Three elements that make hyper-casual resilient in a post-IDFA world

Tap, swipe, swerve, stack, merge. It’s game on! Since 2020, app stores have seen unprecedented growth with hyper-casual game releases. Accounting for nearly 31% of all installs, these snackable games continue to dominate. With Apple’s iOS14.5 released, and App Tracking Transparency enforced the traditionally user-level targeting reliant genre is bracing for impact.

 

At Fyber, we took a deeper dive into what has been fueling this business model and if this mobile gaming genre will transition easier than others – we’re feeling good about it!

 

Hey hyper-casual, good things come in threes
Category-based targeting outplays user-level targeting

We’re a few weeks into Apple’s ATT enforcement, and the opt-in rates are as low as 20% from users on iOS14.5. However, through the lens of hyper-casual games, the genre’s wide appeal, persistent in-app ads (IAA), and high volume of downloads position it as less reliant on these low opt-in rates. In fact, this user base can range from anyone who plays mobile games, regardless of information such as  age, gender or income. 

 

If these users are not necessarily niche, we can essentially extract more data by peeling back the layers of traditional categories in the App Store and further use category and contextual-based targeting to enable effective UA. A simple example could be sports games. They can be broken down into basketball, golf, football etc. Breaking down these traditional categories and focusing on what “sport” users enjoy playing, enables publishers to advertise to users around similar category-based apps and acquire more users to achieve higher LTV – without having to rely on IDFAs.  For comparison, hard/midcore or casual genres are more heavily dependent on personalization to monetize as the categories are more complex. Paired with the low acquisition costs, these factors make hyper-casual more sustainable.

 

In-app monetization will require shuffling some inventory cards 

Speaking of  UA, the principle reads that by attracting high volumes of users to download your game will increase the volume of IAA and maximize your revenue. Taking this into account when analyzing iOS, we determined the impact it has on different ad formats – banners, interstitials and rewarded video – and what insights we can gain by measuring RPM (at Fyber we refer to RPM as the revenue divided by the number of a million ad requests).

 

Based on Fyber’s analysis, the number of buyers actively buying LAT traffic has steadily increased by more than 60% since June 2020. 

 

Hyper-casual advertising is focused on three main ad formats – interstitials, banners, and rewarded video. In our analysis of RPMs on LAT traffic, as compared to IDFA traffic, we discovered that since the beginning of the year LAT traffic for interstitials and rewarded video generated higher RPM as compared to IDFA traffic. This can be explained by  the change in bidding behavior. Advertisers are buying more impressions at cheaper prices. Since the beginning of 2021, in preparation for the ATT rollout, the number of advertisers transitioning, testing and shifting their budgets to LAT traffic surged. This caused RPMs to increase, and fill rate to improve too. With advertisers scaling their spend and activity, the increase in competition is driving a rise in RPMs – therefore validating advertisers ability to generate positive ROAS on LAT traffic on hyper-casual games. 

 

The pace of hyper-casual games leave the rest in the dust

Since the genre’s debut on the App Store, the hyper-competitivity has fostered a turbo pace of releasing new titles. Low production costs allows hyper-casual developers to produce and roll out new marketable, bite-sized games within weeks. Because of their short LTV curve, the average hyper-casual player tends to play the same kind of games, and generally only plays for a week or two before moving onto the next one. This consideration is baked into the UA cost, which is usually fairly low and makes it relatively easy for hyper-casual game developers to make back the money they spent on acquisition. 

 

If we blend user retention and LTV cycles with monetization and UA models – we get cross-promotion. Hyper-casual advertisers running campaigns on hyper-casual supply plays a critical role in sustaining the genre’s ecosystem and acts as a consistent revenue stream for developers. The beneficial feedback loop of sharing gamer traffic and trading engaged players within this economy is what makes the wheels turn. Add in the IDFV signal, and developers are now able to understand their own audience and gain an edge in moving their users around their studio-owned games, and extend user LTV cycles at the portfolio level. 

 

It’s all about balance

 

Finding the equilibrium between increasing the volume of cross-promo ads and paid ads is what makes this monetization strategy effective. Publishers will need to define a new point of symmetry between cross-promotion and ad monetization. If you push cross-promotion too hard and monetization takes a hit from IDFA changes – it may hinder profitability if the cost of UA does not decline as quickly as inventory prices are going down. 

 

While it is too early to speak to the full effects of iOS14.5 and ATT, these preliminary insights can provide a snapshot into how the hyper-casual business model can weather the storm – provided developers are ready to adapt to the new reality.

 

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