The Chinese market and the emerging opportunity for hyper-casual games

Over the last year, a trend emerged in the top app store rankings in the United States—lightweight games with simple game mechanics shot up both the App Store and Google Play free charts. While the traditional categories of casual, mid-core, and hardcore games are well understood, these simple games bucked the trend and didn’t fit into any of these three categories. Instead, this genre is part of a new mobile gaming genre: hyper-casual, a term coined by Johannes Heinze, MD International at AppLovin. 

One of the reasons why hyper-casual games have seen such success in the United States is that their simple game mechanics makes them instantly playable and infinitely re-playable. The genre is often addictive because sessions are short and their minimalistic UI and controls invite repeat sessions. Hyper-casual games are even easier to pick up than casual games like Candy Crush with instantly understandable gameplay and iconic visual style. 

Why hyper-casual is not as big in China, yet

While hyper-casual games have proliferated in the West, the genre hasn’t broken into China in the same way, yet. Up until now, there has been minimal opportunity for hyper-casual games to flourish in China because of the ad-dependent revenue model of the genre. Historically, the largest Android app stores in China have not allowed redirecting to websites or locations to get content, preferring a closed ecosystem, which has hampered the flexibility to support an ad-based revenue model. 

However, Android app stores rules around in-app ads have begun changing and they have begun allowing ad-supported apps and games in an effort to promote user growth. While the user bases of larger Android app stores have continued to experience rapid growth over the last few years, partially due to the parallel growth of the smartphone audience in China, growth has slowed due to smartphone saturation. 

The inability to support ad-based revenue models in games means that Chinese developers have focused almost exclusively on IAP as a primary revenue model. This external suppression of ad-based games means that mid-core and hardcore games dominate the Chinese market. Some casual games have had success, but this usually requires reaching millions of DAU (think Subway Surfers or Fruit Ninja). The requirement for such high a DAU is due to  the lower per-user LTV for casual games in China and the large scale marketing costs required to reach those user numbers. 

Additionally, most Chinese mobile gaming companies have been focused on midcore and hardcore genres or more robust and deeper casual games that use IAP as a primary focus for monetization. Due to this focus, it means there is currently less expertise about developing hyper-casual games in-market in China, creating a mobile game niche for developers to fill. 

Opportunities in China with hyper-casual games

Combined with the fact that smartphone and Android app store growth has slowed, you can see why hyper-casual games offer an untapped opportunity in China. Hyper-casual games are by definition more broadly appealing because of the genre’s low barrier to entry and high potential for viral growth. The Android app store ecosystem has a special interest in hyper casual games to offset slowing user growth, and therefore have been slowing opening the door to developers to include ads in their games, usually via strategic partnerships with preferred ad network partners, which unfortunately still tend to be different across each Android app store

The global hyper-casual game market is currently dominated by Western developers and to date China based studios have been minimally focused on this genre, offering Western studios  the near-term opportunity to capitalize on the dearth of hyper-casual games in the Chinese market. Since hyper-casual games are so simple, these games generally don’t require localization to be appealing to Chinese players. 

From an ad revenue perspective on iOS, there is still massive demand for CPI inventory due to the top grossing games being dominated still by high LTV genres that are hungry for CPI based traffic. CPI levels in China on iOS tend to be similar to those in US for midcore and hardcore games, and in some scenarios, even higher. While Android CPMs may currently be one-tenth those of iOS, the sheer scale of the Android audience in China makes this meaningful now and the upside potential of even small improvements in the CPM in China make it even more attractive.

Franklin Song is the founder and CEO of Yomob, an international company with a global monetization as a service platform used by over 2,000 developers and serving hundreds of millions of end users a month.  “We are currently seeing around $5 to $25 CPM on iOS in regions like China vs. only $.50 to $3 on Chinese Android market,” says Song. “That being said, the average Android CPM has been growing rapidly over the past 6 months and we believe it can grow 200-500% more over the next year.  One of the key drivers for this growth is that developers are no longer focusing exclusively on being featured in app stores as a means for growth in China, but now also focus on paid UA, as the tools and infrastructure for evaluating paid traffic are finally catching up in the Chinese market.”

Issues Western hyper-causal developers face

Although there are significant opportunities for hyper-casual games in China now, Western developers will inevitably face challenges bringing their games into the market. One hurdle is that mobile games require an approval number from The State Administration of Press, Publication, Radio, Film, and Television (SAPPRFT), which is just one of multiple compliance requirements for mobile games. To find out more about other regulatory hurdles you’ll face in China, read this article. 

Additionally, Chinese mobile game developers tend to move very fast to capitalize on any opportunities in their hyper-competitive market. As a result, foreign developers may soon have to compete against local developers and based on the number of studios, sheer size/resources of some local players (Tencent, Netease, etc.), this may become a monumental challenge if there’s a shift locally in focus to developing hyper-casual games.

For Western developers, you’ll need to consider working with partners who have expertise in the Chinese market to help you navigate regulatory hurdles and publishing into the Chinese market. Although a partnership may require revenue sharing, you’ll have a local partner with a mutual goal of success. However, if you can clear these market entry hurdles and get your hyper-casual games in front of the Chinese market, which we should not forget is the largest in the world, the opportunity to grow your mobile game business will likely be quite substantial.