Jeff Karp is the executive vice president of mobile and social games at GSN Games.
The focus of this GamesBeat 2013 — The Battle Royal – is more than just a conference theme. It’s a daily reality in an industry reminiscent of the Wild West. Where settlers once battled for survival and land, today’s casual game companies compete for players and talent. Only the most strategic and innovative will thrive in this unforgiving landscape. Below, I share my predictions for the future of the casual game industry and insights on what will drive survival of the fittest among industry pioneers.
1) Advertising will surpass virtual currency as a key revenue driver in two years
Virtual currency will continue to grow, yet there’s another revenue stream that has yet to reach its full potential. Typically, less than 5 percent of players generate all the revenue for any given game, leaving 95 percent unmonetized. Game companies cannot ignore this huge opportunity and must figure out ways to monetize this audience. Advertising in games can provide a positive experience. Proven brand campaigns strike a balance between satisfying brands’ needs and providing players a seamless game play experience with incentivized rewards. New concepts in advertising – including sponsored in-game accomplishments and incentivized video ads – lead to better user engagement, better brand recall and increased revenue.
When done correctly, monetizing this 95 percent helps companies fund innovation in other areas.
2) Lack of innovation will slowly kill many major players in the space
Today, there’s very little innovation coming out of the casual games space. Declining daily active users among even the most popular games is proof that the market is getting bored with the “me, too” offerings. The same game mechanics that once seemed novel – match-3, hidden object, and time management challenges – have been recycled, leaving players with many iterations of the same games. You don’t have to replace game mechanics that players enjoy — but you should approach new game design with an equal blend of proven game mechanics, improvements to existing mechanics, and innovation to take entertainment to the next level.
3) Companies who value talent above all else will rise to the top
For a while, two or three big players attracted all of the top talent. Not anymore. In-demand, top talent is looking for companies with strong financial backing that also value innovation. Previously, job seekers only got one or the other, but smart companies offer both. Companies that are willing to fail, embrace creativity, offer room for professional growth and encourage ownership at all levels will thrive. These are qualities deeply embedded in our culture at GSN Games. We believe every voice matters.
4) Social casino will continue to outperform other genres of social games
Social casino games are a proven profitable choice with an established, broad audience. This genre has succeeded by offering casino lovers a low- or no-risk alternative to gambling with the same adrenaline boost of hitting the casino floor. It also offers the opportunity to capture a new audience of people who don’t consider themselves gamers. As a lucrative specialty, social casino affords the opportunity to expand into related game themes and can fund future innovation.
5) Rising customer acquisition costs will force market consolidation
Discovery of content is more complex than ever. Market saturation from an increasing number of mobile and social apps is making it more difficult to win users. With more than one million iOS apps available in the Apple App Store alone, companies need deep pockets, strong analytics and marketing teams, and marketing dollars to connect with players despite the quality of their game. If companies want to survive, mergers and acquisitions will be key to scoring new users and content, without losing to competitors with bigger marketing budgets. Small companies should be open to mergers and acquisitions, while big companies should make it a fundamental part of their growth strategy.
What are your thoughts about the future of games? Feel free to share your comments below.
Jeff Karp is the executive vice president of mobile and social games at GSN Games.