2024 industry trends and winning strategies for in-app purchase games

Key takeaways

‍

• Based on Moloco’s research, the decline in year-over-year gaming revenue is due to fewer repeated purchases from top payers, but the number of unique players and transaction values remain stable, indicating a consistent and engaged player base
  
  
• Moloco internal data spotlighting the top 5 fastest-growing games worldwide revealed comparatively higher retention and payer engagement likely due to higher transaction volume, and higher repeat purchase rate.
  
  
• Top performers have more diversified acquisition strategies, investing more in EMEA and Android compared to the rest of the industry. In terms of creative formats, they also make better use of mid-length video and playables across both operating systems. 

‍

Insights into the mobile gaming industry landscape

Recent gaming industry news (such as reported from Pocket Gamer, Tech Crunch, and Polygon) suggests a bleak picture amidst decreasing app downloads. Convinced this narrative wasn’t telling the whole story, the Moloco data science team conducted an in-depth analysis using our internal data and found the reality considerably more nuanced and optimistic than the headlines suggest.

Given the proportion of headlines concerned about the performance of games monetized by in-app purchase (IAP), our data science team focused on the performance and advertising practices of a subset of IAP gaming advertisers. Our data set covered metrics like installs, revenue, retention, total payers, purchase values, time to purchase, repeat purchase rates, revenue growth curves, and more. 

After analyzing two years’ worth of robust internal data, we learned that by the end of 2022 and beginning of 2023, the gaming industry experienced a growth phase, followed by a period of stabilization. By Q1 2024, growth started to decrease across iOS and Android platforms, which is what media reports have focused on.

In our analysis, we uncovered key trends that are driving performance across the industry and identified top performing games that are managing to become outliers and drive quarter over quarter revenue growth. Some of the key uncovered insights:

• Top payers ad spend likely explains “decreasing industry growth" narrative
• Top games have better day 7 (D7) retention, repeat purchasers, and overall transaction volume
• Compared to peers, the top 5 games focused more on acquiring users throughout EMEA, spending on Android, and using playables and mid-length video ads

What follows is a deeper dive into these industry trends and insights around revenue, monetization, and retention. 

‍

Underlying trends in IAP revenue

Overall revenue generated from IAP in-game is falling — but examining the underlying metrics that drive revenue reveals a more complex story.

• YOY decline in growth likely due to top payers' ad spend: Negative year-over-year (YOY) growth numbers should be understood in the context of the significant increase in ad spending throughout the end of 2022 through 2023. 

• Repeat purchases are a key driver: The trend in repeat purchases seems to be more impactful on revenue than other metrics like the number of unique payers (which is on the rise in 2024) and average transaction value (which has been stable). 

To help marketers find success amidst these headwinds, we segmented the top 5 games based quarter over quarter revenue growth for iOS and Android to identify the distinct approaches they were using to drive significant growth.

‍

Monetization and retention insights    

When isolating the top 5 games, we found that gaming developers achieving high double-digit revenue growth excelled across three key metrics: repeat purchases, transaction volume, and retention. 

• Better retention in the first week: The top performing games see better D7 retention across both iOS and Android. 

• Higher transaction volume: Compared to the benchmark group, the top 5 games see higher transaction volume. 

• Higher repeat purchase rate: From the second purchase and beyond, top performers keep users purchasing more compared to the industry benchmark over time. 

While the installs trend is mostly driven by marketing efforts, the revenue trend is primarily driven by retention and monetization. Retaining users for a longer period of time provides top games with more conversion opportunities, generally leading to better monetization. The increased revenue can then be reinvested for acquisition, creating a growth flywheel for these top performers.

In addition to understanding what success metrics look like for top performers, our analysis revealed several distinct acquisition strategies these companies used to sustain growth. 

‍

3 key learnings from the top 5 games

The learnings from our analysis shows that compared to the rest of the gaming industry, the top performers invest more heavily in Europe, Middle East, and Africa (EMEA) markets, Android, and playables and mid-length videos to acquire and retain customers. 

It’s important to note that our key learnings reflect how the top 5 games invest and market specifically with Moloco, but our data reveals clear differences in their marketing spend compared to the rest of the industry. Here are three strategies of these top performers to consider adopting, based on our learnings.

1. Investing more in EMEA markets: The data shows that for both iOS and Android, the top performers are investing more heavily in EMEA markets. One hypothesis is that these companies have been able to get better ROAS by targeting smaller, less competitive EMEA markets than the benchmark group, as demonstrated by brands like Gamehaus.

2. Skewing spend towards Android: Historically, Android has generated lower ROAS, but the top 5 games are investing more in Android compared to other game developers. These top performers have either unlocked winning approaches for the OS or diversified their acquisition strategies to an extent that allows them to beat the trends. 

3. Focusing investment on playables and mid-length videos: While the benchmark group uses a wide variation of creative formats, the top 5% invests primarily in playables and mid-length (16-30 second) videos. 

Playables are more expensive to create, which can pose financial hurdles for some developers. Exchanges also have a variety of inventory rules and creative capabilities, making it more challenging to optimize how playables are served to users. But for these top games, it appears the investment is worth it. On the other hand, these top 5 games seem to be keeping things simple with video. Since they’ve found success with 16-30 second ads, we hypothesize they are saving the cost and energy of investing heavily in other video format lengths. 

‍

Key strategies to staying ahead of the curve

Major industry forces and trends can feel beyond any marketer’s control. But looking closely at the top 5 performing games can reveal a few ways companies can take action and respond to stay competitive despite the overall trends. To summarize:

• Focus on improving short-term retention: Driving early engagement, especially in the first two weeks, is essential to increasing transaction value. 

• Keep playables close to actual gameplay: Misleading ads — ones that show some, but not much, resemblance to the actual game — can put users off, whereas ads showcasing actual gameplay attract more valuable users. When investing in playables, don’t focus only on driving clicks and installs but ensure to remain true to actual gameplay to avoid hurting retention.

• Ensure repeat purchases are a key metric: Closely monitor repeat purchases and optimize for more conversion opportunities, which tend to be a top driver of overall revenue — rather than transaction value.
  
  
• Test and optimize campaigns for a tailored acquisition strategy: Creative formats, audience segmentation, and platform investment all play a role in determining the overall success of acquisition campaigns. Adopting a data-driven mindset enables marketers to test and measure how each factor impacts return on investment (ROI). 

Taking the learnings from the top 5 games, marketers can stay ahead of the curve by using advertising platforms that enhance ad targeting and bidding with machine learning (ML). ML can enable marketers to make better real-time bidding decisions around supply and ad costs and identify unique markets to target, helping them optimize their returns on spend.

If you’re interested in learning more about Moloco Ads, please reach out to us.

‍‍
Any third-party links are provided for your information only. Such links should not be interpreted as approval by Moloco of those linked websites or any information you may obtain from them. Moloco has no control over the contents of those sites or resources.