Identifying The Right Gamers

Identifying Target Markets for Games

The games industry is a battlefield of creativity, innovation, and fierce competition. With thousands of games launched annually (over 14k were launched on Steam in 2023 alone), developers and publishers face the daunting task of creating and successfully marketing their games. The challenge has been compounded since the depreciation of IDFA (Identifier for Advertisers) in 2021, making user acquisition (UA) strategies more complex and expensive. There has also been a major pullback in the funding environment and capital expenditures at many studios and publishers. As we noted in our last quarterly report on the gaming industry, Q4 2023 was the lowest quarter by funding amount in the last five years.

This trifecta of the competitive landscape, UA challenges, and lack of capital makes the tactics of launching new games incredibly difficult. Beyond luck, the key to success often lies in the strategy of identifying and capitalizing on a specific and addressable niche market for the game they are launching.

Developers can discover genres that offer room for innovation or revitalization by analyzing trends, player feedback, and market gaps. These opportunities could range from reviving classic games with a modern twist (for example, Hades did this with the rogue-like genre by focusing on surprise and variety over difficulty) to exploring the combination of emerging genres (an example being turn-based strategy and adventure were successfully combined in Mario + Rabbids Kingdom Battle).

Identifying a genre niche in the landscape of available games is only part of the equation; developers also have to add the dimension of identifying appropriate target audiences. In the era of community-driven and guerrilla marketing, which emphasizes localized and hands-on strategies, market selection and targeting is critical (and now harder post-IDFA). Regional preferences, cultural differences, and gaming habits play a pivotal role in a game's adoption and subsequent success.

At a high level, demographic differences across geographies can help drive decisions on where to launch games; some important categories include population, median ages (also a proxy for growth rate), income levels, and education.

For emerging markets in particular, it is also important to consider internet adoption rates, mobile phone adoption, ease of doing business, and access to payment methods. For example, Nigeria, the Philippines, and Egypt may be compelling new markets as they have large populations, low median ages, and higher GDP per capita than some of their peers (though still below world averages). Raw demographic data can help identify potential growth markets, but they do not tell the whole story.

Considering cultural differences

Early last year, a study on 118b hours of mobile play data across the globe was published by researchers in the Nature Journal. The authors aimed to determine if there were broad cultural differences in how people across countries engaged with games across various factors. They analyzed total playtime, average daily playtime per active user, yearly playtime per capita, and the proportion of playtime that came from the most active 1% of players. The researchers then bucketed countries into 8 clusters that had similar characteristics across the data analyzed:

• A-Type ("Elite Gamers"): Dominated by countries with a significant layer of highly engaged players atop a moderate gaming culture, exemplified by the most active 1% of players dominating the playtime.
• B-Type ("Casual Players"): Characterized by very low mobile gaming per capita, this cluster showcases a more evenly distributed playtime among gamers compared to A-Type.
• C-Type ("Moderate Players"): Consists of a diverse set of countries where mobile gaming per capita is moderate without a concentrated layer of highly engaged players, indicating a balanced gaming culture.
• D-Type ("Emerging Gamers"): Comprises developing countries with low mobile gaming engagement both per day and per capita, yet these territories still engage more than the lowest playtime clusters.
• E-Type ("Heavy Players"): Marked by high gaming engagement per capita, making mobile gaming common among its members, with a significant portion of playtime coming from the top 1% of players.
• F-Type ("Sparse Gamers"): Features the lowest average levels of mobile playtime per capita globally, including the least developed countries and those affected by conflict, with evenly distributed playtime among players.
• G-Type ("Island Enthusiasts"): Predominantly Pacific Island states where few people game, but those who do play more per day than elsewhere, with gameplay evenly spread among players.
• H-Type ("Gaming Extremists"): Consists of wealthy East Asian territories with extremely high playtime per capita and the most active 1% of players dominate the amount of playtime in these markets, highlighting a culture of intense gaming engagement among a small percentage of players.

*Note: the quoted cluster names are Konvoy’s, not from the paper.
In November 2023, we outlined that the gaming industry generates ~$59 in revenue annually per player, which is under-monetizing. A large part of the story is that the gaming industry gives away too much for free. Ranking the least to best monetizing clusters (with examples, saving some specific outliers) would be:  

1. “Sparse Gamers”: South Sudan, Syria, and other Least Developed Countries (LDCs) and countries in conflict
2. “Island Enthusiasts”: Papua New Guinea, Vietnam, and many Pacific Island states
3. “Casual Players”: India, Nigeria, and other developing countries
4. “Emerging Gamers”: Mexico, South Africa, and Indonesia
5. “Moderate Players”: Brazil, Argentina, and Saudi Arabia
6. “Elite Gamers”: China and most Western European countries
7. “Heavy Players”: USA, Japan, and Russia
8. “Gaming Extremists”: Singapore, South Korea, and Hong Kong

Countries switching between these clusters could represent a substantial business opportunity for individual game companies that are watching this unfold in real-time.
Countries in the “Casual Player” cluster (low playtime and a broad playtime distribution) could transition towards “Moderate Players” (moderate playtime and broad playtime distribution); an example of this could be India, where widely popular mass-market games could entice large swaths of the population to engage with gaming more frequently.

Countries within the “Moderate Players” clusters may better entice top gamers with hardcore titles and premium offerings to transition these markets towards the “Elite Gamers” bucket characterized by a significant layer of highly engaged players. Many high-GDP Middle Eastern countries, for example, are “Moderate Players,” which challenges the common assumptions about wealth correlating with higher engagement.

The “Island Enthusiast” cluster exhibits a unique gaming pattern in that they rank highest in average daily playtime per player, but not many people overall play; additionally, gameplay is relatively egalitarian (only 33.1% of playtime is concentrated within the top 1% of players by playtime). These characteristics for the “Island Enthusiast” cluster (which is primarily composed of Pacific Island states but also includes Vietnam and Guinea) suggest a potential correlation between geographical isolation or community size and mobile gaming engagement, which could be explored as a path to high engagement amongst players in other states.

‍Takeaway: The gaming industry, while lucrative, is under-monetized, and developers are confronted with significant challenges, including intense competition, difficult UA, and a stringent capital environment. Success hinges on gaming companies' ability to pinpoint and cater to specific niches within various genres and markets. Gaming is global, but it is not homogenous - understanding player behaviors across markets is key to uncovering and capitalizing on the most promising opportunities. For those curious, the full Cross-Cultural Patterns in Mobile Playtime paper is well worth the read.