The hyper-casual game genre is very popular among mobile game studios right now. The success of companies like Vodoo and Ketchapp has pervaded the industry, and nobody wants to miss out. The idea of hyper-casual is straight forward: create a simple, easy to understand, engaging, fast-paced core game loop that allows for short playing “sprints” that have an addicting “one more round” effect on players and that can be replayed indefinitely. Studios that focus on hyper-casual try to crank out several new titles a month. While the games are still fairly rough, they are soft-launched to a small audience in countries with low user acquisition costs. Key metrics such as retention rate and average revenue per daily average user (ARPDAU) are rigorously recorded. Developers study the metrics and decide which games make the cut for further development -- most don’t. The few promising titles with the required stickiness are fully developed and officially launched.
Hyper-casual games, even the most successful ones, rarely have long shelf lives, so the monetization has to happen in a matter of months. In most cases, it’s all about high user volume, chart position, effective user acquisition (UA), great ad mediation, cross-promotion, and sheer stickiness. The most lucrative titles generate $40-50M dollars in revenue and cost less than $100K to make. Then, it’s all about repetition; can the studio do it again and again?
Hyper-casual is difficult to pull off. Success boils down to an arbitrage play. Developers need to carefully balance lifetime value (LTV) vs. cost-per-install (CPI). LTV is predominantly driven by incentivized ads while CPI depends on the efficiency of cross-promotion and paid user acquisition.
The arbitrage opportunity is disappearing, though. The hyper-casual genre has become very crowded. As a result, the average CPI is going up. Ad networks are becoming saturated with ads for hyper-casual games, causing the effective cost per mille (eCPM) to go down. As a consequence, the ad monetization opportunity for hyper-casual games is diminishing. The margin narrows, rendering the business model less viable.
For the hyper-casual genre to remain financially attractive, additional in-app purchase (IAP) monetization is required to support the faltering ad revenue. Below are five types of IAP suitable for hyper-casual players.
1. “No ads” IAP
This is the most straightforward IAP for any game that generates most of its revenue from ads: The player pays a fixed amount of real money in exchange for a playing experience that is ad-free. The concept is universally applicable and easy to pull off, but somewhat limited. Many games already offer a “no ads” package, sometimes in combination with premium currency purchases. For those games, there is no real opportunity here. Additionally, many players rely on the rewards they receive for watching video ads to boost their gameplay experience, and therefore might not want those ads to disappear. Further, even if a player buys a no-ads package, it’s only worth a few dollars and can only be purchased once in a player’s lifetime. And, with that purchase, the ad monetization opportunity vanishes entirely for that player.
2. “No-ads” Subscription
An ads-free experience can also be sold as a recurring subscription. The subscription period can vary from weekly to yearly. The recurring payments eradicate one of the most crucial problems of a no-ads IAP, but the other issues remain. Players might not view the disappearance of the ad rewards favorably, and if they do, the ad monetization opportunity is still gone the moment they buy the IAP.
3. Premium Currency - Game Economy
Several well-known hyper-casual games now feature in-game economies that allow players to purchase items from an in-game store (weapons, vehicles, buildings, etc.) for premium currency. Players exchange real money for premium currency -- classic freemium. The opportunity for additional monetization is there. It all comes down to the depth of the economy: What is the maximum amount of premium currency a player can spend if he/she exhausts every option. However, hyper-casual gameplay, with its fast rounds and high repetition rate, usually doesn’t allow for sophisticated game economies where a lot of upgrading, healing, trading, harvesting, and building needs to take place to progress. All of these tasks take time, and, thereby, prolong the core game loop. Long gameplay is the opposite of what’s intended in a hyper-casual game. Narrow economies, on the other hand, offer only so many possibilities for the player to spend premium currency and therefore limit monetization through premium currency IAP.
4. Premium Currency - Skins
“Skins” or other non-consumable items are a viable option if there is a vanity element in the game. This method requires a strong motivation to collect skins in a single-player environment or the introduction of a social layer in the game, for example, a combative component or a collaborative situation. The question is, do the elements that require interaction with other players work with the easily accessible, fast, highly iterative gameplay that defines hyper-casual games. Asynchronous play, where players don’t compete/collaborate in real time, comes to mind, but there are no successful examples of this strategy in the market right now.
5. Premium Currency - Consumables
A game economy that features consumable items (boosters, energy units, bombs) presents a good opportunity for IAP monetization. Hyper-casual gameplay thrives on an immediate reward mechanic. Consumable items that can be bought and immediately used to increase performance, boost speed, or grant additional time, integrate very well with a hyper-casual core game loop. Several successful hyper-casual games in the market show how these mechanics can be a crucial part of gameplay. Additionally, items that can be consumed/bought repeatedly allow for continuous demand without any limits to individual player spending.
As the Hyper Casual market is becoming increasingly crowded, the LTV-CPI arbitrage opportunity is shrinking for game studios. Supporting the decreasing ad revenues with IAP monetization layers can be the solution. For an implementation of IAP into hyper-casual to be successful, the general requirements are to maintain fast, easily accessible gameplay while offering instantly gratifying opportunities to spend in-game currency, repeatedly. With those boundaries in mind, depending on the game, the most promising approaches are skins (4) and/or consumables (5). It will be exciting to see where hyper-casual goes in the next 12 months.