Will Android dominate mobile gaming?

Last week at its Games Developer Summit, Google announced a slate of new advertising tools designed to help mobile games developers reach qualified players. These new features are, in descending order of my subjective opinion of impact:

  1. tROAS bidding for ACe campaigns: ACe campaigns, or App Campaigns for Engagement, were introduced by Google last year and allow developers to target ads to players that have previously installed an app. The new ACe campaign tROAS bid setting gives developer the ability to bid against a ROAS target over a prescribed timeline versus a cost target, similar to Facebook’s VO bidding type. More on tROAS in this QuantMar thread.
  2. tROAS bidding optimized for ads revenue: Google will allow game developers to bid against predicted ad revenue in their tROAS targets, versus merely IAP revenue. This is an important development for eg. hypercasual games, which monetize exclusively or in the majority through ad revenue.
  3. Re-install exclusion: this feature will allow developers to automatically and natively exclude players that have already installed a game from being targeted with ads.
  4. Deep-link free option for ACe campaigns: ACe campaigns currently require a deep-link endpoint to be submitted during campaign creation, but soon they will automatically direct users to an app’s loading screen if a deep link hasn’t been configured.

In addition to these features, separately, Google introduced a “Play as you Download” feature for Android 12 that will allow players to begin playing a game before it has been fully downloaded, sideloading any assets that aren’t critical for launch. Ostensibly, “Play as you Download” is an application of the Google App Bundle format that was introduced in 2018, since “Play as you Download” will be enabled automatically in Android 12. Developers will be required to publish apps with the app bundle format starting this August.

The new advertising products that Google announced are potentially momentous for game developers: tROAS campaigns generally form the core of most game developers’ advertising budgets on UAC. Opening this bid strategy to engagement and re-engagement campaigns will bring the efficiency of that tool to a marketing strategy that has become incredibly important to many game developers as their audiences saturate and a regular cadence of event-driven collaborative and competitive content (“live ops“) becomes the monetization standard for mobile gaming. Similarly, allowing ads revenue to be bid on via the tROAS strategy likewise gives that power to casual game developers and likely provides a significant benefit (10-20% bid increase) for all other developers.

These are important tools that will improve commercial outcomes for mobile game developers that publish on Android. But perhaps more notably, these tools stand in stark contrast to the limitations that have been imposed on audience aggregation and distribution for mobile games on iOS through Apple’s App Tracking Transparency (ATT) privacy policy. ATT is dramatically limiting the ability of game developers to reach audiences, and it almost completely undermines their ability to re-target users or systematically deploy re-engagement campaigns. As a result of ATT, but also in response to the tools that Google is providing to mobile games advertisers, could Android become the dominant platform for mobile gaming?

iOS has historically served as the platform of choice for mobile games developers operating in Western markets*. Only a small number of device models need to be supported for games that are published to iOS, and the average monetization rates for iOS users tend to be higher than for Android users. I wrote this article in 2013 and the general thesis has remained true: marketing prices are higher on iOS than Android because iOS users are generally more valuable, and building for iOS is more straightforward because so few device models (and screen resolutions, and performance profiles, etc.) need to be supported. This has led to a common phenomenon: the Android deficit, whereby a games developer’s Android build lags the iOS build by some number of updates because iOS development has been prioritized.

What if that changes? Not only has Apple handicapped developers in terms of building their audiences, but Google is actively exploiting those limitations by delivering tools to developers that improve the baseline performance of marketing strategies that are now mostly impossible on iOS. Operating re-engagement campaigns is, at the very least, much more limited now in the ATT environment than it once was: because of these new advertising tools, re-engagement campaigns for Android users on UAC are even more powerful.

A Wall Street Journal piece that was widely circulated within mobile gaming circles earlier this month documented a substantial shift in advertising spend from iOS to Android in the wake of ATT. While I think this sharp increase in ad spend for Android is mostly speculative — companies re-testing Android performance — and will be short-lived, it reveals something quite stark about advertising spend, broadly, for iOS: it can’t grow. As I argue in this piece, the common performance advertising model involves spending as much as possible on any given channel with thin margins against a performance threshold. If efficiency drops on a channel, ad spend must drop proportionately — there exists no “spare capacity” in the form of thick margins that can compress to offset the ad performance efficiency degradation. A spike in Android spend indicates a “crowding of the lifeboats”: advertisers are piling into Android ad markets because ATT has devastated advertising performance for iOS and advertisers are desperate to deploy ad budget anywhere they can.

If advertisers are chasing yield on Android in the absence of tools that are purpose-built to fill the performance gaps left by ATT, then certainly they’ll redouble those pursuits when those gaps widen through purpose-built engagement targeting tools. It is wise of Google to specifically address the advertising deficiencies imposed on iOS with ATT by building capabilities around tROAS bidding for engagement campaigns and for ad revenue (as well as previous install exclusion). Engagement campaigns will no longer be meaningfully possible on iOS, and CPMs there for ad monetization are already compressing. And it seems likely that these new UAC tools represent just the beginning of a trend of Google investing with great purpose into empowering games developers to aggregate audiences on Android.

*I could caveat this to death, but I won’t, as it is broadly true. Yes, exceptions exist.