State of Mobile Ad Revenue | Future and 2021 Retro

To Execs, PMs, Ad Monetization Teams, and Marketers:

IDFA deprecation was supposed to be a killer. What we’ve learned, however, is that it depends on who you are.

If you’re Facebook, well… ok, sure it sorta sucks. Many mobile publishers have significantly reduced revenue from Facebook Audience Network (FAN). But there are others in the gaming ecosystem that have escaped relatively unscathed or have even gained.

I really can’t believe they made this movie…

In the lead up to IDFA deprecation, the smartest perspective I heard about the potential impact came from GameJam CEO Christian Calderon during a panel on the Future of Mobile Attribution:

Basically, Christian is suggesting that there would be winners and losers and while some may lose margin, others should gain.

Expanding on Christian’s point at that time, one view I promoted was the potential impact of IDFA deprecation viewed in the following way:

The scenario hypothesized at the time was that:

1. Hyper-targeting ad products from the ad networks that make the most use of IDFA fall

2. Overall game developers’ margins potentially increase as the ad networks that sit in between players and the game developers fall. Having said that, certain genres that rely on high LTV player targeting would suffer e.g., social casino and 4X

3. ID targeting ad networks fall to the level of other ad networks that use non-ID, non-event/value based forms of targeting like contextual based targeting

4. Game developers who don’t have to give up so much margin to ad networks are potentially able to give players more value or invest more into the game back to players

From what we’ve seen so far it seems that certainly #1 and #3 are true. For #2, Social casino certainly seems impacted and we’ll see what happens on an overall basis. #4 remains to be seen.

Impact to Hyper-casual Games

One prediction many in the industry including myself thought would happen that didn’t: the fall of hyper-casual games.

That hasn’t quite happened, or at least as badly as many had predicted. With respect to hyper-casual in particular, if we look at a basket of 8 of the top 10 hyper-casual game companies we can get a high-level view of impact to the genre. We include Voodoo, Lion Studios, Crazy Labs, Amanotes, Good Job Games, Playgendary, Azur Interactive, and Supersonic Studios. However, we don’t count Applovin or Zynga as both publishers have a much more diverse portfolio.

IDFA deprecation should have started to have an impact in May or June. Based on the graph below, while there is a bit of a dip in revenue there, we don’t see an Armageddon level of impact:

However, with respect to downloads, there does seem to be some loss that could be described as major, from a 2021 high of 446M downloads in May to 338M downloads in September translating to a drop of 24%.

However, note that generally speaking hyper-casual traffic is generally pretty spiky so it’s not clear whether this is an impact from IDFA or not. You can see how spiky this traffic is since 2019 below:

Last August, we spoke with some key experts on the demand side of mobile advertising to determine the impact at that time on the mobile gaming industry from a user acquisition perspective:

• IDFA Loss: Real Data & Real Talk

Mobile Ad Revenue | Current and Future Outlook Panel Discussion

I am so lucky as a dumb executive to be able to talk to world-class experts in their specific areas of expertise. This time, we spoke with folks on the ad monetization side to see what the current state of the market looks like and speculation on the future:

Speakers:

• Josh Chandley, COO, WildCard Games

• Sofia Gilyazova, Head of Ad Monetization, Socialpoint (TakeTwo)

• Offer Yehudai, CMO, Digital Turbine

Some Key Takeaways:

• Ad CPMs did not drop as precipitously as predicted by many in the industry

• From Josh’s casual games portfolio some ad CPMs have actually increased up to 5% on iOS and even more on Android. Ad ARPDAU was flat for him on iOS and more increase on Android.

• Offer suggests CPM drops should be differentiated by game genres and ad units. On average he saw, on iOS, 12-18% CPM drop for all ad units aggregated. Banners vs. Interstitials vs. rewarded video were impacted differently. CPMs on rewarded video weren’t affected or went up.

• Sofia didn’t see crazy drops in CPM as was hyped. She did see light declines on iOS in certain games and stability in others depending on genre. Casual games seem to be holding up better relative to midcore/hardcore.

• Offer previously predicted that a lot of the concern about hyper-casual games getting destroyed by IDFA deprecation was over-hyped and that contextual advertising would offset some of the loss from IDFA deprecation. He seems to have been right. FAN seems to also be moving towards contextual.

• Josh has continued to see CPM hotspots with CPM over $300 at times in the US. Further, he has seen the gap between LAT and non-LAT traffic reduce as more ad networks switch over to contextual.

• Offer suggests best practice for publishers especially those in mid/hardcore should still maintain separate waterfalls for LAT vs. non-LAT traffic. Sophia hasn’t seen a big difference maintaining separate waterfalls for Socialpoint but they have specific reasons for this.

• Sofia has a very simple view of the impact of IDFA deprecation on specific games or game genres: any game that was dependent on Facebook is heavily impacted, those that aren’t weren’t highly impacted.

• Offer great insight: “In our industry, we are trained to believe certain things are absolutely true.” Be careful to test assumptions and be careful about industry conventions.

• Offer suggests now is finally the time where we may have crossed the tipping point for game developers to consider brand advertisers in their ad mix.

• Data transparency has been an issue. From our last talk, we noted that Josh mentioned that access to data such as how much ad networks are paid to show a user an impression or Sophia mentioned she couldn’t see bids in programmatic. Josh mentions data transparency is improved on the ad revenue and ad monetization side overall since we last spoke. Sofia worries more about how companies and the corresponding data are being bought and sold.

• On John Koetsier’s report on Applovin potentially rerouting SKAdNetwork postbacks, we got some politically correct responses from our speakers on this but also some real and very balanced comments which I won’t write here but you can watch for yourself in the Data Wars of 2021 section of the video.

• Admon teams are today a primary interface between internal game studio data and external parties. Therefore, heads of admon teams are increasingly taking on the role of deciding strategy for their company’s game data.

• Biggest winners - SDK ad networks like Unity (*cough* fingerprinting *cough*) and more contextual-focused ad networks.

• Biggest losers - “The catastrophic loser is Facebook.” Most publishers prior to IDFA deprecation had at least 25-30% of revenue on iOS coming from FAN and now that’s like 3-5%.

• The acquisition of MoPub from Applovin will now force publishers to make a choice: are we moving to Max? Are we choosing someone else? A choice will come up on the demand side as well. These decisions are coming up but will have a long-term impact.

• Fyber remains the only open, transparent, and independent mediation platform out there. With others, you may have to roll the dice on your data.

Predictions

Concluding our panel, we had our speakers give us up to 3 predictions on what they expected in the future from our industry.

Offer Yehudai:

1. Mid-core games make a rebound with alternative payment options and the ability to do direct billing on iOS

2. On the UA front, creators and influencers may really start getting into the media mix in a bigger way,

3. Lastly, Offer believes our industry is maturing and the giants like Netflix and Disney will be a blueprint to where we are heading with the ability to bring together content, platform, UA, monetization, and cross-promotion.

Sofia Gilyazova:

1. Big publishers may become increasingly autonomous and create or acquiring their own ad-tech relative to using external ad tech platforms where data may be potentially compromised.

2. There are some MMPs up for grabs and Sofia suggests there may be some M&A here.

3. Finally, Sofia believes we will see an interesting range of experiences in games where hard and mid-core games will adopt influences from casual or other game experiences. Expect to see more merging of genres like with Merge Dragons.

Josh Chandley:

1. There will be an expansion of the Data Wars. We will learn how valuable SKAdnetwork data actually is and this will become the new area to fight over.

2. We will go from “SKAdnetwork Apocalypse” to the “SKAdnetwork New Frontier.” The changes today may actually not be a contractionary force but instead an expansionary opportunity.