The 30% increase in revenue is grinning, and at a glance, the profit growth is single-digit or even negative. Has the money earned by the new tour been eaten by the purchase cost? This has become a common phenomenon in the industry.
Gigabit wrote in a recently released semi-annual report that Celadon Digital’s large investment in the early-stage marketing and promotion of the new tour resulted in losses, and therefore caused more than 40 million yuan in investment losses to Gigabit.
Since “The Strongest Snail” was launched at the end of June, Celadon Digital has invested a lot of advertising resources for this new game. According to App Growing data, “The Strongest Snail” launched nearly 4,000 sets of ads in June, such as Giant Engine, Unity Ads, and Meiyou, ranking 9th in June.
According to the observation of the game teahouse, “The Strongest Snail” has also placed a large number of soft or hard advertisements on Weibo, Station B and live broadcast platforms. The actual advertising volume of “The Strongest Snail” is definitely much higher than 4000 groups. The game teahouse especially remembers that during that time, the little snail occupied the homepage of various traffic platforms.
“The Strongest Snail” has a very good purchase effect. Not only did it win the App Store download list, it also ranked sixth on the best-selling list in the first month of its launch. The game flow should be good. However, due to the large investment in early advertising and the relatively late recognition of game revenue, Celadon’s temporary losses in the first half of the year were caused.
Celadon’s loss is undoubtedly only temporary, but with the high purchase cost, game makers’ increase in revenue but not profit has become the new normal.
Marketing expenses increased by more than 20%, revenue increased by 14%
Game practitioners generally believe that there is a “traffic shortage” and “product shortage” in the current industry. In fact, the shortage of traffic and the shortage of products are also mutual. Because of the lack of high-quality game products, the products on the market do not absorb the volume, which leads to higher purchasing costs.
But we can’t blame the game makers for not working hard. In the Internet traffic pool, too many app opponents compete with games for traffic. In many cases, the amount of game advertising is still a younger brother. As far as Q2 this year is concerned, the game purchase king “Three Kingdoms: Strategy Edition” can only be ranked 18th in the app.
Judging from the feedback in the semi-annual reports of listed game companies, the marketing expenses of major manufacturers are generally increasing.
In the first half of the year, the marketing expenses of some well-known large manufacturers have reached 4.5 billion yuan, and the marketing expenses of smaller manufacturers with issuance capabilities also approached 100 million yuan. The game teahouse compiled the marketing expenses of some representative game manufacturers in the first half of the year as follows:
It can be seen from the above table that the marketing expenses of leading companies such as Sanqi Mutual Entertainment and NetEase have exceeded 4 billion yuan in half a year, which has exceeded the revenue of a large number of game manufacturers last year; while the relatively small Palm Fun Technology and emerging manufacturer Yao Marketing expenses such as science and technology have also exceeded 100 million yuan. In addition, the marketing expenses of manufacturers such as Zulong Entertainment and Dianhun Network who are good at research and development are close to 100 million yuan, which is more than 90 million.
According to statistics from Tianfeng Securities, the marketing expenses of 24 listed companies in the game industry (excluding Tencent and NetEase) in the first half of the year totaled 10.095 billion yuan, a year-on-year increase of 24.18%. The revenue growth rate of these 24 game manufacturers was 14.41%. Considering that manufacturers such as Shengqu Games and Palm Fun handed over their key products to Tencent for distribution, the actual marketing expenses would be higher.
It can be seen that competition in the industry is intensifying, and the promotion cost of games is rising faster than the growth of game revenue.
It is not uncommon for the purchase price to break one hundred yuan
The cost of domestic purchases has undoubtedly been increasing in recent years.
This year is also a bit special. Due to the popular homestays choosing online entertainment under the epidemic, manufacturers have received a wave of long-lost traffic dividends. However, after the domestic epidemic is basically under control, or affected by the resumption of work and production, the traffic dividend has gradually faded. More than one manufacturer told the game teahouse that the cost of purchasing volume has gradually recovered since Q2 this year, and the effect of purchasing volume has become worse.
A person in charge of the traffic platform told the game teahouse that traffic costs have been increasing in recent years. He told the game teahouse that taking MMO games as an example, the unit price of purchases this year has increased by 20% to 25% year-on-year. “Currently, the more popular placement, SLG and card categories, the unit price for Android users is in the range of 30-65 yuan. The legendary category will be more expensive, reaching more than 100 yuan, and the unit price for iOS users may be as high as 300.”
“A good product can accept a higher purchase cost in exchange for more exposure. So it is not unusual for the unit price of purchase to exceed 100 yuan.”
Another practitioner, X, who is familiar with the buying volume market, believes that at the moment, the traffic dividend cannot be considered to disappear completely, but after years of education in the market, users have more selective tastes and prefer high-quality products. “The game itself doesn’t work, users don’t recognize it at all, and naturally there is no conversion.”
In X’s view, the cost of traffic is likely to continue to rise in the future. After all, traffic platforms such as Huge Engine and Tencent Advertising have been improving their commercial deployment.
“I feel that the more tools, the more expensive the traffic cost. I still miss the past, simply doing a little bit of delivery can bring a lot of traffic.” X complained to the game teahouse.
Can investing heavily in R&D + three-dimensional marketing ease the pain of buying?
Now that the traffic is so expensive, how should game makers respond?
According to the game teahouse observation, the first thought of big manufacturers is to invest heavily in research and development, improve the quality of the game, expand the game category, and reduce the cost of purchase.
Sanqi Mutual Entertainment disclosed in its semi-annual report that R&D expenses in the first half of the year increased by 98.61% to 645 million yuan. Among the Sanqi Mutual Entertainment reserve products, in addition to the ARPG types that are good at, there are also card, SLG and other categories in order to expand its user base.
At the end of June, Xindong completed a 700 million Hong Kong dollar refinancing round, mainly investing in self-research projects. According to Xindong’s semi-annual report, Xindong’s research and development expenses increased by 53.3% to 218 million yuan.
The traditional big factories such as Perfect World and Century Huatong also cost more than 700 million yuan in research and development.
However, R&D requires slow work and meticulous work. The quality of these new products under research and the effects of purchases will take a year or two before the results can be seen.
On the other hand, game manufacturers are also working hard on three-dimensional marketing to comprehensively reduce purchase costs.
An overseas publisher told the game teahouse that games in the Japanese and Korean markets are usually endorsed by local celebrities, and at the same time they shoot TV commercials, store a large number of brand advertisements offline, and superimpose online purchases.
The issuer explained that the purchase cost is high in Japan and South Korea, and the unit price for iOS users in the Japanese market can reach $30. If you only rely on online purchases, the high cost is unacceptable to most manufacturers. Through the three-dimensional marketing method of celebrity endorsement + offline advertising + online purchases, the cost of customer acquisition can be controlled in an acceptable range.
The person in charge of the aforementioned traffic platform also believes that while domestic manufacturers should reduce the size of the package, they should also combine various marketing methods such as Internet celebrities and celebrities to reduce purchase costs.
The domestic market is expensive to buy, and it is not news in the industry. This phenomenon is also an inevitable phenomenon brought about by the gradual peaking of the Internet demographic dividend. Compared with large companies with deep pockets, small and medium manufacturers are more cost-sensitive. Small and medium-sized manufacturers often use their entire organization to promote a product on a large scale, which is undoubtedly very risky. It is possible that the money made by the new tour will be offset by the purchase cost.
Source: Game Tea House