Time: 4 pm. It is tea time for Bhargav Gowda and friends. They’ve huddled under a tree on the lavish sidewalk in front of Central Mall in Bengaluru. A game of Ludo is on. Gowda, in his late 20s, has grown suspicious of me looking over his shoulder so I quickly volunteer that I’m a reporter and ask if I can take a picture. They’re happy to pose for me.

Time: 7 pm. I’m waiting to collect a takeaway order at Hotel Savoury in Frazer town, Bengaluru. A group of middle-aged men are playing Ludo on their phones. Jokes are being cracked. Tea and cigarettes to go with. I feel rather shy to disrupt their addabazi. So I snap a picture from behind and make my way back home, dal makhni in hand.

On FactorDaily’s WhatsApp group, I post these pictures. My colleagues have their own Ludo stories. One colleague spent New Year’s eve camping at the outskirts of Pune and playing Ludo on the phone with friends.

Once you start looking, it’s almost epiphany smacking you in the face. You can’t stop seeing the games people play. On train and buses, in the lift, in the checkout queue at grocery….

Casual gaming is on the rise in India and Ludo King is the undisputed breakaway success.

“Ludo King is off the charts and no one expected this,” says Arpit Agarwal, an investor at Blume Ventures*, which has backed Bengaluru-based gaming company MechMocha. The classic board game-based app created by Mumbai-based gaming startup Gamotronix has racked up over 100 million downloads. As per SensorTower estimates, it earned about $10,000 in December 2018 mostly from users in India and Indonesia by selling virtual goods and showing ads to users.

Until recently, Indian gamers were mostly served by foreign game-makers such as King and SuperCell with games like Candy Crush and Subway Surfers. Then there were the card games that brought in a certain kind of user. WIth Ludo King, games Indians enjoyed playing in their childhood have broken through.

Games like Snakes and Ladders, Chinese Checkers, Carrom are climbing up the charts, says Agarwal. After disappointing game developers for years, the market seems to be finally taking off. Leading game companies like Nazara Games and Moonfrong Labs are looking to cash in on the opportunity presented by the next 300 million Indians who will go online.

Dozens of startups like Hippo Labs from Hyderabad, MechMocha in Bengaluru, Backlight Studio from Delhi, and Gamotronix from Thane are starting to serve these users. But even before they grow big, new and combat-ready competitors are rushing in all the way from the Middle Kingdom.

How did we get here?

But before we dive into the upcoming battle royale, let’s back up a little. How did we get here: to a point in time when casual gaming will finally have its moment? Since as early as 2014, when the first 100 million Indian users went online, game developers have been waiting for the riches to be unlocked. But it never took off. Blame it on poor data networks and lower quality of smartphones that Indians owned.

The next logical question would be: did we really need high-quality smartphones and data networks for the casual gaming industry to pick up, especially since most users seem to be content with simple games like Ludo? The answer to this question lies in a belief industry veterans hold to be true.

Users typically start with casual games and graduate to midcore and hardcore games. Game developers monetise casual games using ads, the low-hanging fruit. But advertisements can never be a big money-spinner unless you have a viral hit game like Flappy Bird or Ludo King on your hands.

To make $10,000 in India, a game will have to serve nearly 5 million ad impressions to its users. That is, if you assume cost per thousand impressions (an industry standard) in India is about $2. So developers typically rely on selling virtual goods to make money. In-app purchases, as this is called in the industry, happen when players get competitive and play real-time.

“Once competitive gameplay over real-time kicks in, when the ego of a player comes into the picture, you’ll see in-app purchases take off,” says Manish Agarwal, CEO of Nazara Games, which is among the largest Indian gaming companies. And competitive real-time games require better data networks and smartphones. Ergo, the need for better data networks and smartphones for the industry to take off.

These two problems have more or less been solved. “The infrastructure has improved massively over the last 12 months and the next 12-18 months the industry will be in high gear,” says Agarwal of Nazara. The casual gaming industry has Reliance Jio, which drove down data costs, and Chinese companies like Xiaomi, which drove down smartphone prices, to thank for.

The change is clearly visible if you have the vantage of someone like Kunal Soni, who heads business development for Google Play in Southeast Asia and India. “India has consistently been on a ramp for the past 12 months,” says Soni who has been in this role for the last 4 years. Game downloads on Google Play store nearly doubled in 2018 as compared with the previous year.

It isn’t just these big improvements in the ecosystem that have put wind in the sails of gaming companies. Search giant Google, which gets to keep 30% of in-app sales, has also pushed a great deal to make sure it takes off in the country. Key among them was the tweaks it made to payments on Google Play.

Part of Soni’s job is to remove friction between users and apps on the Play store and the other part is to get developers to make more apps for the Play store. To that end in 2016, Google allowed developers in India to price in-app goods at less than a dollar. This drop in pricing from $1 to Rs 10 was a first for Google and developers could now sell in-app goods for as low as Rs 10.

“That helped developers unlock monetisation,” says Soni. Next, the company also struck up carrier billing partnerships with operators like Airtel and Vodafone to make it easier for users to pay for apps. Google also started selling Play Store gift cards in nearly 800,000 retail locations in India.

The company also came up with a framework called build for Billions, which allowed developers to deliver apps tailored for markets like India. The program was later rolled out globally.

What’s at stake?

By most estimates, there are nearly 375 million smartphone users in India and about 500 million are expected by 2020. They spend about 200 minutes a day on their phones across Play apps, says Soni. There are about 250 million users on 4G now and by 2022, about 520 million users are expected to be on 4G by 2022. Over 90% of them use Android phones.

In emerging markets, India is the largest in terms of downloads. Over 2.8 billion game downloads were carried out during the first half of 2018, as per a report from App Annie. That’s nearly double that of Brazil, the next big emerging market.

“India leads the pack and we’re excited about the momentum,” says Soni. All this is expected to add up to a neat little prize: a market of $1.1 billion by 2020, according to a Frost & Sullivan report last year. Clearly, a large commercial opportunity for players in the ecosystem.

Indian consumers, as per the App Annie report, have about 77 apps on their phones on an average and they end up using 42 of them in a month. Indians spent upwards of 20 minutes on games every day in the first half of 2018.

So there’s definitely demand from users. Now to keep them and make money off them. “Lot of money will be spent to build behaviour at the cost of unit economics, like how e-commerce happened in India,” Agarwal of Nazara says.

Games people play: Casual to Midcore

India’s mobile gaming market has been traditionally dominated by large game makers like King and Supercell with games such as Candy Crush and Subway Surfer. Then there were the card games– Teen Patti, Rummy, Poker and so on. But The success of Ludo King has sparked a new trend of Indian games. Competitive gaming, especially in the midcore segment with games like PubG and Fortnite, has also picked up.

Tencent bought 40% of Epic Games, the owner of Fortnite for $330 million in 2012. Tencent also has a stake in South Korean gaming company Bluehole which owns PubG.

But what’s coming next will be the real gamechanger: skill-based real money games, or RMGs. “Real money is going to be the killer in the Indian gaming market,” says Agarwal of Nazara. The company, which has traditionally focused on IP-led games such as Chota Bheem and Cricket, now plans to roll out RMGs through a mix of acquisitions and in-house games.

The first wave of real money games was led by rummy, poker and other card games made by companies such as Rummy Circle and Adda52. But ‘Real Money Gaming 2.0’ will be about simpler games such as car racing or even quizzing.

“This is really blue ocean territory,” says Agarwal about RMG 2.0. Blue Ocean is a term often used in strategy meetings to denote markets that don’t exist yet and are created by innovative companies. Red Ocean, in contrast, refers to an existing market where many competitors exist.

Battle Royale

“Have you heard of Hago?” a top consumer internet executive asked me recently.

“No.”

“Humko kuch hawa hi nahi hai,” he says. (It roughly translates to: we haven’t even caught wind of them.)

Hago is a little known Chinese social gaming app that’s quickly growing in India. It already has over 50 million downloads. As per SensorTower data, Indonesia is its biggest market followed by India where 14% of its users come from. The app makers, based in Beijing, have started pushing the game in India recently.

FactorDaily had reported earlier that 2018 is likely to be remembered as the year when the Chinese took over Indian app ecosystem. Five out of the top 10 mobile apps in India are Chinese — versus two at the end of 2017. This includes apps like TikTok and Helo. As of December 2017, there were 18 Chinese apps among the top 100 across categories on the Play store. The number of Chinese apps in the top 100 Play store apps reached 44 by 2018.  A similar scene is likely to play out in the gaming sector, a billion-dollar market in the making.

Mobile gaming is big business in China, where about 850 million people use the internet. Gaming industry revenue in China stood at about $34 billion in 2018. But these developers are being frozen out by the country’s government, which has taken upon itself to regulate the industry strictly to prevent abuse. In March last year, the country stopped approving new video games. In December, China approved new games but left Tencent games such as PubG out. Just as how China’s trade war with the United States resulted in bigger investments in India’s internet market by Chinese companies, game companies are also likely to focus on India in large numbers.

“Their share prices got hammered because of the ban in China and their markets are also saturated. So many are looking at India,” Agarwal of Nazara says. Chinese companies, with experience from the Mainland, will find it easier to acquire users, release new games and handle scale in India. However, they will have to improve their understanding of the Indian market. To that end, some of them have already set up outposts in India.

Tencent has hired a team in Gurgaon and also runs a small team focused on PubG out of Bengaluru. The company plans to invest nearly $200 million in India and could pony up another $800 million if it starts seeing results, a TechCircle report from March 2018 said.

Chinese gaming company Youzu Interactive, which launched in India sometime in 2017, had made public its plans to invest $10 million to develop casual games for India in 2017. Paytm and Alibaba-owned AGTech launched a joint venture called Gamepind in late 2018. They’ve set aside $16 million to fund the venture and appointed Paytm executive Sudhanshu Gupta to lead it.

“Anything that crosses a couple of millions in daily active users will be copied by the Chinese competition,” says Agarwal of Blume. Casual gaming will also need to compete with apps such as TikTok and ShareChat for the users’ time. “In the top 100 apps, if you don’t see a Chinese competitor for an Indian app, you’ll see them in the next two months.”

*See disclosure

---