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  • Writer's pictureEitan Reisel

Mobile Games - what’s going on with marketing costs?

Many times when we mention marketing when referring to mobile games or mobile studios, what we’re really referring to is user acquisition costs. It’s no secret that cost has been on the rise for the past few years and is predicted to continue growing. We’d like to share with you our observations, back it up with a few data points and offer some solutions on how to tackle the issue.

VGames-Mobile Games - what’s going on with marketing costs

Let's start with an investor observation. Going back ten years or even less, starting a new mobile studio, especially in the rising casual category, could have been bootstrapped or supported by raising a friends and family/angel round of several hundred thousand dollars. This of course, would not take us through growing and being profitable, but would totally cover the team and initial game validation. This is no longer the case. In most of our investments, we allocate $500k-$1M for UA alone (validation), and that does not include, of course, operational costs. These are no longer friend and family rounds, but larger investments needed for young studios. We personally believe that an increase in labor costs (in many instances, a healthy increase) and UA costs has resulted in the rise of dedicated game funds that are able to support new studios with larger checks.

So, to simplify, if we want to reach a certain test group to better understand our game performance, such as retention (D7, D30, etc.), we need to have the ability to acquire new users over time. This will allow us to improve and continue doing so, until we are confident the game is performing well or not, and whether we should move on to the next game. A non-scientific point of view is that around 1000 DAU is a good test group. A simple multiplier in a Tier 1 country would turn this acquisition cost to at least $500 daily spend. And this is only for testing.

VGames-Mobile Games - what’s going on with marketing costs

CPIs end of 2020, US, by game category (AppsFlyer Data)

CPIs end of 2020, US, by game category (AppsFlyer Data)
Non organic installs only, threshold of 500+ paid installs per month, percentage refers to increase from January to December 2020

Let's go back to the root of this.

Why have UA costs increased? Or another way of putting it is why have CPI’s increased over time?

  • Competition: many more games are available on both the App and Play stores. This creates a discoverability challenge to surface a new game over existing ones. The more crowded the stores become, the more publishers try to promote their games. Now, we could argue that the amount of people playing has also significantly grown - but the real estate where people could discover apps hasn’t grown much. So, more competition generates a more competitive landscape, which results in harder discoverability and the need to invest more to attract players.

  • Crowded categories: this is part of a competitive landscape that becomes even more challenging in crowded genres. We are asked pretty often what we think about hyper casual. Well, it‘s not a matter of opinion whether hyper casual games are relevant, it’s enough to look at top charts to understand they are - and growing. More than half of the top 20 are pure hyper casual games, monetized primarily through ads.

VGames-Mobile Games - what’s going on with marketing costs

That being said, margins in this category are small and it’s a game of scale. Now, what does this have to do with cost of acquisition? It does… CPIs in this crowded and dominated category have been on the rise, as very large publishers are competing with similar titles, targeting similar audiences. Hyper casual is one example where CPIs increased by 26% during 2020 in the US only. Casual has an even higher increase of 34 - 46% during that same time. Other categories that have very dominant players acted the same.

  • Concentration of networks: despite many active networks available, the concentration for gaming is still very high. The top 2 positions are taken by Google and Facebook, with no change, while the most active networks for retention are Unity, ironSource and AppLovin (AppsFlyer Performance Index XI)

  • Smart bidding tools: this is probably the largest reason for an increase in marketing costs. Why? Think about it - we can set up campaigns today on FB and Google and target Payers, ROAS, LTV -- in simple words, paying users. This is a game changer - we can actually target users who will most likely become paying users. If that is the case, it would be natural that more and more publishers would choose to target paying users and the “here we go” ripple effect of competition will increase for payers. Why is this the largest reason, in our opinion? Well, even when not using the most sophisticated targeting, we are always aiming to reach the most valuable users - this only allows us to do it in a more precise way. So, if more publishers are competing on those users, the entire landscape will increase no matter what targeting we do leverage on those platforms.

But this is not the only effect. Universal App Campaign by Google and Automated App Ads by FB are really plug-and-play campaigns where publishers have very limited ability to optimize campaigns. Standardizing the process has a lot of advantages, yet all publishers, no matter whatsize, are using the same tools. Therefore, there are fewer options to use “out of the box” techniques to target users in creative ways that would probably be more difficult at scale, yet less costly.

  • Organic is becoming more difficult, i.e. discoverability. This is an entire topic that we will cover in a future post. In short, for CPI to turn to eCPI, we need healthy organic growth channels. This has never been easy, but with more games and great content, getting users to drive engagement of other users is nearly an impossible task at the start.

VGames-Mobile Games - what’s going on with marketing costs

Has this reflected ROI and Payback?

Yes, of course. When starting a new game, one of the early (if not immediate) health indicators is ROI and understanding the payback period. This demonstrates the game economy - the only way of building a long term sustainable game. The more UA costs are on the rise, the longer a payback period we would expect, unless we are able to balance it with game economy, monetization and retention.

What is happening to returns? How does that impact profitability? This is the endless battle between retention and eCPI.

How do we propose to tackle this?

The purpose of this post is not only to show the challenges of increasing marketing costs, but opportunities of how to address them. With no doubt, measurement is at the heart of the solution. Why is measurement important? Measurement is critical for companies at every stage - as you know, things that aren’t measured can’t be improved. Defining clear, measurable objectives is crucial for every business, and gaming is no different. Here are the most important things to address when thinking of marketing, or to put it another way - practical tips for what we propose to do in this complex environment :

Defining KPIs - Think of strategy from day 1. Clear KPIs for your marketing is a must-have, as it will define the objectives of your marketing activity. The industry shift to automation in marketing tools makes it even more important, as you have to specify the goal of the campaign upon creation. These will evolve and become more accurate as your game matures.

Life Time Value - Setting KPIs is closely tied with predicting the LTV of the users. Lack of data in the beginning makes the task of predicting LTV quite challenging, but simple top-down models combining retention and ARPDAU can be a good starting point. Once you have enough users, it’s worth switching to more advanced models, such as user level prediction - it will unlock new opportunities for tailored pricing and more efficient marketing. Leverage Google Insights for evaluating lifetime value for game developers to navigate different ways of calculating LTV and choose the right approach for your needs.

Decision making grounded in data - Embrace a testing culture in your company. The industry is so competitive that intuition can’t help you make decisions, especially when big budgets are at stake. Make sure to test strategic marketing ideas and decide on actions before seeing the outcome. It won’t be feasible to test everything, so make choices based on the cost of potential mistakes. A good practice is to plan the strategic tests ahead, and have a plan for a quarter. This will allow you to approach the tests more systematically, with well-defined hypotheses and clear outcomes.

Understanding Attribution and Incrementality - Your attribution partner setting can make or break your performance, as longer attribution windows will increase credit for the user acquisition channel. Clearly, it’s not changing the performance of your business, as it’s a zero sum game. Calibrating the attribution model (conversion window) of your top advertising partners using custom tools such as Facebook conversion lift or Google Geo lift is the most scientific way to make sure each channel is getting the fair share of credit (aligned with their true causal impact) and your marketing budget.

Use broad acquisition strategies - especially when starting. Most ad networks today allow you to target the best users, in terms of retention or purchase intent. However, diminishing returns of the auction efficiency (you get the best users with your first dollar after the algorithm learning is complete) can distort the metrics, as when you scale, the quality of marginal users will decline. Starting broad and using install optimization will allow to establish a baseline of users quality and refine the product before switching to advanced optimization strategies, such as CPA or ROAS

Raise necessary funds to succeed - When you decide to go out into the world and raise capital, make sure you take into account user acquisition costs. It is relatively easy to benchmark, and most important, to see how this falls into the game budget and plan. Capital is there - the landscape is in a much healthier position than it was a few years ago. To do so, build the right game budget. Build a plan that takes into account the right metrics to drive a healthy business plan. Retention is key, and understanding organic factors.


As stated above, marketing is a complex space to play in, and there’s a reason we decided to put expected IDFA changes aside, as they add more complexity.

Our recommendation is to think out of the box, try not to do things like others, act according to what’s unique for your game, genre and audience. Community is key - the more people love and share your game, the higher your chances to reach broader audiences.

All the above is our opinion based on years of experience. We hope it’s useful, and if we were to contribute one more thought or perspective, it’s a great outcome.

See you in our next post!

Blog writers

Daniel Mironov, Principal VGames

Eitan Reisel, Founder VGames

Both Daniel and Eitan have extensive experience in marketing especially in the Games industry.


AppsFlyer data

Sensor Tower data - Lizzy Miggins <>


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