Apr 15, 2021

How can mobile gaming prove it’s more than just a cash cow?

mobilegaming
mediaandentertainment
Apps
Smartphones
Harry Menear
8 min
The $174.9bn mobile gaming industry needs to shake its reputation as an unscrupulous cash grab if it wants to become a serious platform.
The $174.9bn mobile gaming industry needs to shake its reputation as an unscrupulous cash grab if it wants to become a serious platform...

The global gaming industry is massive, generating just shy of $165bn last year - meaning that gaming revenues are fast closing in on more established sources of entertainment like video and professional sports. Of that total, console games accounted for around $33bn of revenue, and the PC market made up about $40bn. The remaining $85bn, you ask? All thanks to mobile gaming. 

Mobile gaming has done very well indeed during the COVID-19 pandemic, and shows no signs of slowing down. Just this morning, AppLovin, a mobile gaming company responsible for popular titles like Matchington Mansion and Wordscapes, raised $1.8bn in an IPO, which has raised its market capitalisation to $28.6bn in one of the biggest public debuts of the year so far by any company.

There are an estimated 2.5bn mobile gamers around the world, according to data from Newzoo - roughly the same as all the PC and console gamers combined. Now, these figures don’t account for overlap; someone who owns a Nintendo Switch or an Xbox is almost guaranteed to also own a smartphone, and probably has a game or two downloaded on it. But the fact that there are around 5.22bn people (about 66% of the world’s population) carrying around a smartphone right now, the rampant success of mobile games becomes a little less shocking. 

If you want to play The Legend of Zelda: Breath of the Wild 2 when it comes out (and trust me, you do; this one might let us pet the dogs) then you need to drop about $299 on the console you need to play it (and the Nintendo Switch is easily the cheapest current-gen gaming platform on the market, with the Xbox Series X and PlayStation 5 retailing at $499.99 - and don’t even get me started on how much it can cost to build a gaming rig for PC) before you've even bought the game itself. 

While that’s not much compared to a flagship smartphone, phones can be used as, well, you name it. From email to social media, video streaming and browsing the internet, there’s a whole lot that a phone can do that a console can’t. 

So, lack of portability and a high price associated with a console vs portability, versatility and more bang for your buck when it comes to your smartphone (heck, most of the games are even free). That figure - 2.5bn mobile gamers - starts to look a lot less impressive when you consider the fact that more than double that number of people already own the platform they need to download a game and play it. 

Why aren’t mobile games more popular?

Remember when I said most of the games are free? If you’ve downloaded a “free” mobile game, it probably didn’t take you long to realise that the vast majority of these games are “free-to-play” but “pay-to-win”, leveraging in-game microtransactions that encourage players to spend small amounts of money here and there to gain better items, unlock new characters, or even progress past a certain point. 

The practice is pretty universally reviled, but the counter argument from the mobile games industry has always been that customers just aren’t willing to pay the same kind of money for an app that they are for a “real game” on a console. The low barrier to entry that, on the face of it, is mobile gaming’s greatest strength is actually its greatest weakness, as the “freemium” element of mobile game design often supposedly creates an experience that rewards spending a few dollars here and a few dollars there over actual skill. 

Back in 2019, for National Video Games Day, Xbox tweeted a message tagging its fellow platforms, saying that “No matter what you call it, one thing that unites us all is the X button”, with an accompanying picture of a Switch, Xbox and Playstation controller, as well as the X key on a keyboard. The internet wasted absolutely no time in adding a fifth entrant: a paywall popup on a mobile game with a tiny X in the corner to cancel the ad. 

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Courtesy of Starecat.com

Nelson Schneider, a columnist at Metled Joystick wrote in that same year that, “In spite of the huge amount of money mobile gaming generates, it is well-known among Core Gamers as a hive of scum and villainy,” adding that mobile ports of popular PC and console games like Diablo “are met with heckling and derision,” and that “We’ve caught onto the fact that mobile games are shallow imitations of the ‘real’ games we care about, with cynical monetisation tacked on.” 

The mass revulsion that “real gamers” feel towards mobile as a platform hasn’t gone away. And why would it have? Mobile games are raking in obscene amounts of money with a model that clearly makes good financial sense. Or does it? Is there a better way?

This week, Eric Switzer of The Gamer wrote an interesting piece in which he notes that “There are plenty of worthwhile experiences to have on mobile, but they tend to get buried under a pile of trash.” He adds that “For every ten greedy pieces of junk mobile games like Crash: On the Run, there’s an equally ambitious and valuable game like Monument Valley or Downwell.” 

Both of those games he mentioned also have well-received console and PC versions, and are firmly wedged into the “indie darling” category of lovingly crafted, niche-ish audience gaming experiences. 

Think of them like The Blair Witch Project, a low-budget, lovingly crafted and truly innovative film that, in its own way, redefined the horror genre. What came next? Paranormal Activity. And Paranormal Activity 2, Paranormal Activity 3, Paranormal Activity 4, Paranormal Activity: The Marked Ones, and Paranormal Activity: The Ghost Dimension. Cheap genre clones of popular indie games are, sadly, a huge problem in the mobile gaming industry, where app stores can’t (or won’t) police intellectual property as effectively as it’s overseen on other platforms. 

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A side-by-side view of the eerily similar artwork in Monument Valley and Skyward - courtesy of YouTube user BitStern

Shortly after the launch of Monument Valley, mobile game studio Ketchapp released Skyward. Tim Seppala, a writer for engadget notes that the time that, “Whereas Monument Valley is a relaxing, almost Zen-like experience that's more about logic puzzles than twitch reactions, Skyward is a shallow attempt at disguising a tired Flappy Bird clone by wrapping it in pastel colors and M.C. Escher-like aesthetics. Oh, and it's full of obtrusive ads for retirement planning and compact cars -- junk that's thankfully missing from Monument Valley.” 

Here you have the other big issue with the mobile industry: that sad reality that, as Seppala wrote back in 2015, “plenty of people will download the knockoff because it doesn't cost anything, while Monument Valley will set them back less than a venti latte from Starbucks.”  

So, how do we fix it?

The shortsightedness of the mobile gaming industry’s business model is, sadly, a bit of an ouroboros. Consumers expect games to be free because mobile games are so often of inferior quality compared to console games; game studios make their games free because customers won’t pay money upfront, but need to recoup their costs somewhere, and so have to make inferior games that include things like microtransactions; and so on… Switzer writes that, “I wish I didn’t have to defend mobile as a legitimate gaming platform in 2021, but there’s just no way to deny that the mobile well has been poisoned for a very long time.”

As an alternative, Switzer holds up Riot Games - the studio behind massively popular MOBA League of Legends - as a possible way forward. “Luckily, trhere’s at least one studio that’s making a concerted effort to legitimize mobile gaming to the “hardcore” audience,” he writes, noting that Riot’s latest release, Legends: Wild Rift, does its best to provide a comparable experience to its PC and console properties. The games are still free-to-play, but microtransactions are purely related to cosmetics (items unlocked in game that don’t have a mechanical impact on how you play) and things like battle passes (basically achievements that give you bragging rights and shinier badges). It’s a very similar model to the one employed by Valve’s Dota 2 - another very popular MOBA (sorry - that thanks for multiplayer online battle arena. Think of it as a tower defence game with RPG elements). 

It’s a promising solution: disconnect microtransactions from mechanical components for a truly cosmetic (and therefore optional) experience. This approach is probably only going to be viable for AAA studios with the upfront capital to burn building a massive user base. 

The other solution is the “indie auteur” route: build the impression of games-as-art or narrative that means people are just as willing to pay $4.99 for a game as they are for a movie ticket or a venti latte from Starbucks. The issue here is the game cloning. If regulation of marketplaces like Google’s Play Store and the iOS store can be tightened up to exclude games that breach intellectual property rights - or at least curate their selections a little better - then gamers would spend less time choosing between something mediocre and “free” and a genuinely pleasing experience with a small upfront payment. 

However, Schneider noted all the way back in 2015 that, “Trusting in Apple and/or Google to legitimise mobile gaming through the co-option and corruption of Indie games seems to embody the proverbial foxes guarding the proverbial henhouse.” He added: “Apple and Google are the ones who got us into this mess in the first place. If not for the heavy-handed advertising and monetization they encouraged app developers to employ, mobile gaming may not have traveled down the dark and sordid path that it did.” 

With $85bn on the line every single year (and Apple, for example, taking 30% of the revenues generated by every single app in its store) it doesn’t look like that particular status quo is going change any time soon. 

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May 4, 2021

Verizon sells AOL, Yahoo for half of what it paid for them

Media
Entertainment
mobileoperators
5G
Harry Menear
4 min
Courtesy of Verizon Media
Verizon has offloaded its media subsidiary, including AOL and Yahoo, to Apollo for $5bn, just over half of what it paid for them...

Verizon has found a buyer for its stable of media brands. On Monday, the US telecom carrier announced that it has entered into an agreement with Apollo, a New York-based “alternative” investment management firm, to sell its Verizon Media subsidiary for the sum of $5bn. 

Verizon Media is the holding company for some of the most venerable names in the collective consciousness of the internet: Yahoo and AOL. 

The price tag for what were once two of the internet’s biggest brands represents a continuing streak of bad bets by Verizon, which is getting barely half of its money back for the two sites, compared to the $4.4bn and $4.5bn it paid for AOL in 2015 and Yahoo in 2017, respectively. 

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Courtesy of Verizon

The sale comes a couple of years after Verizon sold off the once-popular blogging site Tumblr for an undisclosed sum, although some fairly reliable sources have put Tumblr’s final price at less than $3mn - a negligible return on investment compared to the $1.1bn that Yahoo paid for the platform back in 2013. 

Following the sale of Verizon Media (which will pass through the transaction as Yahoo), Verizon will maintain a 10% stake in the company and its current CEO, Guru Gowrappan, will continue to lead the company. 

Gowrappan has said that he is “excited to be joining forces with Apollo.” He added in a statement to the press on Monday that, “The past two quarters of double-digit growth have demonstrated our ability to transform our media ecosystem. With Apollo’s sector expertise and strategic insight, Yahoo will be well positioned to capitalize on market opportunities, media and transaction experience and continue to grow our full stack digital advertising platform. This transition will help to accelerate our growth for the long- term success of the company.”

Executives from Apollo have also expressed their confidence and enthusiasm for Verizon’s stable of media assets. David Sambur, a senior partner at Apollo Global, said that he and his colleagues are “big believers in the growth prospects of Yahoo and the macro tailwinds driving growth in digital media, advertising technology and consumer internet platforms.” 

While talking about the same media organisation that produced pearls of internet absurdity like Yahoo Answers (which is being shut down ahead of the sale - sorry, MBMBaM-binos) in the same breath as phrases like “a key destination for finance and news among Gen Z” seems laughable, Apollo Global may have a point.   

Yahoo News recently became the fastest-growing news organisation on the immensely-popular social media platform TikTok (a sentence I never thought I’d ever write), and Verizon Media goes into the sale off the back of two years of strong revenue growth. 

So, why is Verizon selling a profitable chunk of itself for just over half of the $9bn it coughed up just a few years ago? 

Much like its competitors AT&T and T-Mobile, Verizon is in the middle of one of the biggest private infrastructure expenses in history. The global 5G rollout prompted more than $2.7trn of investment before the end of 2020, and it’s nowhere near “complete”. 

Infrastructure companies, governments, and particularly carriers are pouring vast sums of money into 5G buildouts in the fight to stay competitive and maybe, just maybe, start turning a profit. Verizon will reportedly be using the $5bn raised from the sale of AOL, Yahoo and the other Verizon Media brands to “aggressively pursue growth areas and stands to benefit its employees, advertisers, publishing partners and nearly 900mn monthly active users worldwide.” It’s a good bet that those growth areas it plans to aggressively pursue are linked to expanding and improving its 5G coverage.    

“Verizon Media has done an incredible job turning the business around over the past two and a half years and the growth potential is enormous,” said Hans Vestberg, CEO, Verizon on Monday. “The next iteration requires full investment and the right resources. During the strategic review process, Apollo delivered the strongest vision and strategy for the next phase of Verizon Media. I have full confidence that Yahoo will take off in its new home.”

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