© App Annie 2015

Mobile Games: Now You Can Predict the Future

App Adoption Cycle

Table of Contents1. Introduction & Key Findings

2. App Adoption Cycle: Gamesi. Game Lifecycles Are Shrinking

ii. Games With Higher Frequency of Use Outlast Their Competition

iii. Role Playing Games Mature Quickly While Casino Games Have Long Lifecycles

3. Recap

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1. Introduction & Key Findings

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Key Questions Answered by Adoption Cycles

• Evaluating investment and acquisition opportunities• How can you value an early stage app startup (especially in industries outside of

gaming)?• Does an app have staying power or is it a short-term hit?

• Managing your app portfolio• When will the growth of your existing apps slow down?• When should a new app be launched to continue your company’s growth

trajectory?

• Understanding the state of competitor portfolios• Are your competitors’ apps maturing or are they still in early stages of their

growth?

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Key Findings• On an aggregate level, new mobile games have been maturing much faster since 2014

as compared to previous years.• In the face of tougher market conditions, the ability to leverage legacy hits (with longer

lifecycles) to cross-promote new games is a strong competitive advantage.

• Based on downloads, follow-up titles like Candy Crush Soda Saga and Boom Beach are maturing much faster than their predecessors, Candy Crush Saga and Clash of Clans respectively. Comparatively, older releases like 8 Ball Pool and Subway Surfers still appear to be in the early-to-mid stages of their lifecycle.

• Simple, one-tap games like Crossy Road seem to mature much faster than other game types.

• Frequently played games are more likely to have longer lifecycles.• If longevity is a goal, average number of sessions per user may be a key metric to track.

• Casino and Racing games appear to generate consistent downloads for long periodswhile Role Playing games mature relatively quickly.

• Varying maturity schedules of different genres could aid portfolio diversification efforts.

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Forecasting App Adoption Cycles• Technology adoption (or diffusion)

typically occurs on an S-curve as distinctconsumer groups adopt new products(or apps) at different rates.

• Early adopters respond to companymessaging or seek out new titles on appstore charts.

• Late adopters usually download newapps after receiving recommendationsfrom their immediate network.

• Combining our industry-leading data setwith a statistical technology diffusionmodel allows us to forecast the lifecycleof existing apps.

• This can also be extended to new appsby using existing apps as comparables.

• These forecasts could be mission criticalin the app economy, where lifeexpectancy can be as short as a fewmonths.

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Typical Technology Adoption Pattern

Early Adopters Late Adopters Cumulative Adopters

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2. App Adoption Cycle: Games

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8 Ball Pool

Subway Surfers

Boom Beach

Clash of Clans

Candy Crush Soda Saga

Candy Crush Saga Crossy Road 2048

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Time

Note: Methodology for modeling the app adoption cycle.

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Older Releases Like 8 Ball Pool and Subway Surfers Still Have Significant Room for Growth

Modeled Position of Games on App Adoption Cycle as of August 2015Based on Worldwide Cumulative Game Downloads, iOS and Google Play Combined

Peak Adoption

Early Stage Expansion Maturity

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Sequels and “Super Casual” Titles Seem to Follow Accelerated Lifecycles

• Despite being on the market for more than two years, Miniclip’s 8 Ball Pool remains fairly early in its lifecycle.

• Subway Surfers , which predates hits like Clash of Clans and Candy Crush Saga,also appears to have significant headroom for growth.

• Boom Beach and Candy Crush Soda Saga appear to be at roughly the samepoint in their lifecycle as their predecessors, Clash of Clans and Candy Crush Saga respectively.

• These sequels may have gained critical mass very quickly thanks to strong consumerawareness and cross-promotion through King and Supercell’s existing hits.

• Games like Crossy Road and 2048 which emphasize simple, one-tap gameplaytend to mature extremely quickly.

• Unlike most games, these “Super Casual” titles tend to generate the vast majority oftheir downloads immediately after launch. This makes the shape of their respectiveadoption cycles more front-loaded than a typical S-curve.

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Average Estimated Time to Maturity for New Mobile Games Has Seen a Sharp Decline Since 2012

• It appears that the window to generate meaningful downloads has been shrinking over time. Thiscould be caused by a multitude of structural factors: increasingly aggressive paid user acquisitioncampaigns, intensifying competition for users and, possibly, increased media attention.

• In this environment, publishers should aim to increase the breadth of their portfolio and, for newtitles, attempt to acquire as many users as possible within a short time window.

• Ability to cross-promote new games through long-running legacy hits may become an even more criticalcompetitive advantage than it is today.

*Defined as the point at which a game reaches 90% of estimated market potential (based on cumulative downloads).

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2012 2013 2014 H1 2015

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Year of Release

Average Estimated Time to Maturity* by Year of Release Based on Worldwide Game Downloads, iOS and Google Play

CombinedN=4,346

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• On aggregate, Google Play games with longer session durations and number of sessions seem tohave more evenly distributed downloads over time than those that score lower on these metrics.

• As compared to the length of game sessions, the frequency with which users engage with a gameappears to have a greater impact on the distribution of downloads over time.

• If longevity is a goal, number of sessions per user may be a key metric for game publishers to track.

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Games With Higher Frequency of Use Outlast Their Competition

Average Estimated Download Distribution by Usage PatternBased on Worldwide Downloads of Google Play Games released between 2012

and H1 2015 and rank among the top 1,000 by monthly active users (MAUs)

Top Quartile by Number ofSessions

Top Quartile by SessionDuration

Bottom Quartile by Numberof Sessions

Bottom Quartile by SessionDuration

N=542

Weeks After Launch

Note: Based on worldwide usage data for Android smartphones and tablets during August 2015

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• Google Play game subcategories show distinctly different download distributions.• Casual and Role Playing Games tend to peak early and mature quickly.• Casino and Racing games generate downloads for longer periods.

• This could be a key input in portfolio planning.• Titles from longer lasting genres may be leveraged in an effort to add portfolio stability.• Frequent releases from fast-maturing genres may be used for possible quick gains.

% o

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Weeks After Launch

Role Playing Games Mature Quickly While Casino Games Have Longer Lifecycles

Average Estimated Download Distribution by Google Play Game Subcategory

Based on Worldwide Downloads of Google Play Games released between 2012 and H1 2015

Casino

Racing

Strategy

Casual

Role Playing

N=3,627

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3. Recap

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Recap

• Forecasting the adoption cycle for apps could help evaluate investment opportunities,manage app portfolios, track competitor portfolios and assist in making key marketingdecisions.

• Plotting popular titles on the adoption cycle shows that sequels like Candy Crush Soda Saga and “Super Casual” games like Crossy Road gained critical mass very quickly.Somewhat counterintuitively, older titles like 8 Ball Pool may continue to generatemeaningful downloads for a longer timeframe.

• New mobile games matured at a much quicker rate in 2014 and 2015 than in previousyears. In these market conditions, the ability to cross-promote new titles through long-running hits is a crucial competitive advantage.

• The frequency of game usage may be a better signal of download longevity of GooglePlay games than session length. Therefore, average number of sessions per user maybe a key engagement metric for game publishers to track.

• On Google Play, Casual and Role Playing Games mature very quickly while Casino andRacing games generate downloads for longer periods. Different maturity schedules ofeach genre could be a key input in portfolio planning.

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Appendix: Methodology

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App Adoption Cycle: Methodology• Historical weekly worldwide download data at the unified app-level was used to

estimate the following bass diffusion model parameters (where a download isconsidered to be “adoption”).

p: Probability of an early adopter downloading the appq: Probability of word-of-mouth from existing users leading to downloads from late adoptersm: Total addressable market (maximum lifetime cumulative downloads)

• These estimated parameters were used to calculate the current position of over 4,500games on their respective download lifecycles (pattern of predicted cumulativedownloads over time). Of these, a few popular games were plotted on a generic S-curve showing their current positions on their respective adoption cycles, fromintroduction to peak adoption (maximum lifetime cumulative downloads).

• This adoption cycle curve was divided into 3 segments based on the level of adoption– “Early Stage” is defined as the period until a game hits 30% of peak adoption and“Maturity” covers the period when adoption exceeds 90% of peak adoption.“Expansion” covers the period when adoption remains between 30% and 90% of peakadoption.

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© App Annie 2015

About App Annie

App Annie is the largest mobile app intelligence platform, providing developers and publishers with a 360-degree view of what they need to know to build, market and invest in their apps. App Annie is used by over 800,000 apps to track their performance, and over 400,000 mobile app professionals -including 94 percent of the top 100 publishers - rely on App Annie to inform their business decisions, including Electronic Arts, Google, LinkedIn, LINE, Microsoft, Nexon, Nestle, Samsung, Tencent, Bandai Namco, Universal Studios and Dow Jones. App Annie is a privately held global company headquartered in San Francisco with 12 global offices in cities including Amsterdam, Beijing, London, New York, Seoul and Tokyo. The company has raised $94 million in funding from e.Ventures, Greycroft Partners, IDG Capital Partners, Institutional Venture Partners and Sequoia Capital. For more information, please visit: www.appannie.com or follow App Annie on Twitter: @appannie.

Report methodology and updates are available here.

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