Why Hyper-Casual Mobile Games Don't Work in the Chinese Market Anymore

Hyper-casual games, characterized by their simple mechanics and quick gameplay, have significantly declined in popularity within the Chinese mobile gaming market. While these games initially gained traction globally, several factors have contributed to their struggles in China. This article explores the reasons behind this shift, including regulatory challenges, cultural preferences, increased competition, changing user acquisition (UA) dynamics, and monetization issues.

The Current State of the Chinese Mobile Gaming Market

China is the largest mobile gaming market globally, with revenues reaching approximately $34.1 billion and around 660 million mobile gamers. However, the market is predominantly dominated by mid-core and role-playing games. Recent trends indicate a decline in hyper-casual game popularity; for instance, a 2023 analysis projected that "the shrinking popularity of hyper-casual games that we projected in our 2023 analysis is set to continue as a trend in 2024."

Regulatory Challenges

The Chinese gaming industry is heavily regulated, requiring game developers to obtain licenses from the National Press and Publication Administration (NPPA). This includes obtaining an ISBN certificate for any game that offers in-app purchases (IAPs). Hyper-casual games often struggle to meet these regulatory standards due to their simplistic nature and potential inclusion of elements deemed inappropriate for the Chinese audience. Moreover, the regulatory requirements make it harder for hyper-casual games to achieve a quick go-to-market strategy, as the lengthy approval process can delay launches significantly. This is particularly challenging for a genre that relies on rapid iterations and quick market testing to stay relevant.

Cultural Preferences and Player Behavior

Cultural factors significantly influence gaming preferences among Chinese players, who gravitate toward more complex and competitive gameplay experiences found in mid-core titles. Hyper-casual games typically focus on universal themes and accessible mechanics, making them easy to learn and easy to get into. However, their downside is a high attrition rate and lower retention compared to more complex games, which combined with high user acquisition costs, spells a rather gloomy picture for their long-term success in this market.

Increased Competition and the Shift Towards Deeper Gameplay

The hyper-casual game market in China has become increasingly saturated as local developers continue to produce titles that resonate well with Chinese gamers' preferences for more engaging and long-term gaming experiences. Unlike Western players, who might enjoy hyper-casual games' quick, disposable nature and frequently switch between titles, Chinese players tend to favor games that offer deeper gameplay mechanics and extended progression systems. They are less inclined to change from game to game, preferring to invest their time in a single game that provides a more sustained and rewarding experience.

A prime example of this dynamic is the decline of Kingsoft/Cheetah Mobile, once a significant player in the hyper-casual market with popular titles like Piano Tiles 2 and Rolling Sky. Initially successful due to the addictive simplicity of their games, Kingsoft/Cheetah Mobile struggled to retain its player base as the market evolved. The high attrition rates and low retention of hyper-casual games proved detrimental as players sought more complex and immersive experiences. This shift in player expectations and increased competition from mid-core games led to a loss of market share for Kingsoft/Cheetah Mobile, illustrating the challenges even established companies face in adapting to changing market dynamics.

Changing User Acquisition Dynamics

User acquisition costs for hyper-casual games have risen sharply in China due to increased competition and market saturation. High ARPU (Average Revenue Per User) games, particularly mid-core and hardcore titles, are willing to invest heavily in user acquisition, driving up the cost per install (CPI) across the board. This increased demand for ad space makes it more difficult for hyper-casual games, which generally operate on lower margins, to compete effectively. The two biggest ad aggregators in China, ByteDance (TikTok) and Tencent (WeChat) have their traffic ecosystems and do not necessarily need to buy external traffic to sell ads, making the landscape even more challenging for external developers.

Moreover, hyper-casual games thrive on rapid game iterations based on market needs, but the regulatory hurdles prevent the fast-tracked launches essential for their success. The lengthy approval process hinders their ability to adapt quickly, leaving them lagging in a highly dynamic market.

Monetization Challenges

Hyper-casual games primarily generate revenue through in-app advertising rather than IAPs. In China, where players are accustomed to deeper gameplay experiences, the monetization potential of hyper-casual games is limited. The lack of compelling reasons for players to engage with ads or make IAPs further exacerbates the monetization challenges faced by hyper-casual game developers in the Chinese market. Moreover, as noted by various sources, hyper-casual games face higher media-buying costs and challenges related to Apple's IDFA changes, making it difficult for them to achieve profitability. The reliance on ad revenue from non-paying users limits overall financial sustainability.

A Winning Combination: Ease of Play with Deeper Gameplay

While hyper-casual games are strong in being easy to learn and quick to play, their high attrition rate and lower retention, combined with the high UA cost, present significant challenges. The ideal solution would be to combine the accessibility of hyper-casual games with deeper gameplay mechanics, creating a hybrid model that offers the best of both worlds.

The My Little Universe franchise by Say Games is a prime example of this winning combination. The game integrates simple mechanics with resource management and progression elements, providing players with a sense of accomplishment and deeper engagement while still being easy to get into. This hybrid approach can potentially overcome the inherent limitations of hyper-casual games and align more closely with the evolving preferences of the Chinese market.

The decline of hyper-casual mobile games in the Chinese market can be attributed to regulatory hurdles, increased competition from local developers, changing user acquisition dynamics, and monetization challenges. The case of Cheetah Mobile exemplifies how even prominent publishers can lose their competitive edge in this challenging environment. Western developers must reassess their strategies as the gaming landscape evolves. They should consider adapting their offerings to align more closely with local preferences and the demand for more engaging gameplay to succeed in this complex market.

Summary: Key Points

• Regulatory Hurdles: Strict regulations in China make it difficult for hyper-casual games to achieve quick go-to-market strategies, impacting their ability to iterate and adapt to market needs rapidly.
• Cultural Preferences: Chinese gamers prefer deeper gameplay and long-term progression, making it challenging for hyper-casual games with high attrition rates and lower retention.
• Increased Competition: Local developers produce games with more engaging mechanics, making it challenging for hyper-casual titles to maintain visibility and compete effectively.
• Rising User Acquisition Costs: High ARPU games drive up user acquisition costs, making it difficult for hyper-casual games to compete in the ad space.
• Monetization Challenges: Reliance on in-app advertising and limited engagement with IAPs hinder the profitability of hyper-casual games in China.
• Hybrid Model Potential: Combining easy-to-learn mechanics with deeper gameplay, as seen in the My Little Universe franchise, could offer a successful alternative in the Chinese market.

Future Outlook

Looking ahead, it remains uncertain whether hyper-casual games can regain traction in China. However, the emergence of hybrid-casual games, which blend the ease of hyper-casual mechanics with deeper gameplay elements, shows promise. Developers who can innovate while respecting local culture and preferences may find opportunities for success amidst the challenges.