How Israel’s $1B game business thrives in a cutthroat global industry
GamesBeat: Do we have a user acquisition crisis right now? How should game companies deal with that?
Frankel: We’re looking at the issue in two ways. One, we’re looking at some interesting sources of existing big audiences on mobile platforms that aren’t very widely available. We’re looking at ways to collaborate with those entities and grow our audience through them.
Obviously we’re also putting a lot of emphasis on the growth we have. Right now we have more than 50 people in the company working on user acquisition full time. This is a very important department when it comes to growing the company.
Schliesser: We grew very gradually in the kids’ market, because it’s harder to target those users. Ultimately we achieved 40 million unique monthly active users. When you can get a game in the top 10 in more than 50 countries, that usually does it. Sometimes we do a little bit of user acquisition, but mainly in situations where we want to improve from, say, number 10 to number six.
On the mid-core front, with the rising cost of user acquisition, there are all sorts of new calculations around CPI and LTV. It’s a whole science. It’s very complicated and it’s changing every day. You need to keep track of that. The idea of gaming as a service is spreading to other platforms through things like Steam. On the kids’ front we’re cooperating with different stores and releasing subscription-based content. We need to find better ways to adapt the games-as-service model as it becomes a part of bigger games. That’s going to be a challenge.
Levy-Weiss: The reality is that there is a big problem with user acquisition. The main reason is that for a couple of years now, the main channel for user acquisition on mobile has been Facebook. Google has been extremely slow at adapting. Right now they’re catching up with YouTube ads and so forth, but Facebook has moved almost everything to its mobile platform and has close to a billion users globally. It’s become the go-to place for game installs.
In the beginning that was great for the game companies that moved quickly. They could get installs very cheaply in one place. At a certain point, 80 or 90 percent of installs in mobile came from Facebook. But as more and more companies started getting on top of it, and in the last year as Facebook started onboarding more brands and e-commerce companies into in-feed advertising, the prices started to go up and up.
Right now the Facebook inventory is more or less fixed. It’s about one ad for every 10 items in your feed. That’s the way it’s calibrated today. As long as they don’t decide to push more, the inventory is fixed. The number of advertisers is only growing, and so CPI has grown by more than 120 percent over the last year. There’s hopefully going to be a few things that are stopping it now. But the reality is that if it keeps going up, it’s going to be tougher for game companies to succeed, especially smaller game companies.