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6 investors on 2021’s mobile gaming trends and opportunities

Many VCs historically avoided placing bets on hit-driven mobile gaming content in favor of clearer platform opportunities, but as more success stories pop up, the economics overturned conventional wisdom with new business models. As more accessible infrastructure allowed young studios to become more ambitious, venture money began pouring into the gaming ecosystem.
After tackling topics including how investors are looking at opportunities in social gaming, infrastructure bets and the moonshots of AR/VR, I asked a group of VCs about their approach to mobile content investing and whether new platforms were changing perspectives about opportunities in mobile-first and desktop-first experiences.
While desktop gaming has evolved dramatically in the past few years as new business models and platforms take hold, to some degree, mobile has been hampered. Investors I chatted with openly worried that some of mobile’s opportunities were being hamstrung by Apple’s App Store.
“We are definitely fearful of Apple’s ability to completely disrupt/affect the growth of a game,” Bessemer’s Ethan Kurzweil and Sakib Dadi told TechCrunch. “We do not foresee that changing any time in the near future despite the outcry from companies such as Epic and others.”
All the while, another central focus seems to be the ever-evolving push toward cross-platform gaming, which is getting further bolstered by new technologies. One area of interest for investors: migrating the ambition of desktop titles to mobile and finding ways to build cross-platform experiences that feel fulfilling on devices that are so differently abled performance-wise.
Madrona’s Hope Cochran, who previously served as CFO of Candy Crush maker King, said mobile still has plenty of untapped opportunities. “When you have a AAA game, bringing it to mobile is challenging and yet it opens up an entire universe of scale.”
Responses have been edited for length and clarity. We spoke with:

Hope Cochran, managing director, Madrona Venture Group

Daniel Li, partner, Madrona Venture Group

Ethan Kurzweil, partner, Bessemer Venture Partners

Sakib Dadi, investor, Bessemer Venture Partners

Alice Lloyd George, founding partner, Rogue VC

Gigi Levy-Weiss, general partner, NFX

Hope Cochran and Daniel Li, Madrona Venture Group
Does it ever get any easier to bet on a gaming content play? What do you look for?
Hope Cochran: I feel like there are a couple different sectors in gaming. There’s the actual studios that are developing games and they have several approaches. Are they developing a brand new game, are they reimagining a game from 25 years ago and reskinning it, which is a big trend right now, or are they taking IP that is really trendy right now and trying to create a game around it? There are different ways to predict which ones of those might make it, but then there’s also the infrastructure behind gaming and then there’s also identifying trends and which games or studios are embracing those. Those are some of the ways I try to parse it out and figure out which ones I think are going to rise to the top of the list.
Daniel Li: There’s this single-player narrative versus multiplayer metaverse and I think people are more comfortable on the metaverse stuff because if you’re building a social network and seeing good early traction, those things don’t typically just disappear. Then if you are betting more on individual studios producing games, I think the other thing is we’re seeing more and more VCs pop up that are just totally games-focused or devoting a portion of the portfolio to games. And for them it’s okay to have a hits-driven portfolio.
There seems to be more innovation happening on PC/console in terms of business models and distribution, do you think mobile feels less experimental these days? Why or why not?
Hope Cochran: Mobile is still trying to push the technology forward, the important element of being cross-platform is difficult. When you have a AAA game, bringing it to mobile is challenging and yet it opens up an entire universe of scale. The metrics are also very different for mobile though.
Daniel Li: It seems like the big monetization innovation that has happened over the last couple of years has been the “battle pass” type of subscription where you can unlock more content by playing. Obviously that’s gone over to mobile, but it doesn’t feel like mobile has had some sort of new monetization unlock. The other thing that’s happened on desktop is the success of the “pay $10 or $20 or $20 for this indie game” type of thing, and it feels like that’s not going to happen on mobile because of the price points that people are used to paying.
Alice Lloyd George, Rogue VC

6 investors on 2021’s mobile gaming trends and opportunities

How Niantic evolved Pokémon GO for the year no one could go anywhere

Pokémon GO was created to encourage players to explore the world while coordinating impromptu large group gatherings — activities we’ve all been encouraged to avoid since the pandemic began.
And yet, analysts estimate that 2020 was Pokémon GO’s highest-earning year yet.

By twisting some knobs and tweaking variables, Pokémon GO became much easier to play without leaving the house.

Niantic’s approach to 2020 was full of carefully considered changes, and I’ve highlighted many of their key decisions below.
Consider this something of an addendum to the Niantic EC-1 I wrote last year, where I outlined things like the company’s beginnings as a side project within Google, how Pokémon Go began as an April Fools’ joke and the company’s aim to build the platform that powers the AR headsets of the future.
Hit the brakes
On a press call outlining an update Niantic shipped in November, the company put it on no uncertain terms: the roadmap they’d followed over the last ten-or-so months was not the one they started the year with. Their original roadmap included a handful of new features that have yet to see the light of day. They declined to say what those features were of course (presumably because they still hope to launch them once the world is less broken) — but they just didn’t make sense to release right now.
Instead, as any potential end date for the pandemic slipped further into the horizon, the team refocused in Q1 2020 on figuring out ways to adapt what already worked and adjust existing gameplay to let players do more while going out less.
Turning the dials
As its name indicates, GO was never meant to be played while sitting at home. John Hanke’s initial vision for Niantic was focused around finding ways to get people outside and playing together; from its very first prototype, Niantic had players running around a city to take over its virtual equivalent block by block. They’d spent nearly a decade building up a database of real-world locations that would act as in-game points meant to encourage exploration and wandering. Years of development effort went into turning Pokémon GO into more and more of a social game, requiring teamwork and sometimes even flash mob-like meetups for its biggest challenges.
Now it all needed to work from the player’s couch.
The earliest changes were those that were easiest for Niantic to make on-the-fly, but they had dramatic impacts on the way the game actually works.
Some of the changes:

Doubling the players “radius” for interacting with in-game gyms, landmarks that players can temporarily take over for their in-game team, earning occupants a bit of in-game currency based on how long they maintain control. This change let more gym battles happen from the couch.
Increasing spawn points, generally upping the number of Pokémon you could find at home dramatically.
Increasing “incense” effectiveness, which allowed players to use a premium item to encourage even more Pokémon to pop up at home. Niantic phased this change out in October, then quietly reintroduced it in late November. Incense would also last twice as long, making it cheaper for players to use.
Allowing steps taken indoors (read: on treadmills) to count toward in-game distance challenges.
Players would no longer need to walk long distances to earn entry into the online player-versus-player battle system.
Your “buddy” Pokémon (a specially designated Pokémon that you can level up Tamagotchi-style for bonus perks) would now bring you more gifts of items you’d need to play. Pre-pandemic, getting these items meant wandering to the nearby “Pokéstop” landmarks.

By twisting some knobs and tweaking variables, Pokémon GO became much easier to play without leaving the house — but, importantly, these changes avoided anything that might break the game while being just as easy to reverse once it became safe to do so.
GO Fest goes virtual

Like this, just … online. Image Credits: Greg Kumparak

Thrown by Niantic every year since 2017, GO Fest is meant to be an ultra-concentrated version of the Pokémon GO experience. Thousands of players cram into one park, coming together to tackle challenges and capture previously unreleased Pokémon.

How Niantic evolved Pokémon GO for the year no one could go anywhere

MTG acquires mobile racing game studio Hutch Games for up to $375 million

Sweden’s MTG is making a significant acquisition in the mobile gaming industry. The company is acquiring Hutch Games, the London-based game studio behind popular mobile racing games such as Rebel Racing, F1 Manager and Top Drives.
The acquisition is an important one for MTG as the company is spending $275 million right away and setting aside another $100 million for performance-based payments.
If you’re not familiar with MTG, you probably know its portfolio companies. Over the past few years, MTG has acquired ESL and DreamHack to become an esports leader.

MTG has also acquired InnoGames and Kongregate for their popular web-based and mobile games. And it sounds like MTG isn’t done just yet, as the company plans to acquire more companies in the near future.
MTG explains why the acquisition makes sense in its announcement. Hutch Games isn’t focused on a single game. It has built a portfolio of successful games, which is always a good sign for future growth.
The game studio has also licensed some well-known brands, such as F1. And MTG believes that F1 Manager, Top Drives and Rebel Racing still have a lot of growth potential. Free-to-play mobile games have become games-as-a-service, so you want to keep them popular over the long run.
When it comes to long-term potential, Hutch Games also has more games in the pipeline for 2021 and 2022. Finally, it’s a cost-effective studio, as most employees are developers.
During the first nine months of 2020, Hutch Games generated $56.3 million in revenue and $13.3 million in earnings before interest and taxes (EBIT). Hutch Games investors included Backed VC, Index Ventures, Initial Capital and angel investor Chris Lee.
As you can see, free-to-play games can be lucrative. That’s why there will be some consolidation in the future. Some companies will use their deep pockets or take advantage of debt to build out big portfolios and the real estate of your home screen, one game at a time.

MTG acquires mobile racing game studio Hutch Games for up to $375 million

PUBG Mobile plots return to India following ban

PUBG Mobile, the sleeper hit title that was banned in India two months ago over cybersecurity concerns, is plotting to make a return in the world’s second largest internet market, two sources familiar with the matter told TechCrunch.
The South Korean firm has engaged with global cloud service providers in recent weeks to store Indian users’ data within the country to allay New Delhi’s concerns about user data residency and security, one of the sources said.
The gaming giant has privately informed some high-profile streamers in the country that it expects to resume the service in India before the end of this year, the other source said. Both the sources requested anonymity as they are not authorized to speak to the press. PUBG Corporation did not respond to a request for comment Thursday.

The company could make an announcement about its future plans for India as soon as this week. It also plans to run a marketing campaign in the country during the festival of Diwali next week, one of the sources said.
In recent weeks, PUBG has also engaged with a number of local firms, including SoftBank-backed Paytm and telecom giant Airtel, to explore whether they would be interested in publishing the popular mobile game in the country, an industry executive said. A Paytm spokesperson declined to comment.
Chinese giant Tencent initially published PUBG Mobile apps in India. After New Delhi banned PUBG Mobile, the gaming firm cut publishing ties with Tencent in the country. Prior to the ban, PUBG Mobile’s content was hosted on Tencent Cloud.
Late last month, two months after the ban order, PUBG Mobile terminated its service for Indian users. “Protecting user data has always been a top priority and we have always complied with applicable data protection laws and regulations in India. All users’ gameplay information is processed in a transparent manner as disclosed in our privacy policy,” it said at the time.

PUBG Mobile to terminate access for users in India on October 30 following ban order

With more than 50 million monthly active users in India, PUBG Mobile was by far the most popular mobile game in the country before it was banned. It helped establish an entire ecosystem of esports organisations and even a cottage industry of streamers that made the most of its spectator sport-friendly gameplay, said Rishi Alwani, a long-time analyst of Indian gaming market and publisher of news outlet The Mako Reactor.
PUBG Mobile’s return, however, could complicate matters for several industry players, including some that are currently building similar games to cash in on its absence and their conversations with venture capital firms over ongoing financing rounds.
It would also suggest that more than 200 other Chinese apps that India has banned in recent months could hope to allay New Delhi’s concerns by making some changes to where they store their users’ data. (That was also the understanding between TikTok and Reliance when they engaged in investment opportunities earlier this year.)

ByteDance in talks with India’s Reliance for investment in TikTok

PUBG Mobile plots return to India following ban

Zynga reports record revenue and strong user growth while still losing $122M

Zynga’s revenue grew to a record $503 million (up 46% year-over-year) in the third quarter, with bookings of $628 million (up 59%), according to its latest earnings report. It also had its best mobile daily active user (31 million) and monthly active user (83 million) numbers in six years.
But things weren’t all rosy: The company also reported a net loss of $122 million. That compares to net income of $230 million during the same period last year, though that was boosted by the sale of Zynga’s building in San Francisco. As of 4:44 p.m. Eastern, shares were down 4.9% in after-hours trading.
Before earnings were released, CEO Frank Gibeau told me that although growth has become more normal after the pandemic caused “that huge jump” in usage during the late spring and early summer, “Engagement remains elevated and monetization remains elevated. Folks that discovered mobile gaming for the first time returned to it and kept doing it.”

The company predicted further growth in Q4, with revenue up 55% to $570 million. Gibeau pointed to a “digital holiday” that could have big benefit in mobile gaming, with new mobile on the market, plus social distancing and lockdowns resulting in the fact that “a lot of folks aren’t going to be able to go to stores and buy gifts.”
During the third quarter, Zynga also closed its acquisition of Istanbul-based hyper-casual game publisher Rollic. Gibeau said the team is “fully integrated at this point from an operating standpoint,” but the company won’t start including Rollic in its user numbers until the next quarter.
“We are well-positioned for further M&A,” he added.

Zynga completes its acquisition of hyper-casual game maker Rollic

Zynga reports record revenue and strong user growth while still losing $122M