Propelled by in-app purchases, mobile gaming revenue to hit $16 billion in 2016

Revenue from mobile gaming is expected to reach $16 billion in 2016, ABI Research said in a report released last week. ABI expects the growth, which is a big jump from the current $5 billion in revenue expected this year, to come from in-game purchases. “An ever-larger share of mobile gaming revenue is coming from virtual goods and other purchases that take place within the game,” ABI Research senior analyst Aapo Markkanen said. “These in-app payments will account for about one-third of the 2011 revenue base, but by the end of 2016 their share will increase to almost half of the total. Also, the in-game advertising revenue will increase considerably, as more and more advertisers take advantage of mobile games’ mass-media potential.” Games such as Zynga’s Farmville and Capcom’s Smurf Village are examples of titles that rely heavily on in-game sales to produce revenue. Markkanen also said that having good game content is a much better business approach to the mobile gaming market than relying on luck, and he used Rovio’s hit game Angry Birds as an example of that. Read on for the full press release from ABI Research.

Mobile Gaming Revenues Will Exceed $16 Billion in 2016, as In-App Payments Grow

LONDON – July 27, 2011

Mobile gaming is establishing itself as a serious form of mass entertainment, appealing to a diverse group of consumers across the world. The growth in this market is driven on one hand by the emergence of modern touchscreen smartphones as a suitable gaming platform, and on the other hand by innovation in casual games that attract users from both genders and from all age groups.

This is also reflected in the industry’s revenue base, which will grow from less than $5 billion in 2011 to more than $16 billion in 2016.

Shift in revenue

ABI Research senior analyst Aapo Markkanen comments, “An ever-larger share of mobile gaming revenue is coming from virtual goods and other purchases that take place within the game. These in-app payments will account for about one-third of the 2011 revenue base, but by the end of 2016 their share will increase to almost half of the total. Also, the in-game advertising revenue will increase considerably, as more and more advertisers take advantage of mobile games’ mass-media potential.”

Thanks to digital distribution of the content, barriers to entering the mobile gaming sector are low.

Good content better than luck

However, Markkanen warns, “The dynamics of both casual gaming and the discovery of new content make it a risky hit-and-miss business, though good content is still definitely more important than luck. Rovio’s ‘Angry Birds’ is an early example of the sort of following that the most successful titles will be able to achieve, yet for one such hit there will be scores of failed attempts to catch consumers’ attention. This is likely to result in further consolidation among developers, as can be seen from recent acquisitions made by industry giants such as Electronic Arts and Zynga.”

ABI Research’s new “Mobile Gaming” study describes available types of games and revenue models, provides analyses of market drivers and inhibitors, and offers an overview of the main technology issues. It includes forecasts for user bases and end-user revenues, broken down by revenue segment and geographic region, as well as data on relevant consumer trends gathered by ABI Research’s latest Bi-Annual Consumer Technology Barometer.

It is part of the firm’s Mobile Services Research Service.

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