Why Is It Harder To Raise Investments In Mobile Game Development In 2024?

From a random kid on the internet making big bucks by streaming games to unbeatable sales of newly-released games, it’s pretty clear that the gaming industry is not just for entertainment, but a profound business opportunity. 

Nowadays, games have been remodeled into an industry worth billions from merely a hobby. 

If we talk about the pandemic period, the mobile gaming market has seen unbelievable growth. It has remained attractive since the initial surge even after the ups and downs leading to high profit margins and huge ROI. 

Considering the hyper-casual game segment, the market still represents a significant share of well-established gaming app installs.

But how do the new games get a bit of this whimsical pixelated pie? 

Well, through this blog, we try to answer this question while also taking a glance at the changes that took place over the years, the importance of raising funds, costs, and profitability aspects with some amazing tips for businesses to know before seeking funding from investors. 

So, let’s begin!

What Has Changed the Gaming Industry Through the Years?

The numbers speak for the mobile gaming industry which has become the largest segment worldwide ahead of console gaming and PC gaming.

Here’s a simpler breakdown of the gaming revenue:

• Mobile Gaming: $90.4 billion
• Console Gaming: $52.2 billion
• PC Gaming: $40.4 billion

Mobile gaming leads the way, making up almost half of all video game revenue. Free-to-play games are a big part of this, accounting for 85 percent of the total. Overall, the global gaming industry is expected to hit approximately $450 Bn by 2024.

A few years ago, hypercasual games were simple and economical to make, often developed by just one or two people. These games had basic mechanics and visuals, but they could still earn a lot of money. Developers could spend $2K to $5K and have a chance to make hundreds of thousands of dollars in revenue each month.

Today, making a hypercasual game is much more complex and expensive. A typical game app development team now includes one or two developers, a game designer, an art manager, and a VFX specialist. 

Sometimes, a team can have up to ten members. With so many projects failing to succeed, studios need more teams working on multiple games at once, which reduces their chances of making a profit.

Studios often operate three to four teams simultaneously, each working on several projects with high-quality standards. They also hire additional specialists like developers, artists, and level designers. It’s not just about having a good game idea anymore, rather it’s also about perfecting the game’s presentation, monetization strategies, level design, and animations.

Publishers also provide their experts to help with production, design, marketing, and other areas. As a result, the cost of developing a game with potential success can easily exceed $20,000, and studios need to invest in multiple attempts to find a hit, similar to how venture capitalists invest in many projects hoping for one big success.

Profitability and Costs: Then and Now

Today, the average profit margin for hypercasual games is around 10% to 15%. A typical development team might include one or two developers, a game designer, an art manager, a VFX specialist, and possibly some studio heads. Keeping such a team running would cost about $30,000 per month, including salaries and other expenses. Without a publisher, costs would be even higher since you’d also need to hire marketers and lawyers, but we won’t focus on that here.

To just break even with this setup, you’d need a game that can handle a marketing budget of $500,000 per month while maintaining at least a 15% profit margin. This means constantly reinvesting to grow or maintain revenue and putting money into new projects to keep expanding. Plus, any initial investments must be paid back from revenue before you start seeing actual profits.

This scenario shows that hyper-casual game development isn’t as profitable as it might seem—it’s similar to running a traditional offline business. Typically, it takes 18 months to two years to recoup investments and see standard profits.

Developing a hypercasual game now takes two to four months, and you have to keep paying salaries the entire time. Even if your game succeeds and you start acquiring users, you probably won’t spend $500,000 on marketing right away, however, you’d likely need to increase spending gradually.

In short, breaking even right after launch is unrealistic. There’s a good chance that the first few months spent developing prototypes might not pay off. You may need to start over multiple times before finding a winning formula.

Why is It Important to Invest in Mobile Game Development?

Securing Enough Resources for Development

For mobile game development, you need skilled developers, designers, and other specialists. Initially, you might not need all of them, but for long-lasting success, ensure you have enough funds to hire and equip your team.

Boosting Game Quality and Features

With more funding, developers can use better technology, advanced tools, and high-quality art to create an awesome game with stunning visuals, mesmerizing sounds, and unique features.

Marketing and User Acquisition

Creating a great game is just the start. To succeed, you need to market it well. Funding helps you run ads, work with influencers, and use strategies to get more downloads.

Tips to Focus before Seeking Funding in 2024

Focus on New and Innovative Ideas

Investors are attracted to startups that showcase fresh and creative ideas. Successful games often break new ground by trying out unique gameplay mechanics and embracing different art styles. It’s not just about following trends but also about creating your own by constantly innovating and taking smart risks. Make sure to highlight what makes your game or studio unique in the crowded market in your investor deck, too.

You may also like to read: A Comprehensive Guide on How to Make a Game App.

Passion and Creativity Matters

Most investors look for founders who are passionate about their games and have a clear creative vision. These traits often signal a team’s potential for success. The teams who really know why they’re making their game and who it’s for should stand out. It’s important to show that you understand your target audience and are driven by more than just making money.

Look for Diverse Audience

The people who play games come from all walks of life, but historically, game creators haven’t always demonstrated this diversity. However, this is starting to change, with a focus on audiences that have been ignored. There’s a lot of potential in creating games for these new groups, especially when the creators themselves come from these backgrounds. Taking a chance on these audiences may take you a step toward success.

Passion Over Data

Data is important but not the only measure of success, especially in the early stages of development. A passionate and dedicated team with a strong vision can be just as valuable as hard numbers. Investors often find enthusiasm and creativity more compelling than a purely data-driven approach. They focus on early-stage projects and the teams behind them.

Assemble a Strong Team

Making games is complex and building a game studio is different from running a tech company. Simply put, it combines all the problems of software and entertainment. Investors look for founders with a clear purpose and who can handle challenges while creating something great. They want to invest in a studio as a whole company, not just a single project. Key questions are about what the studio will become, who is leading it, and what their goals are. Teams with a strong vision who can execute it from start to finish are rare and valued.

How a Game App Development Company Can Help Businesses in Investment Decisions?

Many leading mobile app development companies across the globe are developing state-of-the-art apps and software that have driven massive growth in the gaming industry. 

A mobile game app development company can help businesses make informed investment decisions by providing support with: 

• Understanding the market trends and insights
• Conducting a thorough competitor analysis
• Estimating game development costs and timelines
• Evaluating technical viability
• Identifying challenging and minimizing the risks
• Choosing the right monetization models
• Optimizing games to increase profitability
• Offering post-launch support and scaling opportunities

Investors who have a basic understanding of the gaming industry should consider investing in game development companies. Considering these companies already have sound expertise in developing games across different platforms and genres, making them a more secure investment option. Putting resources, time, and money into a professional game app development company will help gaming studios and businesses lay strong foundations for success. Hence, this investment is a safe and secure bet. 

Conclusion

Coming to an end, it’s safe to secure funds for your mobile game to succeed in the competitive industry. Business owners should never stop exploring and adapting to various funding strategies, like alternative options, traditional sources, and publisher partnerships. This way, they can add value to their game development process, marketing, and long-term growth of the funding journey. 

If you’re ready for development with your funding, game idea, and everything in check, you can consult a mobile app development company specializing in game-building services. Their experts will help you in estimating the total costs of the entire game development process.