear, this prediction did not anticipate a nuclear winter for Hypercasual. Instead we predicted an evolution of these games on two levels -

1. Hypercasual meta systems will deepen to drive stronger medium term retention

2. Hypercasual monetisation would ‘hybridise’ to rely on both Ads and IAPs

Fast forward 10 months, hypercasual downloads are at an all-time high - as you’ll see in the data ahead. Moving in perfect lock-step, hypercasual ad revenues are also peaking. At this point, it would make sense to retract the prediction and admit to incorrect judgement. But in this particular case, we’re going to double down on our initial prediction. And as always, we’ll let the data back us up.

But first, a quick recap.

How the Hypercasual Party Got Started

When the sub-category known today as Hypercasual first came to be known during the later half of 2017, things were peachy to say the least. Extremely low production values allowed the games to be made and shipped in a matter of few weeks. The incredible mass appeal and ultra aggressive ad monetisation made sure that the revenue per (often short-lived) hit games were fat. Low entry barriers, high marketability, low CPIs and ultra aggressive ad monetisation practices created a scenario where LTV beat CPI on its way to massive scale.

In 2018, myriads of publishers understandably jumped on the hypercasual bandwagon. During this growth spur, hypercasual pushed the envelope on many sections of the industry’s value chain - specifically, the user acquisition, ad monetisation and operational sides. As a result, it could be argued that user acquisition and especially ad revenues reached new heights, as hypercasual games grew to become one of 2018’s defining trends.

But as with anything that has low entry barriers and arbitrage economics - competition rushes in, product differentiation becomes more difficult and crucial. Simultaneously, retention for new games suffers, marketing techniques evolve, payback times increase and ROIs decrease. In other words, the market starts to mature. Which is exactly what was happening to hypercasual games.

As seen in the graph below, the Quarter-over-Quarter (QoQ) downloads growth rate for hypercasual greatly slowed down over 2018. Downloads market size also showed signs of stagnation. Naturally, QoQ IAP and Ad revenue growth followed downloads, given the front-loaded monetising nature of these games. At this point, the signals were clear - the hypercasual market was maturing at a rapid pace, while both market entry and staying power became harder.

Just as we were tapping ourselves on the back for an accurate prediction, a massive surge in sub-genre downloads occurred in Q2 2019. Most definitely, this left us scratching our heads and wondering - with a +50% QoQ market size jump in 2019, is a second Hypercasual growth spur on its way?

Despite the surge in installs, here are four reasons why we choose to stand our ground on the Hypercasual gold rush ending.

#1: One Spike is not a Trend

Firstly we decided to be prudent and see if the growth spur continues into Q3 2019. A glance at the graph below tells a very clear story.

During Q2 and Q3 2019, hypercasual downloads were up by +500-600M YoY (+55-85%). While the absolute numbers are extremely convincing, is this conclusively a growth trend? With data from the latest completed quarter included, it can be seen that the Q3 2019 QoQ growth rate is back to Q4 2018 levels. This clearly shows that the growth rate did not sustain QoQ, and is more indicatory of a spike rather than a trend.

With access to almost 3 years of data, one can also zoom out and look at YoY growth rates to get a clearer picture of the sub-category’s long term growth trend. Hypercasual has continued its growth rate decline through 2019, as can be seen in the orange line.

In other words, even though the market is still growing in absolute numbers with double digit YoY growth rates, the rapid deceleration of YoY growth rates signals systemic concerns across the hypercasual genre. Further, the YoY growth rate trend neither explains the massive market spike in Q2 2019, nor provides a more conclusive prediction about the future of hypercasual. So, let’s go deeper.

#2: More Games, Same Amount of Players

Before going any further, it should be clarified that all the download numbers in the graphs above do not showcase “unique downloads”, but rather “total downloads” across multiple hypercasual titles that appeared at least once in the quarterly Top 200 downloads charts since 2017.

Consequently, Downloads per Quarter = No. of Hypercasual Games x Avg. Downloads/Game

As can be seen in the graph below, average downloads per game has remained relatively constant since Q2 2018.

Therefore, if a certain quarter has an unusually higher number of hypercasual games in the top download charts, market size jumps would occur. And this is exactly what happened in Q2 2019.

As can be seen in the graph above, Q2 2019 had a total of 33 hypercasual titles in the top 100 downloads chart. 16 of these were in the top 25 of most installed games in the market, which is the highest it has ever been since the start of 2017. With such a high concentration of hypercasual titles in Q2 2019’s top 25 downloads charts, a massive market size spike is naturally expected. But does that mean the hypercasual market is actually growing?

Hypercasual Market Size is Stagnating

Here’s a fact: the best source to acquire players for a hypercasual game are other hypercasual games. As more and more of these games enter the market, they fuel the growth of the sub-genre as a whole. Given below is an image of where “Jelly Shift” by SayGames acquires its users from - primarily other hypercasual games.

From their fantastic analysis, ironSource’s opinion on this -

“Today, the majority of hypercasual inventory is sold to other hypercasual games, or to cross promo campaigns from the same publisher — either way it’s hypercasual advertisers running campaigns on hypercasual supply.”

With the above mentioned and an increasing number of hypercasual games in the top 100 download charts, it can be argued that the hypercasual market size is not really growing. Rather, the same players are just installing more hypercasual games. Simply put, players of hypercasual games are simply switching from one short-lived game to another causing money to change hands largely between hypercasual publishers and the mediation platforms. You may guess who the real winners are.

#3: Hyper-competition 

a.k.a “What the h_ _ _ happened to Voodoo?”

More hypercasual games entering the market means rising competition, and top hypercasual publishers are not able to maintain their momentum into 2019. The most notable of these being Voodoo - the poster child of Hypercasual. The number of titles Voodoo has been able to get into the top 100 downloads has massively dropped between 2018 and 2019.

Very similar to how Voodoo stormed the hypercasual market in 2018 with many new releases, SayGames from Belarus and Good Job Games from Turkey have replicated the strategy and are now dominating 2019. Further speculating, these two newcomers have the advantage of using their location to source the best talent at a cheaper cost. Therefore, these companies can afford more shots on goal due to more manpower available at a fraction of the cost. And more shots on goal is one key aspect for a newcomer to find a hit game that can overthrow market leaders.

Together, SayGames and Good Job Games now occupy 35% of the market, followed by Voodoo at 17%. Voodoo’s short-lived reign at the top stands as testament to the fact that hypercasual is also hyper-competitive. In a sense, it is very hard for publishers focussing purely on hypercasual to maintain competitive advantage in the long run -

1. Players are not loyal to a single hypercasual game

2. Creating unique gameplay experiences only becomes harder

3. More hypercasual publishers gives hypercasual developers more options to choose from

4. Data and processes can be quickly duplicated within hypercasual publishing houses

5. Marketing and user acquisition has one dominant strategy

So, where are the market leaders going? With Voodoo’s war chest now being $200M richer thanks to Goldman Sachs, recent strategic moves by Voodoo signal a focus on a “diversification” strategy over deeper investment into hypercasual.

The most notable move being the opening of a Berlin studio that is categorically focussed on “casual” games, with key hires coming in from Blizzard, King, Rovio and the likes. More recently, and while writing this post, Voodoo also announced a new Montreal studio that wants to build games “beyond hypercasual”. Further, new offices are also being opened in various T2 countries (Turkey and Ukraine) - probably to move a lot of the hypercasual operations to and mirror the SayGames/Good Job Games approach, while key studios focus on the next frontier.

While the diminishing market share and opening of non-hypercasual studios can be seen as Voodoo’s fall from grace, it can also be viewed as Voodoo’s strategic retreat from the hypercasual market. This can signal that Voodoo wants to diversify its portfolio - after all, hypercasual is also hyper competitive. But this can also signal that the overwhelming market leader doesn’t find the market they dominate just that lucrative anymore.

IPM Trend Indicates that Market Saturation is Upon Us

Before we proceed, let us establish as simple user acquisition formula:

CPI (cost per install) = CPM (cost per 1000 impressions) / IPM (installs per 1000 impressions)

As ironSource agrees, a corner stone for making a hit hypercasual game is to reduce CPIs by increasing IPMs (installs per thousand impressions). But with an increasing number of hypercasual games fighting for the same audience with often very similar visuals, gameplay goals and marketing tactics, IPMs are bound to suffer and therefore indicating market saturation. As can be seen in the graph below, we’re starting to see the first signs of IPMs being hit as they have started to flatten.

This can only mean the worst for CPIs, and Tenjin gives us a sneak peak at a slowly increasing hypercasual CPI trend since Q1 2019 in their GameAnalytics report.

If nothing changes in the current state of the hypercasual market, it is only a matter of time until these metrics enter complete free fall. Most definitely, this will mean decreasing returns per hypercasual developer.

So real question now is - what’s the next step for hypercasual?

#4: A Fundamental Change to the Business of Hypercasual

While most of hypercasual is ad monetised, we predicted a year ago that these addicting games would start getting straightforward meta systems, which would generate strong IAP revenues in addition to the generous ad revenues. Further, the meta systems would also help with improving the notoriously low medium-long term retention woes of hypercasual. All this resulting in greater product longevity and a healthier LTV curve. It cannot be understated that this would fundamentally change the way the industry approaches hypercasual from design, production and marketing profitability perspectives.

Problem was, when we made the prediction, we didn’t have a reference game to point to. Well, a few months back, we all played one. Enter Archero!

In just 6 months, Archero has accumulated more than 38M downloads worldwide and well over $50M in IAPs and likely another $15-25M in ad revenues. And it is pioneering the above mentioned fundamental industry shift.

Design Evolution

From a design perspective, Archero’s success can be attributed to two key factors -

1. A highly addictive and accessible core gameplay aka hypercasual that anyone with a finger can play and enjoy.

2. A highly simplified meta game built on top of a hypercasual core while keeping target audience fit in mind, and therefore resulting in a healthier medium-long term retention curve and more sinks to drive hybrid monetisation - in other words, a strong LTV curve.

Today, as competition heats up and the market matures, generating unique hypercasual designs that can crack the top 100 download charts is becoming increasingly harder. But what Archero’s design has shown us is that hypercasual core design can beautifully coexist with traditional meta design principles. Armed with that insight, one can imagine what the big publishers of yesteryear will use/reuse their massively huge traditional hypercasual portfolios for. A new breed of hypercasual design is coming, we call it “Hyrbidcasual”, and now it is only a question of when.

Production Evolution

Having said all the above, achieving Archero’s design prowess is no simple task. And achieving brilliance takes time. Archero had a soft-launch period of 2-3 months, and probably the same amount of time before that for prototyping and design iteration. From a traditional hypercasual production perspective, those kinds of timelines are completely unheard of. Six months would likely result in 10-12 traditional hypercasual titles, rather than one hybridcasual title.

What Archero signals is a massive upcoming change to the production process of hypercasual. As our friend Dylan, who heads publishing at ZeptoLab put very succinctly:

“While the hypercasual process is a wonderful machine for discovering new core mechanics, the real big money in hypercasual is going to come from organizations that can turn hypercasual into a cog in the bigger machine. Eventually some place will be so well run they’ll be able to validate a mechanic via the traditional hypercasual process, take it to market, and out of every 50 or so, find the 1 game in there that has the potential to be grown into a ‘full’ huge product.”

This sort of elongated production process obviously has increased project cost ramifications, again quite unlike those that traditional hypercasual is usually used to. Most definitely, this reinforces the above mentioned design evolution - more Hybridcasual!

Marketing Evolution

Referring back to ironSource’s article, they prove that hypercasual brought in a huge influx of new users to the entire mobile gaming market.

“We can back this up after analyzing the aggregated data of 2.5 billion users in the IronSource network over two years, of which 660 million play hypercasual games. 520 million out of that 660 million play both hypercasual and IAP games, but interestingly, 101 million out of that 520 million played a hypercasual game first. This effectively means that 20 percent of new gamers who play both IAP and hypercasual games first played a hypercasual game and only then moved to IAP games - where hypercasual games confer an almost ‘nurturing’ effect on new gamers, warming them up for IAP games.”

IronSource concludes the article with -

“The future of the hypercasual economy is therefore heavily dependent on whether IAP games learn how to effectively buy on hypercasual inventory and continue to increase budgets… IAP buyers must learn optimization techniques, like improved creatives, to better understand hypercasual users and how to monetize them after install.”

And that is exactly what Archero was able to accomplish with its extremely effective marketing strategy. Habby leveraged the hypercasual core game design to center its marketing videos around, while also showcasing its more RPG elements in a light and fun way. This allowed the game to capture not only the wide hypercasual audience, but also the well monetising and notoriously expensive RPG audience - all without breaking the bank!

Check out our full deconstruction of Archero and an in-depth podcast for a deeper dive on how Habby is leading the way in these three evolutionary steps that will spawn a new breed of games in 2020 - Hybridcasual Games!

Next Gold Rush: Hybridcasual

Data shows that we’re not at the tipping point of Hypercasual, as the sub-genre has in-fact been growing and hit record numbers during the last two quarters. Nevertheless, a deeper dive into the numbers shows that hypercasual’s YoY growth rate is rapidly decelerating, which brings out key systemic issues in the future of the sub-category. Namely, market size stagnation, hyper-competition and market saturation. This implies that the hypercasual market could have peaked.

What makes hypercasual games so appealing is that they are incredibly fast to make and quite straightforward to scale. But what makes this category appealing has now also made it unappealing. All three systemic issues mentioned above strongly work against any kind of staying power a hypercasual focussed publisher may have. Ketchapp, while likely profitable is but a shadow of its former self. Cheetah lost its stride due to (alleged) wrong doings and now Voodoo, a company that looked unstoppable just a year ago, is rapidly falling from the top and looking to enter other categories.

Something’s got to give. And by mid-2019, Archero entered the scene and took the world by storm. Simply put, it is a game with a strong hypercasual core, super light meta and hybrid monetisation tactics. On top of that, it scaled rapidly by making the most of a hypercasual style user acquisition strategy that catered to hypercasual and IAP users alike.

At the beginning of a year we predicted that the Hypercasual Party, as We Know It, Will End. Half a year later, we had a long lasting data driven debate on whether Archero signals the start of something new for hypercasual games. And quite frankly, Archero has everything we predicted. It makes us comfortable to stick to our guns and predict that the hypercasual gold rush is about to end and that the new gold rush will be funded by games that can monetise off of hypercasual players. Games that are built with a hypercasual inspired production process, have simplified meta-systems built on addictive easy to play cores and most importantly, games that make the most of hybrid monetisation, and apply user acquisition strategies that allow them to profit from both traditional hypercasual and IAP users.

We call the next gold rush Hybridcasual. And we cannot wait for 2020!