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KEY HIGHLIGHTS

🎮  Factors that contributed to the rising popularity of the hypercasual games

🎰  How the unit economics differs for hypercasual and hybrid games

💰 Key motivators for players to spend $$ on IAPs

🛻 Tips to move from a hypercasual to a hybrid game

 💻 What resources should developers look at adding to build a hybrid game

📓 The different publishing strategies for both the genres

⛔️ Common mistakes to avoid when moving from a hypercasual to a hybrid genre

KEY QUOTES

Hypercasual games are reaching a point of saturation

The reality is there’s only so many interstitials and rewarded videos, you can physically cram into a level before negative impact on your retention. If you read a hypercasual review, there are notes saying there are too many ads. That is a challenge now for the industry because I think the industry is growing in terms of players and number of games, but in terms of classic monetization, perhaps we are close to hitting peak revenue

What are hybrid games?

Within hybrid games, what labels might people think of? I would think of hyper idle games – not full on idle but taking elements of hypercasual up. This genre just exploded and I would say every hypercasual publisher is now building this concept of idle arcade games. So it’s got that grind you experience in an idle clicker or classic idle game. But it also does have some element of actual adventure and collecting in it with some hypercasual mini games.

The benefits of including IAPs in your game

Generally once you have IAPs in your games the goal is set, let’s say your day zero target might be 60 cents instead of 40 cents. So it gives you a little bit more breathing room. Therefore the CPI you need to balance with ARPU to give you a chance of scaling a profitable game is higher.

CPI is not all that matters

It’s not this obsession about low CPI, obviously, low CPI is great, but it’s that initial build, it’s about looking at play time. It’s not like you’re going to nail $3 day zero on the first attempt, but it’s looking at more particularly rewarded video and interstitial frequency as well, to give you this validation that “Okay, now it’s worth putting some proper development into this game.” Because you might be looking at 4-8 week development cycle versus two weeks for hypercasual.

The next step to monetizing hybrid games

For hyper casual, if it’s gonna go anywhere, it’s this movement more into a play to earn model. I’m doing the same thing just swapping the coins I’m earning for some form of token. And it could work with some of the publishers, when you’ve got big enough games, the audience can take that token across games, I think that’s the key.

The key to finding credible publishers

You do need to make sure the publishers have the set of tools for hybrid games. So they need to have experience in IAP games. It’s not easy to just suddenly switch your knowledge around IAPs, both from a user acquisition monetization perspective, but also BI. You’re going to be want to think about live ops and live events in your game. So for example, there’s lots of peak gaming times around, say,  national holidays, where you can do some really cool events. So whether it’s around Diwali, Christmas, St. Patrick’s Day, Valentine’s Day, Chinese New Year, these could be really great revenue events for your game. But you need a publisher that has got experience doing that. And traditionally, not your classic hypercasual publisher, because they don’t get the casual games. 

What is the grind in hypercasual games

You still need this addictive core loop. It’s not as simple as – I just build more content and more matter and I get more playtime and more monetization. That’s absolutely incorrect. You still need this fundamental core loop. People talk about the grind. When you come to these idle hybrid games, where I want to really feel like I’m grinding to achieve something, it’s that grind and that loop that you need to perfect. And that’s what then drives the play time.

It’s unnecessary to rush to a soft launch and add networks

In hyper casual, it’s rush, rush rush, if you don’t rush, everyone’s going to copy your game adding loads of networks. I think in hybrid, that is not the mentality. Don’t get me wrong. If you first test the game, and you’ve got great play time, day zero, day three looks nice, you’ve got great content, then of course, let’s do some more testing add some more networks, because logically, we’re not wasting any users, We’re making money off each user and we very quickly need to start thinking about day seven. But if we do the first test, and we’ve got some 20-30 minutes of play time, we’ve got some nice rewarded video engagement and CPI is good, then why do we need to suddenly rush a soft launch and add loads of networks and just burn users? Why do we do that? Because it’s a lot harder to just suddenly copy this game like you can in hypercasual.

FULL TRANSCRIPT BELOW

Shamanth  

I’m very excited to welcome back Jon Hook to the Mobile User Acquisition Show. Jon, welcome.

Jon Hook 

Yeah, it’s great to be back. Thanks for having me.

Shamanth

Absolutely. Technically, our last episode was in our other podcast “How Things Grow” and that is such an instructive primer on all things hyper casual, really about what makes the genre itself tick. I’ve looked up to you to understand what’s at the forefront of gaming, and we’re going to talk about one of these topics today. We’re going to talk about the next step of of monetization, and what that holds for the future of gaming. To start, we talked about the hypercasual space the last time we spoke, which was a few years ago. How has the competitiveness of the space changed over the last couple of years? What are some of the contributing factors to this?

Jon Hook 

Hypercasual just continues to get bigger and bigger. So if you break that down, why is that happening? First of all, there’s just more and more people that are now playing hypercasual games, because it’s a natural entry point into mobile games. Very intuitive, easy to play, snackable. So I just think you’ve got more and more people playing hypercasual. But of course, on the development side, you’ve got more people now making hypercasual games. Why is that? Again, it’s just natural, it’s perhaps the simplest form of mobile game you can make. 

Obviously, there’s been some big events going on in our lives right now and I think as a result of the global pandemic, you’ve had a lot of people now actually teaching themselves how to code. There are some great no code platforms like Buildbox that are very easy to drag and drop and make. And we’ve also seen maybe a lot of studios that have come on hard times and are moving into hypercasual, where there’s some more accessible commercial deals now from publishers. So I think we’ve seen an explosion of developers, and on the publisher side, there’s just so much growth in terms of publishers now with them raising money and getting bigger. So what does that mean? Now they need even more games to test and sustain that growth, and also there are some great new entrants into the publishing space as well. So if you put that all together, we’re seeing tremendous growth, in terms of the hyper casual gaming sector

Shamanth

Yeah. And there’s definitely been a boom in the last couple of years. And I think one factor also is that for developers, it’s seen as a low barrier to entry. It seems easy to put together a hypercasual game in just a couple of days or weeks. And this proliferation of publishers that’s happened, just in terms of the competitiveness, I’m curious about one aspect of that. So in terms of ad monetization, how have the dynamics of ad monetization changed, with all the industry wide changes that you just alluded to?

Jon Hook

I think there’s no doubt that the simple economics of how there are more people that are now testing on Facebook as a platform. This makes it more challenging to achieve the low CPIs that you need to get in hypercasual to really scale that global hit. And that’s working on an assumption that your day zero ARPU is maybe at best going to be 40 cents on a very strong game, but maybe around 20 cents. So for the economics of that to work, you have to get a low CPI. So yeah, there’s no doubt with more developers and publishers coming in and more games tested that the unit economics is getting more and more challenging now to hit that really low CPI, if that is your business model, because I’m not saying that that is the business model in all of hypercasual. 

I think also, it’s not necessarily what’s changing the monetization, but I just think there’s a simple reality in terms of like, let’s say, an average session time of let’s take five minutes as a snackable example. I think the reality is there’s only so many interstitials and rewarded videos, you can physically cram into a level before negative impact on your retention. If you read a hyper casual review, there’s going to be notes saying there are too many ads. But I definitely think that is a challenge now for the industry because I think the industry is growing in terms of players and number of games, but I think in terms of classic monetization, perhaps we are close to hitting peak revenue for the reasons I’ve just mentioned. There’s only so much you can tweak in like a runner game like upgrading skins and shops that you can put in before you then start adding matter and getting into a different type of game.

Shamanth  

You’re right, at some point the users are going to get sick of watching ads. Anytime we look at the reviews for hypercasual games, that’s somewhat a common complaint. And you can’t just keep adding even more. All of this seems to have precipitated the advent of hybrid monetization. For folks that are listening that may not be familiar with the term, can you tell us more about what that means?

Jon Hook  

I’m not sure we’ve arrived at a point where there is a standard definition of hybrid monetization. So for me the simplest form is, if someone says I’m making a hybrid game, from a monetization standpoint, I’m going to assume that it means that you have in-app purchases, IAPs and it’s not 100% ad based. So at its simplest level, if someone says that, to me, that’s what I’m looking for. The percentage split between IAPs and ads will really depend on the type of hybrid game. But I think the reason that some people are moving to this space is because there is a lot of competition, I wouldn’t go as far as to say saturation. In this pure ad monetization, classic hypercasual module as we’ve just discussed, it only works with really, really low CPIs to make those low day zeros work. 

However, if we move up into these hybrid games, and I think that’s quite a big label, so let’s break it down. Within hybrid games, what labels might people think of? I would think of hyper idle games – not full on idle but taking elements of hypercasual up. This genre just exploded and I would say every hypercasual publisher is now building this concept of idle arcade games. So it’s got that grind you experience in an idle clicker or classic idle game. But it also does have some element of actual adventure and collecting in it with some hypercasual minigames. Generally once you have IAPs in your games the goal is set, let’s say your day zero target might be 60 cents instead of 40 cents. So it gives you a little bit more breathing room. Therefore the CPI you need to balance with ARPU to give you a chance of scaling a profitable game is higher. So really, for me, the IAP piece is interesting, because it gives you the opportunity to obviously increase your day zero, day three, day seven, day fourteen, depending on the hybrid games.

Shamanth

Yeah, and as you said, you can’t just pack 5 more interstitials in the game. Adding IAPs is a step function increase in your ARPDAUs. And I can see how that can be made the difference between a kind of CPI the game supports. I’m curious, though, if the user base has come to expect a lot of ads in the game, if they’ve come to expect hypercasual elements, I would imagine they’re not necessarily accustomed to making IAPs, what would you say are some of the key motivators for these kinds of players to spend money on IAPs?

Jon Hook

What we’re talking about here is game design. It’s not it’s not as simple as, “hey, let’s just add things into a game.” I wish it were that easy. But why would someone engage with IAPs? It’s because you’ve built a really nice engaging game with nice progression in a collection mechanic anyway, that gives you the opportunity to introduce IAPs. Now, the type of player that would do that. I always use the analogy of the education system. So hypercasual is like kindergarten games, you start off, and you’re basically just saying, “okay, this is a mobile game, maybe it’s a runner, okay, it’s one button control, and I’m collecting something, maybe there’s some awesome coins. And maybe there’s some transformational progression in the game. And oh, at the end, I’ve unlocked a percentage of a skin. And now I watch a rewarded video at the end, and I’m back in the level.” 

At some point, there might be an option to pay 99 cents to remove ads. But outside of that it’s your classic interstitial rewarded videos. But maybe as I play more and more of these games, and I start playing maybe more, say some arcade or hypercasual games or some racing games and maybe there is some element of IAPs in it or I start seeing ads for games that are not hypercasual games. Maybe I download one of those and say, “Hey, actually, this is kind of interesting.” There’s a bit more matter to it, but oh, hang on a minute all of a sudden, actually the thing I really want the skin of a car, the sword, that item of clothing, all of a sudden that’s not behind a rewarded video. That’s a 1.99 upgrade.

But this game that I’m now playing, I’m spending more time in so all of a sudden I’ve gone from kindergarten, and now I’m in high school, I’m very comfortable with spending more and more time in a game and it’s something I enjoy. So the concept of spending a couple of dollars on an item is not really a stretch of the imagination. And then before you know it, you’re looking for even more gameplay experience. And then you’re playing casual mid core games, and therefore, the concept of spending $50 on something in a game is no different to buying a pair of sneakers. So I think it’s also about the evolution of the player journey. So in summary, you need to be really clear on who your audience is in this game you’re making, to understand that correct balance between ads and IAPs. The most important thing really before you worry about monetization, it’s the earlier you can start thinking about monetization as part of your game design. That’s when it gets a lot easier, because you’ve been thinking about that from the start. And it’s just baked into the gameplay, like the progression, the upgrades and the collection. It’s not something that I now need to fit into a game that chances are won’t work.

Shamanth 

Yeah, you can’t just take a hyper casual game, add IAPs and forget about it. It’s a game design problem and about the depth of content depth of monetization. People have to be wanting to play this for a long time, then the monetization is going to follow. With that in mind, let’s just say there’s a hypercasual developer that says, “Let’s go hybrid, let’s make this happen.” It’s not like flipping a switch, they presumably understand that and they buy into that. So what skills or resources should they develop for this, in terms of people to hire, expertise to develop by themselves to make sure they have a good shot at succeeding when they transition from hypercasual to hybrid?

Jon Hook  

It’s a really good question. And I wouldn’t say there’s a one size fits all answer. If you’re going to take on something above hypercasual, you’re going to need some developers that have got a great grasp of design, so that transition is very easy. With hypercasual games, you don’t necessarily need a huge amount of game design. But for some of these games with more matter, you do need some solid game design knowledge. Depending on where you net out, you’re most likely going to need a 3D artist. You don’t always need that for hypercasual games, because if you polish your hypercasual game too much the CPI can skyrocket because all of a sudden it looks and feels like a casual game. Already in the evolution of these hybrid or these hypergames, now, I’m seeing beautiful 3D art quality which is now becoming the norm. 

It’s not like you suddenly need to go and hire five developers. If you’ve got that hypercasual prototyping, rhythm and testing in your veins that will fit perfectly here because the process for me is the same as trying to get some data led validation for these games. It’s not this obsession about low CPI, obviously, low CPI is great, but it’s that initial build, it’s about looking at play time. It’s not like you’re going to nail $3 day zero on the first attempt, but it’s looking at more particularly rewarded video, but also interstitial frequency as well, to give you this validation that “Okay, now it’s worth putting some proper development into this game.” Because you might be looking at four to eight week development cycle versus two weeks for hypercasual. So yeah, I think it’s that combination of having design knowledge, or extra design knowledge, certainly a 3D artist, but not losing that hyper casual testing mentality.

Shamanth 

Yeah. And I think it’s important to underscore not losing that hyper casual testing mentality, because there’s value in that speed, there’s value in that rapid iterative testing. It’s my understanding that while a number of games have combined ads and IAPs, there aren’t many games that have combined ads, IAP and subscriptions. So would you say that’s accurate? And if yes, can you explain why that is the case?

Jon Hook

I think there are different models, and it comes back to this player behavior. If you’re looking at the subscription model, that’s the whole concept which is, “Look, I’m paying a monthly subscription for access.” A bit like Apple Arcade. The concept there is, I’m not looking for ads. And the trade off is because I just don’t want ads to interrupt my experience, I’m happy to pay X amount per month. It’s not that these games shouldn’t have a really nice mechanic and progression element to them. It’s just, that’s sometimes the problem. I think when you’ve got low play time, low revenue games, why are we trying to retrofit those into a subscription model? I think there are better models that are now popping up. Let’s say, these hyper games, which are moving more into this concept of link to blockchain and crypto. That for me makes a lot more sense when I think about player behavior and what these players actually want from a game versus trying to fit a subscription model into hyper casual games unless you have got a giant portfolio of games where maybe the economics could make sense. 

For hyper casual, if it’s gonna go anywhere, it’s this movement more into a play to earn model. I’m doing the same thing just swapping the coins I’m earning for some form of token. And it could work with some of the publishers, when you’ve got big enough games, the audience can take that token across games, I think that’s the key. But yeah, I think that for me, the subscription model in hypercasual, just doesn’t make sense.

Shamanth  

Sure, publishing and publishers have been a key part of the hypercasual space for the last couple of years. So how do publishing deal structures change for a hybrid game, as compared to hypercasual? 

Jon Hook 

The economics are a bit different. Since you’re building a slightly bigger game, it requires more resources. I think the initial conversation is the same in terms of understanding the audience, the project and having some form of validation. Generally, there is some expectation that the teams building these may have actually come from the casual or even the mid core space down. That’s why sometimes I see a higher starting cost versus hypercasual. It’s a bigger room, maybe they’ve done a casual game, so they just have a higher price tag to sign them versus a hypercasual team moving up. They’re more comfortable with the economics of hypercasual. 

The same thing with hypercasual that you get with these hybrid deals is also it’s just about cost of living. The cost of living in Berlin is very different to Istanbul, is very different to Mumbai is very different to Seoul. So there’s that element as well, that will impact these conversations based on the size of the team and cost of living. I think revenue should be fairly similar, I don’t think it should necessarily change. The only way it might change is when you have these hybrid games. 

I think the key thing for developers, just to understand is, you do need to make sure the publishers have the set of tools for hybrid games. So they need to have experience in IAP games. It’s not easy to just suddenly switch your knowledge around IAPs, both from a user acquisition monetization perspective, but also BI. You’re going to be want to think about live ops and live events in your game. So for example, there’s lots of peak gaming times around, say,  national holidays, where you can do some really cool events. So whether it’s around Diwali, Christmas, St. Patrick’s Day, Valentine’s Day, Chinese New Year, these could be really great revenue events for your game. But you need a publisher that has got experience doing that. And traditionally, not your classic hypercasual publisher, because they don’t get the casual games. 

So I think that is the trade off that you’re getting access to a bigger set of tools that you need. That might be a negotiation point. But I think I’ve seen some very fair pricing in these kinds of conversations. But it’s also about you as a studio, what’s most important? That upfront cost of development, or maybe because you’ve had a hit and you’ve got more cash flow, you can have a low upfront payment, because you want a bigger chunk of the revenue and profits if you publish the game. So it’s a very personal decision on cost of living, appetite for risk, size of the team and your experience.

Shamanth 

Yeah. Just to drill down on this a little bit more. The kind of prototype testing that’s very common in hypercasual is for marketability. Do you think that exact same approach works for hybrid or similar adapted approaches work? Have you seen that?

Jon Hook  

 I’ve seen it working well for merge games, idle games, because really, it’s about resource allocation. How can I get some data led confirmation that this is the right approach to go down? Before I go and spend six months building a game that only after three months do I test and it could be awful, and I’ve wasted three months. 

I think I’m really excited now by these hybrid teams, because usually what I’m seeing is they have a team working on hypercasual. And if you catch a theme in hypercasual, there’s a good chance that that theme will have some relevance in this hybrid space as well. So you may need to add something new to it. But as simple as take that theme and add a three button upgrade mechanic and then all of a sudden it is more of a hybrid game. And if the CPI still holds, it may be worth building out some initial content and then look at play time indication or monetization potential. So I definitely think that the hypercasual testing mentality holds in this hybrid gamespace.

Shamanth 

Yeah, like we talked about earlier, just rapid iteration and rapid testing can be so valuable. Also, just because I think that upside is so much more, it’s much more valuable to reduce your downside by doing that type of testing upfront. Jon, also, what do you see are some of the more common mistakes that developers make while attempting to transition to hybrid?

Jon Hook

There’s a few common ones, I think the first one with these hybrid games, the same rule applies as hypercasual. You still need this addictive core loop. It’s not as simple as – I just build more content and more matter and I get more playtime and more monetization. That’s absolutely incorrect. You still need this fundamental core loop. People talk about the grind. When you come to these idle hybrid games, where I want to really feel like I’m grinding to achieve something, it’s that grind and that loop that you need to perfect. And that’s what then drives the play time. Of course, then it’s about adding on more matter, more worlds, which in turn drives the monetization. 

I see that mistake a lot. I see games that have actually got some very nice FTUE onboarding, the game is really clear. But then after that the collecting or whatever you’ve asked me to do is just really dull and repetitive. When you get new categories popping up, everyone jumps on it, because they’re like, oh, great, this is a new thing. I can make loads of money, but they actually don’t do the basics that we all do in gaming every time – who’s my audience? What do they want? What’s the mechanic? I think that’s the key one. 

I think the other one is – not working smart. So if I’ve published one of these hybrid games, there’s clearly something in that game that users like, so why would you not want to re-skin this game, change some of the models, as a path to finding a new game, versus building this kind of project completely from scratch? I wouldn’t say it’s a mistake, I would just say it needs to be this conscious decision about working smart here. So you should be using your current game as a vehicle to try and find the sequel or the next game. Because maybe there you find this amazing creative, that actually then leads into a new game because you run this creative, and you’ve just got crazy CPI, CPR, IPM, that obviously drives loads of traffic to your game. And if the content in that ad is not in your game, you can add it in or actually, just make a brand new game if it’s that good. 

The other mistake is, and this is where it is a bit different from hyper casual like in hyper casual, it’s rush, rush rush, if you don’t rush, everyone’s going to copy your game adding loads of networks. I think in hybrid, that is not the mentality. Don’t get me wrong. If you first test the game, and you’ve got great play time, day zero, day three looks nice, you’ve got great content, then of course, let’s do some more testing add some more networks, because logically, we’re not wasting any users, We’re making money off each user and we very quickly need to start thinking about day seven. 

But if we do the first test, and we’ve got some 20-30 minutes of play time, we’ve got some nice rewarded video engagement and CPI is good, then why do we need to suddenly rush a soft launch and add loads of networks and just burn users? Why do we do that? Because it’s a lot harder to just suddenly copy this game like you can in hypercasual. I think that is also a mistake.

Calm down a little bit, take a deep breath and let’s actually make a game. Let’s analyze the data we have, let’s do some funnel analysis, let’s find out where the pain points are. And then let’s retest. So it’s a hybrid, it’s then actually not a casual game development cycle. So I think sometimes developers just need to make that adjustment and if you’ve spent all your time in hypercasual, what I’m now saying is an alien concept to you because you’re constantly rushing. No one owns the crate challenge. Of course, Netflix owns the IP for squid games. But last week in the top 10 on Google Play, six were Squid Games. You don’t quite get that in hybrid casual. So I think that’s a really key point.

Shamanth  

Yeah, so from what I’m hearing, it’s very much a mindset shift from getting the basics right to getting used to a different pace. It’s a complete mindset shift that developers need to undergo to make sure they embrace hybrid and execute it well. 

Jon, this has been very, very instructive, just like the last time we spoke. I’ve taken notes. This is perhaps a good place for us to start to wrap. But before we do that, could you tell folks how they could find out about you and everything you do? 

Jon Hook

You can put my details in the episode. People can hit me up on LinkedIn and you can share my email address. I’m pretty active on Twitter as well. Please reach out if it’s to discuss anything in this podcast – how to grow your studio, how to make these transitions, how do you start thinking about investment, all these topics I enjoy talking about and writing articles on. 

Shamanth  

Wonderful, John, and I know you’re very open with sharing all that you have learned, something I admire and appreciate about you. So thank you for sharing all your wisdom on this episode. Thank you so much.

Jon Hook

Thanks for having me back. And thanks, everyone, for listening.

A REQUEST BEFORE YOU GO

I have a very important favor to ask, which as those of you who know me know I don’t do often. If you get any pleasure or inspiration from this episode, could you PLEASE leave a review on your favorite podcasting platform – be it iTunes, Overcast, Spotify, Google Podcasts or wherever you get your podcast fix. This podcast is very much a labor of love – and each episode takes many many hours to put together. When you write a review, it will not only be a great deal of encouragement to us, but it will also support getting the word out about the Mobile User Acquisition Show.

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