Candy Crushing to money crunching: the boom of mobile gaming in India

Mobile gaming is fast becoming India’s favourite pass-time. In the last two years, millions of Indians, from office commuters to college students locked away in their rooms, have spent their hours furiously tapping away on their smartphones in a sincere attempt to level up on Candy Crush or to win the ongoing battle at Pochinki on PUBG.

One of the biggest causes behind this boom is India’s Jio-led data revolution. Jio’s aggressive pricing forced data costs to drop sharply across the nation and made the average Indian consumer able to stream music, watch videos, and play games without burning a hole in his/her pocket. In addition to affordable internet, smartphone penetration has grown from six percent to 23 percent in the last five years, enabling widespread access to the app ecosystem. With this, the population of gamers has touched 200 million, making India a major market for mobile gaming.

Casual social gaming has made gaming mainstream

The dawn of mobile gaming in India can also be attributed to the mass appeal of games like Fruit Ninja, Candy Crush, and Temple Run. As these games usually do not need expert level skills, everyone from little Chintu to Sharma aunty next door can enjoy the “sugar rush”.

The social nature of these games, with their engaging game design and multiplayer features, is a key ingredient to their appeal, as compared to the niche ‘hardcore games’ like Dota and Counter-Strike. Furthermore, the popularity of mobile gaming and the age-agnostic audience have brought back digital versions of family card games like Rummy (nostalgia running high!).

But are VCs excited?

Early stage VCs have rightly spotted the trend and taken bets in this space. However, late-stage investors have been cautious. Their hesitation stems from the limited predictability that casual gaming developers have managed to achieve owing to their short shelf-life and unpredictability of successful games (success of one game does not guarantee the performance of another).

Further, for casual gaming platforms, revenue streams are currently limited—either by running advertisements or through in-app purchases—and these companies are still figuring out steady sources of revenue. On one hand advertisers are hesitant to shell out top dollars, and on the other, users hesitate to pay for their gaming experience given the massive availability of free games.

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Do esports and fantasy fix the “glitch” for VCs?

Fantasy games, which allow users to create 'fantasy teams' during real-life matches, and e-sports platforms, which conduct tournament-style competitive sessions of casual games like Fruit Samurai, seemed to have solved the issues that plagued the first wave of mobile-gaming startups, encouraging VCs to invest in the gaming sector.

Both these gaming categories not only give gamers the social experience by allowing them to contemplate strategy and compete in real time with friends, but they have also potentially figured out consistent revenue streams. By introducing real money gaming, with minimal participation fees levied on users, they can claim seven to 15 percent of the pot as their revenue. Furthermore, by aligning with the Indian sports calendar, fantasy gaming platforms have also hit the user retention jackpot. Marquee events and sporting leagues like the IPL ensure that gamers remain engaged throughout the year, thereby assuring investors of a sure shot customer base.

In addition, since esports platforms are game aggregators rather than one-game apps, they don’t place their bets on the success of just one game. For example, WinZO Games offers over 30 games across multiple formats, giving users a wide pool of gaming options to choose from, be it Fruit Samurai, Fantasy League, or trivia questions. This significantly diversifies the risk.

Unlike the esports industry in the US, which focuses on hardcore games like League of Legends, the Indian esports platforms have a more casual gaming portfolio. This drives the mass appeal further since they can choose to run popular themes such as Endless Running or Tetris’ and monetising the large base of casual gamers. As a result, both categories of gaming startups are scaling fast, with the best-in-class companies tracking user retention at 35-45 percent in the third month, baiting investments from venture capital funds across the globe.

Not surprisingly, the popularity of online gaming has reached a stage where it is challenging traditional entertainers i.e movies and music for consumer eyeballs. Prominent OTT platforms like Netflix fear to lose their customers to gaming or sleep! In fact, an argument can also be made that by virtue of multiplayer overlays in their designs, games have edged out their OTT competitors.

Cognisant of this advantage, internet media biggies such as Apple, Activision Blizzard Inc, Electronic Arts Inc, and Enthusiast Gaming Holdings Inc have started investing in the gaming sector. If projections by Google and KPMG reports hold true, the future of online gaming looks promising with the industry poised to touch $1 billion at a CAGR of 20 percent by 2021.

(Edited by Evelyn Ratnakumar)