The D2C iceberg: How top games hit record profit despite the ATT crash

By
Archie Stonehill
Feb 19, 2024

There’s one narrative that’s loomed over the games industry the past few years: the boom of COVID-19 followed by a crash - a 9.8% decrease in mobile game revenue, largely due to ATT and IDFA deprecation. 

But what if there’s another narrative that you haven’t heard? One in which the biggest studios are becoming more profitable? Yes, some of the same game developers who were hit worst by ATT also reached record levels of profitability. How? By going direct-to-consumer. 

This is the D2C iceberg. For years, some studios’ declining mobile revenues have been offset - or even exceeded by - growth in higher margin direct-to-consumer channels. Beyond that, they’ve nurtured direct relationships with their players, letting them enhance their player experience, deepen engagement, and gather first-party user data. But this revenue - and additional benefits - has been invisible because it isn’t captured by industry sources, like market data from data.ai or Sensor Tower, and doesn’t factor into app store rankings.

Web stores have been a hot topic in 2024, driven by a torrent of news (Epic v Google, the Digital Markets Act, etc.). The fact is, though, the most successful games in the world have been operating D2C for years. 

Let’s reveal the entire iceberg and expose the best-kept secret in the industry: how a handful of the biggest studios across multiple genres successfully established D2C channels and boosted LTV - and how you can, too.

Genre #1: Social casino

Social casino games have been using learnings from real money for years, offering premium VIP service and loyalty programs to their highest-spending players. For example, while a Vegas casino may gift their VIP guests a free night in their penthouse suite, a social casino game developer may offer their best players all-inclusive trips to Las Vegas. Let’s dive further into what social casino developers have done to build D2C channels and how successful they’ve been by looking at two examples: Playtika and Huuuge. 

Playtika

Playtika is the most successful social casino developer in the world, with a market cap of close to $3 billion and annual revenue of over $2.5 billion. Their D2C channel is a huge factor in this growth, which now comprises almost 25% of the company’s total revenue ($607 million).

From 2021-2022, Playtika’s revenue increased from $2.58B to $2.62B. However, they actually experienced a $65 million decrease in “third party” revenue (i.e., through the primary app stores). This is the iceberg effect: What’s hiding under the surface is a 15% growth in D2C revenue that offset their decline in third party revenue - and then some. 

Most importantly, for each dollar that went through their D2C channels, Playtika saved 27% more revenue in app store fees (after deducting their own 3% payment processing fees). On top of that, Playtika got access to granular user data they could use to serve their players better, deliver more personalized offers, cross promote their other games, and retarget former players. 

This success largely came down to Playtika’s sophisticated VIP customer service and rewards programs. Not only does each Playtika game have its own rewards and loyalty system, but there’s a studio-wide system as well, in which Playtika Rewards Status points earned in any participating game are counted towards the total Rewards balance. 

Maximizing engagement from and retaining a small number of highly valuable players are the keys for success in social casino, where CPIs can be extraordinarily high. And when players do churn, having these direct relationships lets Playtika retarget them and send personalized offers to try to re-engage them. 

For example, Playtika’s Slotomania has a VIP program that lets anyone sign up to start earning rewards and climbing the ranks. These VIPs even get their own account manager, whose core responsibilities include providing a tailored and exclusive experience to the game’s most valuable players, preventing churn, and gathering and document player data. Essentially, to: “build and implement Player Account Management strategy: planning, delivery and optimization of the high value customer strategy.” Then each tier unlocks different rewards:

Huuuge Games

Huuuge is another - well, huge - name in social casino, with a market cap over $1.65 billion; in Q3 2023 alone, they earned $72 million in total revenue. Though in an earlier stage than Playtika’s, their D2C web shop is becoming an increasingly important driver of their growth strategy. D2C accounted for approximately 8% of total revenue by the end of Q3 2023, up from about 3% in the beginning of the year. 

Here’s the big takeaway: That $72 million in Q1 ‘23 revenue is a decrease from $78 million compared to the previous year. But EBITDA (a profit indicator) increased from $24.5M to $27M over that same period. We’re back to the iceberg, with the growth in EBITDA disguised under the surface. Is it a coincidence that the D2C web shop grew over this period, too? Huuuge doesn’t think so, according to the letter they sent to shareholders in Q3 2023: “Our direct-to-consumer channel continues to grow, strengthening player connections and improving our business margins.” They even mention in their Q3 earnings call presentation that the channel exceeded their expectations. 

Their loyalty program, called Huuuge Rewards, is built to offer additional value to their VIPs. Like Playtika, their goal is to drive higher spend from their top players. In their words from an April 2023 investors presentation, the Huuuge VIP program is all about “generating an uplift in engagement, retention and monetization of our most valuable players.” Focusing on quality of players over quantity - and retaining these MVPs - with Huuuge Rewards has already led to a 3% increase in ARPDAU QoQ.

They’ve also set up a tiered rewards system that incentivizes players to keep purchasing and playing so they can achieve the bonuses and rewards available at each card level.

They even have a mystery card “Ultimate” similar to Playtika’s “Black Diamond” tier. Mystery tiers like these create an exclusivity reminiscent of real-life casinos that’s clearly attractive to high-spenders.

Genre #2: Midcore

Midcore games are characterized by deep engagement - users need to invest time and grow skills in order to progress. Naturally, D2C channels and monetization strategies for midcore games reflect this, focusing on incentives that enhance the community and offer an improved gameplay experience. Scopely, Tilting Point, and many other studios have had success combining web shops with cross-platform distribution. We’ll look at one example, Plarium Play, which has become a major D2C distribution channel for Raid: Shadow Legends. 

Plarium

Plarium, the developer behind major midcore hits, have driven over $3 billion in user spend globally. Launched in 2019, RAID: Shadow Legends quickly became one of the most profitable RPG titles in the world, reaching over $1 billion in lifetime player global spend just on mobile in 2022. On average, time spent per user was over 2 hours on Android in Q4 2023, and the average number of sessions per user hovered around 5 during the same time period. 

This high level of engagement is what’s enabled Plarium to channel their users to Plarium Play, the studio’s proprietary D2C desktop launcher. Here, users can play desktop versions of Raid with complete cross-platform and cross-progression functionality, creating a seamless experience between mobile and desktop. Plarium Play also allows Plarium to cross promote their other titles, like Mech Arena, and even distribute other developers’ games, too. And it’s working: Plarium Play now drives 30% of the studio’s total revenues. This is a huge number that not enough people are talking about. Why? It’s the lower part of the iceberg, hidden from third-party data sources and store rankings.

To incentivize users to spend through Plarium Play, free from in-app commission fees, Plarium launched its own Plarium Points Program. Players earn Plarium Points through in-game quests, activities, and reaching certain playtime benchmarks - or by purchasing them through the shop. 

The company has also encouraged their desktop-based community further through exclusive deals and rewards with partners like Prime Gaming, nurturing its community with third-party tools, like RSL Helper, and working closely with their content creators on YouTube. Though these are specific to RAID, driving users to Plarium Play is an excellent strategy for cross promotion and user acquisition.

By driving traffic to Plarium Play, the studio not only saves on app store commissions, but also gets users to create a Plarium ID. Plarium ID functions across Plarium’s huge portfolio of games on any device, and in the studio’s words the advantage is: “play several games simultaneously and effortlessly switch between them to progress quicker.” Owning their own identity layer, Plarium can connect more deeply with their players, provide them with a more frictionless experience, and of course retarget better. 

All of this is evidence that their D2C channel is a major contributor to Plarium's success, letting them generate significant revenue and get valuable user identifiers in a post-IDFA world.

Genre #3: Casual

Many people are under the impression that D2C channels only work for midcore and casino games. But the iceberg effect applies to casual, too. So to finish off, we’ll look at two examples from casual game developers: Supercell and Rovio. Both of these developers have leveraged the engaging gameplay to create brands that players recognize and love - and in doing so, have developed a direct connection with those players that isn’t quantified in any Data.ai report or app ranking.  

Supercell

Supercell is obviously one of the biggest mobile game developers in the business. Their portfolio boasts five live games, all of which have become massive hits, generating more than $1B each:

That success is in large part due to their brand-focused marketing strategy. Summarized by Iwo Zakowski, Supercell’s Marketing Lead, at RovioCon 23: “We need to make our games f**king famous, and they need to become a part of pop culture.” 

The fact is, already 68% of Clash of Clans users came to the game through word of mouth and organic sources, rather than through app stores. This shows how powerful a social force and brand the game already is - now the team just wants to expand on that.

By operating their games as a consumer offering, Supercell was able to build identity systems and membership clubs on top. This helped them create a powerful direct-to-consumer offering. Supercell ID is one of the most successful (and oldest) direct player ID systems for mobile - it even came before their web shop and desktop versions of their games. The studio first scaled Supercell ID by letting users connect their profiles between games, which helped build the close-knit and engaged communities across their titles, like what we’ve seen in Clash of Clans.

Rovio

Other mass market games are getting in on the D2C trend, too. Rovio - the studio behind the Angry Birds franchise - has been quietly scaling their web shop using a membership program and sharing their higher web-based margin with their players. 

Red’s Club offers exclusive offers on power ups, gems, and bundles to those that sign up and purchase on the web. Users need to register to start using the store, so this is also a way for Rovio to get user identifying information they can use to optimize UA campaigns and encourage higher spend. 

Rovio’s now leveraging that Angry Birds IP outside of gameplay and mechanics to build trust and go direct-to-consumer. The Club is still in its early stages, and we’re excited to keep tabs and see how it evolves into a bigger section of the iceberg - we mean, business.

The secret’s out 

So there it is, the big reveal: D2C channels are the secret behind major studio success despite the fallout from IDFA deprecation. Regardless of game genre, incentivizing your highest spenders to spend even more by driving them to a direct channel can help you increase profit - and avoid in-app commission fees - in the same way Playtika, Huuuge, Plarium, Supercell (and soon Rovio) already have. 

And, engaging directly with players lets you create a single user identifier and get access to information that’s valuable for UA and retargeting campaigns. Not to mention, a D2C channel is the only way to offer cross-progression play, which can boost retention and playtime.  

You know the secret, you know the path to success, now it’s time to put this into practice. Take a cue from the gaming industry’s biggest names and build your own D2C channel - starting with a web shop. Stash is here to help. We’re the web shop that does more than drive higher spend - we also attract players and build loyalty by offering features gamers genuinely enjoy. Learn more about unlocking more cash with Stash: Contact us or play with our demo.

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