The Breakout Gaming Companies of 2024

2024’s Breakout Gaming Companies‍

As inspired by Semil Shah’s prescient Breakout Tech Company predictions, we are making our own picks for 2024’s breakout gaming companies in two categories: Content and Tech & Platform.

‍Content: Game Science (Black Myth: Wukong)‍

‍Black Myth: Wukong, released in August, is estimated to have sold 21.5m copies and generated $940.7m in gross revenue this year (Gamalytics), the most of any new game release in 2024. This is notable, especially because Black Myth: Wukong is China’s first internationally released AAA game. The game peaked with 2.4m Steam players shortly after release, the most concurrent players of any game this year. The player base for PlayStation is unknown, though DiscoverGameCo estimates the Chinese PS5 player base of Black Myth: Wukong to be >3.5m.

Black Myth: Wukong is based on Journey to the West, a famous Chinese novel of adventure, fantasy, and heroism. The game heavily relies on the deep lore and traditional cultural themes well-known across China, which likely made it one of the most anticipated games in the country over the past few years. This gave it mass appeal and reach as a game by China and for China.

The game was created by Game Science, a once relatively unknown developer founded by a strong team from Tencent. CEO and founder Feng Ji is a well-known, but controversial figure in China’s game development scene. By 2018, four years after the developer's founding, Game Science had achieved only modest success across three mobile titles. On the surface, it could be perceived that Black Myth: Wukong was somewhat of a hail mary for Game Science. However, the game is actually a spiritual successor to Asura Online, an MMO the team developed while at Tencent, which is also based on Journey to the West. Although Asura Online had initial success, much of the player base was driven away by the additions of microtransactions that were put in place in an effort to better monetize the game. Shortly after, Feng and his team departed Tencent to start Game Science.

For Feng, a game based on Journey to the West may have always been the goal. In developing Black Myth: Wukong over the last 6 years, Game Science leaned into the craft of game development, leveraging voice actors, using motion capture, and recreating historical Chinese sites within the game. As a juxtaposition to many other top games this year, Black Myth: Wukong is a premium, single-player game, and an original release (not a sequel). These characteristics seemingly would give the game a handicap:

• Single-Player: Unlike multiplayer, single-player games do not have direct network effects (where increased usage leads to a direct increase in the value to all users).
• Premium Paid: Unlike Free-to-Play games, there is a higher barrier to entry as users cannot try before they buy. This also required Game Science to build a complete game from the onset, which is counter to recent game development trends that rely on ongoing content updates (i.e., Live Operations).
• Original Release: The majority of top game titles are longstanding franchises with deep brand recognition that can be relied on in order to market to consumers. Alinea Analytics estimates that ~$943m in gross revenue was generated by Steam from the top 10 sequels alone. This is also prevalent in cinema: in 2024, the only movie on the USA's top 10 list that is not a direct sequel was Wicked.

Despite these apparent drawbacks, Game Science was able to put out an incredible game. With a ~$70m budget, a keen understanding of the local Chinese market, and leveraging an underutilized IP, Game Science was able to put out the most successful new game of 2024. We believe that these great heights will continue to be accessible to indie developers. Before the release of Black Myth: Wukong, we wrote about The Era of the Indie Game: the average rating for indie games and AAA has converged and the democratization of tools has enabled indie creators.

‍Tech & Platform: AppLovin

‍While far from a startup, no other tech & platform gaming company has had the meteoric rise that AppLovin has had in 2024. Their stock rose from $38.78 on January 1st to $323.83 on December 31st (+735%), making $APP the best-performing stock on the Nasdaq 100. This was on top of already impressive gains in 2023 of 260% from $10.78 at the start of the year. Combined, AppLovin is up 2,904% over the 2 year period and now has a market cap of $118bn.

AppLovin is an ad monetization platform for mobile games and apps. The company was started in 2012 by Adam Foroughi, John Krystynak, and Andrew Karam in stealth mode. By launch, they had already secured 300 clients, including the likes of Spotify, OpenTable, and Groupon. By 2016, boosted by strong growth in their ad network business, they were preparing to sell the business to a Chinese private equity group, Orient Hontai, for $1.4bn. The acquisition ended up falling through due to opposition from CFUIS. As a result, AppLovin instead sold 9.98% of the business for $140m and accepted an $841m debt investment from the group which helped the founders manage the company towards an IPO.

In 2018, AppLovin started Lion Studios, an internal mobile gaming developer and publisher. This was a surprising move for some in the industry because it put AppLovin in direct competition with their own customers, other game studios. Theoretically, this could allow Applovin, who runs the mediation platform, to treat their first-party games more favorably. What Adam and his team were actually after was the first-party data from games to improve their ad-network performance, specifically its AI-powered Axon engine. While many mobile game studios were frustrated and questioned whether Lion Studios received preferential treatment from AppLovin, the ad-network performance was improving markedly because of the addition of first-party data. For ad monetization, performance (the highest CPM for ad-based monetization or the lowest cost to acquire new users) is all that matters, so AppLovin customers continued to stay with them as it was the best solution in the market.

AppLovin went public in early 2021 at a roughly $23bn market cap (CNBC). That same year, Apple deprecated IDFA (Identifier for Advertisers) removing the ability for advertisers to reliably track users for ad targeting, measurement, and attribution without explicit user consent. In efforts to counter these IDFA depreciation risks and grow their book of business generally, AppLovin went on to acquire Adjust (a mobile app performance platform) as well as MoPub (an ad exchange owned by Twitter), both deals valued at ~$1bn.

Though these acquisitions were accretive to the business and helped shield the company from IDFA depreciation, they did not necessarily protect the company from the existential threat of Unity’s June 2022 proposed merger with IronSource (another app monetization company). A combined Unity and IronSource would, in theory, have the first-party data (from Unity) and ad network (from IronSource) to offer a compelling alternative to AppLovin. This threatened the business so much so that AppLovin offered to acquire Unity in August 2022 for up to $20bn (an 18% premium) as long as the IronSource deal was abandoned. But Unity shareholders rejected the offer. As fate would have it however, Unity went on to make several poor strategic decisions (notably introducing a new pricing model focused on a “runtime fee” that lost trust with developers) and, by the end of 2023, had ousted CEO John Riccitiello. Today, Unity’s market cap sits at $9.6bn; if Unity shareholders had accepted the deal, their portion of the combined entity could potentially have been worth >$50bn.

While Unity has struggled over the past two years, AppLovin went back to continue focusing on the fundamentals of their business. Their story over the years has been one of strong product-market fit during the growth of mobile, cunning strategic decision-making, and some short-term pain for incredible long-term gain. So what heralded the stock performance in 2024? For one, revenue and earnings, have continued to climb for the company. They broke the $1bn mark in quarterly revenue in Q1 of 2024 and grew that to $1.2bn for Q3 (13% growth); over the same period, earnings rose from $236m to $434m (84% growth). Software Platform revenue, which is driving the bulk of growth, grew 66% quarter over quarter and saw EBITDA margins improve from 72% to 78% (Applovin). Beyond the strong financial performance and improved projections, investor sentiment appears bullish on the positive impacts that AI will have across the business with supporting personalized creatives and improvements to their technology stack.

Takeaways: Game Science (Black Myth: Wukong) and AppLovin stood out to us as the breakout gaming companies of 2024 across content and tech & platform. Black Myth: Wukong was highly anticipated, but still beat all expectations to become the best selling new game of 2024 and catapulted Game Science as an independent developer to the forefront of China’s gaming ecosystem. AppLovin, though a storied company that came up with the rise of mobile in the 2010s, reaped the rewards of an incredibly strong fundamental business and impressed public market investors with robust financial performance throughout the year. We are excited to see how they use their momentum entering 2025.