Mobile Gaming's Pullback (Post-IDFA)

Consumer spend on mobile gaming has declined the past 2 years. This is due to the unfolding impact of the deprecation of IDFA (Identifier for Advertisers) in 2021 and the adoption of App Tracking Transparency across mobile gaming. As a reminder, in 2021, Apple put this policy in place to give users more control over their own data, specifically how it is shared with other apps or games.

The changes to IDFA had a significant impact on mobile advertising and attribution. Advertisers could no longer reliably track users for ad targeting, measurement, and attribution without explicit user consent. Industry experts estimated that the opt-in rates for IDFA tracking would be below 20% (SearchAds).

This shift forced the mobile advertising industry to adapt by developing alternative solutions such as Apple's SKAdNetwork API, which is a privacy-centric API developed by Apple that allows advertisers to measure the effectiveness of their mobile app install campaigns on iOS devices without compromising user privacy or accessing personal data. This has increased the mobile industry’s reliance on first-party data and adoption of privacy-centric advertising strategies.

While the deprecation of IDFA had been anticipated for years prior to their announcement in 2020, Apple's concrete steps in 2020 marked the start of a major privacy-driven transformation in mobile advertising, which has had a meaningful impact ($8-10b/year decrease in spend) on the mobile gaming industry.

Timeline of IDFA’s Deprecation:

• June 2020: At Apple's Worldwide Developers Conference (WWDC), the company announced that iOS 14 (which was to be released in September 2020) would require apps to get user permission before tracking them across apps and websites. This meant that the IDFA would be effectively opt-in for users.
• September 2020: Apple initially planned to release the IDFA changes with iOS 14, but delayed the rollout until early 2021 after facing backlash from companies who needed more time to prepare for this dramatic shift to the mobile industry.
• December 2020: Apple released iOS 14.3 with a new “App Tracking Transparency” framework, which enabled the IDFA opt-in prompt for users. However, enforcement of the new policy was still delayed and not in full force yet (meaning app developers still had time to implement and comply with this policy).
• April 2021: With the release of iOS 14.5, Apple began enforcing the new App Tracking Transparency (ATT) rules, requiring apps to prompt users to allow tracking. This made the IDFA an opt-in identifier, as tracking was denied by default.

Now that it has been 3+ years since the full deprecation of IDFA and the adoption of ATT standards, we have the ability to look at the landscape and see the impact these changes had on the mobile gaming industry specifically.

Mobile Gaming: Consumer Spend is Down

Since 2014, mobile gaming has been the leader in revenue for the overall gaming industry from a dollar and growth perspective. However, mobile spending on gaming has decreased by about $8-10b per year over the last two years (see chart below) since IDFA deprecation and the implementation of ATT.

Downloads and Spend: Both are Down

In developed markets, there has been a clear decrease in downloads and consumer spending on mobile games over the last three years (see chart below). The United States, for example, peaked in monthly consumer spending in 2021 with almost $600m in March 2021 (as you can see in the above timeline, this was the month before ATT rules were enforced).

China, the largest gaming market, gives an even clearer picture. In 2021, China’s weekly downloads for mobile games topped 40m. Since then, weekly downloads have hovered between 20m and 33m, with a clear downward trend. Consumer spending in the Chinese market has also been declining (especially since the start of 2023).

It should also be noted that China didn’t see an immediate impact on total consumer spending, but we believe this was due to the success of longstanding games like Genshin Impact (released in September 2020) and Honor of Kings (released in 2015, still the highest-grossing mobile game).

The good news is that developers have been able to find users in other markets globally. While growth is still either stagnant or declining, it’s clear that developers are exploring less expensive UA (User Acquisition) in developing countries instead of focusing on acquiring high spenders in developed markets. The downside of developing markets is that their consumer spend is lower per player, which puts financial pressure on game studios, which need to bring in more consumers to make up for the revenue shortfall they are experiencing in developed markets like the US or China.

Global Mobile Ad Spend

With the uncertainty around acquiring users and the resulting decreases in downloads and spending, we would have expected hesitancy about spending more on UA. However, global mobile ad spending has continued to increase (YoY growth is decreasing but is still positive).

Mobile games are reliant on UA spend to acquire users so this is not necessarily a surprise but it is clear that traditional markets from pre-IDFA deprecation can not be relied on as heavily as they had been.

New Releases

A big concern for mobile games over the last few years has been the saturation of games available on app stores. According to data.ai, no single market has reached 2021 levels for new game releases in 2022 or 2023.

Also, while this may be slowly reversing, established games (released in previous years) command a majority of revenue relative to new releases. (State of Mobile Gaming 2024).

Due to an inability to reliably acquire users, game developers either maintain existing games (and their user base using first-party data) or decide not to release new games altogether without clarity on how they will acquire new users.

Takeaway: The past three years have seen a notable decline in downloads and consumer spending on mobile games in developed markets, with the US and China exemplifying this trend. Despite drops in both the US and China’s weekly downloads and consumer spending, developers have identified opportunities in other regions (e.g. India and Vietnam) where they can acquire users at a low cost (albeit with lower spending power).

This potential shift towards user acquisition (UA) in developing countries highlights a strategic pivot from high-spending markets. Surprisingly, global mobile ad spend continues to grow annually, despite the acquisition challenges since the IDFA changes. However, the rate of new game releases has not rebounded to 2021 levels, and established games dominate revenue, reflecting a cautious approach by developers who are focusing on maintaining existing games rather than taking a risk on new releases without reliable user acquisition strategies.