2014 proved to be a record-breaking year for mobile games firms for many reasons. One that caught my eye came from the UK’s annual games marketing spend league table. According to ad specialists Media Campaign, the biggest marketing spend for games software (as distinct from hardware) last year across all media types was made by King.
Yes, King spent more on individual games marketing than any console games publisher. This month, I want to explore what King’s ascent to the ad spend throne ahead of the retail publishers says about the state of the mobile games advertising market.
A quick dissection of the financials for King, Activision and EA in recent years reveals some notable marketing spend differences. Activision and EA invested around 14 per cent of their revenue in the ‘marketing and sales’ cost category in 2014 – figures that are pretty typical in their recent history. To support its hyper growth of the last three years, King has spent between 34 per cent and 20 per cent last year.
Is this a radically different approach to game promotion? It would not be a huge surprise given that these are publishers targeting different market segments. Critically, even taking into account its higher marketing percentage, King is still much more efficient than Activision and EA with operating profits of 33 per cent vs 25 to 26 per cent for Activision and EA. King, therefore, has more margin to play with. But are they all that different in practice?
Using the microcosm of UK games marketing spend last year we can see that King, Activision and EA all invested most heavily in TV ads. Remarkably, King spent more on TV than Activision and EA combined.
As a company that has grown aggressively using directly measurable customer acquisition strategies, the massive use of such a traditional, blunt marketing instrument might surprise. However, there is evidence from App Store data that TV ads can drive huge downloads. Such promotion is difficult to measure accurately but for King, this appears to be acceptable and the relative consistency of their TV ad spending in the UK throughout 2014 suggests it is also effective.
Many of the top grossing mobile games publishers such as King, Supercell – who also feature high in the same TV spend charts – and Machine Zone appear to have crossed a Rubicon in the last 18 months. They have apparently reached a point where direct customer acquisition is not enough to maintain their chart placement, install rate and – ultimately – their revenues. Broadening mass brand awareness and reach are the next logical step. Hence the enlisting of high profile actors and models, premium Super Bowl ads and giant billboard campaigns.
Of course, we’ve seen this all before with the big console games publishers who have regularly used mega-budget cross media campaigns to drive title awareness and retail sales. However, the parallels between console and mobile games publishers don’t stop there. The top mobile players all invest very heavily in performance marketing and direct customer acquisition too. This has often driven up ad prices out of the reach of many companies in the tiers below them.
The economics may not always make sense in the long-term for them but this will be seen as an affordable sacrifice if the result is continued chart dominance in the short-term. For me, this is reminiscent of the major retail games publishers using their scale to dominate shelf space and point of sale promotion – which, in a physical retailer, is always going to be at the expense of the competition.
In the retail space, this has contributed materially to the collapse of the mid and lower tier console games market and a concentration of power at the top. Will mobile gaming follow suit or will its infinite shelf space and theoretically lower barriers to entry prevent this from ever happening?
One could argue that for the lower tier of mobile gaming, this has already happened – although many more factors than ad spend by the top tier are responsible. Perhaps the greatest threat could come from top tier publishers saturating not just the top but also the middle of the charts? How long will success in the mid-tier, which remains vibrant and viable, if the chance of cracking the top 50 becomes increasingly difficult?
Data courtesy of Media Campaign
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