Economists around the world have been predicting a recession to hit in 2023 and latest surveys conducted have only gone to make it more apparent.
While experts are still divided in their forecasts as to the likelihood of entering a global recession in 2023, the general consensus is that it is looking more and more likely. According to a report on US Today, as of September 2022, economists have predicted a 54% chance of a recession in 2023. This is a stark 38% increase from June’s survey average.
Now, mobile marketers are validly asking themselves, “How will mobile apps fare with this recession approaching ever-quickly on the horizon?” Therefore, we decided to take a look at one of the prominent industries and how a recession can affect its business: the gaming industry.
The gaming industry endured the Great Recession during the height of console gaming. However, by mid- recession in 2008, 37 million game consoles were sold in the United States alone. During this peak, Facebook instigated the transition to more casual gameplay.
The social media mogul offered casual games like Words With Friends, FarmVille, and Texas Hold ‘Em. Then, gaming apps came onto the scene. Apple’s App Store launched in July 2008, followed by Android in September of the same year. These huge successes in the gaming industry are telling of why the gaming industry has widely come to be known as “recession-resilient”.
During the Great Recession, unemployment more than doubled in the United States. Mark Zandi, chief economist at Moody’s Analytics, anticipates a 4% to 4.5% increase in unemployment and high inflation, should we enter a new recession.
There is a high probability that a greater number of people at home with less discretionary income will lead to a mobile gaming boom similar to 2020 (during the pandemic and beyond). Consumers are also likely to trim back their number of Subscription Video on Demand (SVoD) services in favor of lower-cost, longer-lasting options like gaming.
Distribution of free and paid apps in the Apple App Store and Google Play as of July 2022
96.8% of Android apps and 94% of iOS apps are free to download. In-app purchases (IAPs) are likely to lower as consumers become more budget-conscious. As a result, we can assume that app developers will be relying more heavily on advertising income from other apps.
While this could drive ad prices for in-app advertising inventory, the overall trend during a recession is generally for ad inventory prices to decrease across channels – more on this later – so advertising costs will likely balance out and remain similar to pre-recession.
However, reducing your app monetization mix to focus on in-app advertising could lead to greater saturation (and therefore over-exposure) of this ad format for consumers.
We asked UA experts how do they predict the recession will impact the mobile gaming vertical in particular and this is what they had to say:
Mobile gamers will be more selective while investing money, feels Societe Generale’s Mathieu Cappe
“It is to be expected that rising concerns over purchasing power will translate into declining budget allocations toward entertainment in general. Digital entertainment is comparatively cheap though, and more expensive alternatives (such as cinema or live shows) are likely to suffer more.
Because of tighter budgets, mobile players will likely increasingly turn to free games and become more selective of the games in which they invest their money.
In-app purchases (IAPs) should thus concentrate on games able to retain players over long periods of time,” said Mathieu Cappe, co-founder of the Global Finance Incubator atSociete Generale Corporate and Investment Banking.
Matthieu went on to add that hybrid games could prove to be the most effective model to navigate through the recession period.
”Consequently, revenues drawn by studios and publishers from IAA (in-app ads)-monetized games should remain solid. However, personal data regulations and unilateral decisions by the platforms have made targeting more difficult, leading to increased UA costs and thinner margins. Hybrid games, monetized through both IAAs and IAPs, usually more qualitative, may therefore prove to be the most efficient model to navigate the months to come.
”Despite the general flight to quality, allowing for more organic growth, the surplus of new games keeps making digital marketing indispensable. Ad networks successfully adapting to the progressive shift from hyper-casual to casual should continue seeing strong outcomes in the future.
”As for the marketplaces, they should directly benefit from the soar in IAP-monetized games,” he added.
Innovate, create, market and grow, says Singular’s John Koetsier
John Koetsier, VP Insights at Singular also echoed the same thoughts as Mathieu and described the gaming industries ability to innovate, build and create will allow it to be strong.
“The gaming industry will do what it does best: innovate, build, create, market, and grow.I recently interviewed Unity CEO John Riccitiello. He's the former CEO of EA, and has seen many cycles of growth come and ebb in gaming. All of these cycles, he told me, are sine waves that, despite occasional dips, ultimately trend up and to the right.
“Over half of the world plays games (!!!) and in tough times, all of us need a spark of fun in our lives. We also desperately need more victory: the emotion and glow and hope that victory can provide in a sometimes gray and depressing reality.
Games offer that, and though game publishers may have to tighten their belts temporarily, those who continue to innovate and invest will win,” John said.
Mobile gaming will continue to grow
Assuming all markets will be indeed impacted by the recession in 2022, potentially 2023, industry experts believe that by the end of next year, we should notice the usage numbers going up again, most specialists also agree that, in the long term, mobile gaming will continue to grow massively.
For example, by 2027, Bain and Company estimates that the video games market will grow by 50%, reaching $307 billion.
What also acts as a ray of hope for the industry is that innovation around NFT and Metaverse, production automation, augmented reality, devices capabilities, and 5G haven’t yet delivered their full potential.
Mobile advertisers need to be on point with in-app advertising strategy
It is believed that gaming will likely fare well as consumers turn to mobile games for entertainment. But, IAPs will likely decrease, driving in-app ads (IAAs) to the forefront.
Consequently, mobile advertising prices will rise and mobile marketers will need to spend time and care on their in-app advertising strategy if they want to continue scaling their app during the recession.
However, mobile advertisers will need to be more accommodating with their marketing strategies and may have to shelve out more money to reach their target audiences. On the other hand, focusing on app retention, engagement and personalization will be very important for app developers.
All things considered, the mobile gaming industry has the potential to emerge from the slump much better compared to other spheres.