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Moon Active is a game development company focused on iOS, Android and Facebook games. Tel Aviv, Tel Aviv, Israel. Secondary Market. Play games with your PBS KIDS favorites like Curious George, Wild Kratts, Daniel Tiger and Peg + Cat!

As we move into 2021 with high hopes for a more healthy year globally, TheGamingEconomy summarises the most significant video game business news stories from the past two weeks. In this digest: Moon Active acquires Melsoft; Liftoff receives USD$400m (£294m) Blackstone investment; Stillfront Group in dual Sandbox and Super Free Games acquisition; Nordisk Games secures 40% share in MercurySteam; Koei Tecmo in 65,000 account breach; and CMGE denies Bytedance stake interest.

Moon Active acquires Melsoft

Tel Aviv-based mobile studio Moon Active has acquired Belarusian casual game developer Melsoft. While the exact financial terms have not been disclosed, it is thought that the transaction is in a nine-figure range, with the Minsk-based acquiree generating in excess of USD$160m (£118m) in sales over the course of the previous 12 months. Melsoft boasts an employee base of approximately 240 staff and is best-known for its range of mobile resource-based titles, which include Family Island and MyCafe.

Further acquisitions have been hinted at by Moon Active CEO Samuel Albin, writing to VentureBeat, “Moon Active will continue to develop games with the highest production value for our users and at the same time add the best and most talented teams to the Moon Active family through strategic acquisitions. We were searching for a company that has the right products and at the same time shares our culture and values that will allow us to grow together in synergy. We were fortunate enough to have finally found Melsoft and are proud that they chose us to be their partners.”

Liftoff receives USD$400m (£294m) Blackstone investment

California-based mobile marketing optimisation platform Liftoff is set to receive approximately USD$400m (£294m) in investment from private equity investment firm Blackstone. The precise terms have not been disclosed, however it has been confirmed that New York-based Blackstone will hold a majority stake in Liftoff following the expected closure of the transaction in Q1 2021.

The financing marks the latest in a series of forays into the mobile and game advertising technology landscape by Blackstone, following its acquisitions of Ukrainian developer Murka in March 2019, and performance marketing platform Vungle in July last year for USD$750m (£552m), which in turn then purchased UA optimisation provider AlgoLift in October.

Stillfront Group in dual Sandbox and Super Free Games acquisition

Swedish mobile game holding company Stillfront Group has announced the dual acquisition of Sandbox Interactive and Super Free Games for a combined initial outlay of approximately USD$310m (£228m). Berlin-based MMORPG developer Sandbox Interactive has been snapped up for an initial consideration of €130m (£118m) in cash and newly-issued share capital, followed by an earn-out payment equivalent to 1x EBIT for the financial years 2021-2024. Sandbox has reportedly generated EBITDA of €5.2m from January-September 2020, giving an upfront purchasing multiple of 18.8x, and marks an expansion into MMORPG and PC gaming by Stillfront.

Meanwhile, San Fransisco-based casual and social game developer Super Free Games (formerly known as Super Lucky Casino) has been bought for an initial USD$150m (£110m_, representing a 12.9x EBITDA multiple, also in cash and newly-issued share capital. This is set to be followed by earn-out payments of a maximum 2x EBITDA following each of the financial years up until 2024. Super Free’s expertise in word games and strong scalability outside of the US have been cited as driving the acquisition. The two acquisitions complete a rampant M&A drive by Stillfront Group through 2020, having bought KIXEYE in August 2019 for USD$90m (£66m); Storm8 in January this year for USD$300m (£221m); Candywriter in April for USD$74.4m (£54.9m); and Nanobit in September for USD$148m (£109m).

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Nordisk Games secures 40% share in MercurySteam

Danish studio Nordisk Games has announced that it has acquired a 40% stake in Madrid-based PC and console developer MercurySteam, best known for its CastleVania: Lords of Shadow series and Metroid: Samus Returns, for an undisclosed sum. The investment marks the eighth by the Egmont media group-owned body, and the first outside of the Nordic region.

In a statement, Martin Walfisz, Senior Partner at Nordisk Games, commented, ”After meeting the founders and team at MercurySteam we immediately recognized their fantastic talent and creativity at work. The studio is undoubtedly one of the premier PC and console game developers in Europe, and we’re very proud of having the company join our portfolio. MercurySteam’s track record speaks for itself, and the games they now have in development are extremely promising and exciting.”

Koei Tecmo in 65,000 account breach

Koei Tecmo has temporarily closed down its US and European websites and forums in response to a cyberattack which is believed to have compromised approximately 65,000 accounts. Details such as email addresses, dates of birth, and passwords, are believed to have been accessed in the Christmas Day attack, however payment card details are not thought to have been breached.

The cyberattack is the third such breach to affect a Japanese gaming mainstay in the last seven months of 2020. In June, an estimated 3,000 Nintendo Network ID (NNID) accounts were thought to have been compromised in a “credential stuffing” attack. Subsequently in November, Capcom was hit by a major breach in which an estimated 1TB of sensitive consumer and corporate data was leaked.

CMGE denies Bytedance stake interest

Chinese mobile game publisher CMGE Technology Group Ltd has denied reports that Tik Tok parent company Bytedance is set to acquire over a quarter of the firm. According to a report initially published in Reuters, Bytedance is exploring the purchase of the 27.6% stake in CMGE currently held by Fairview Ridge Investment Ltd, currently the largest shareholder in the Guangzhou-based company, for around USD$275m (£202m).

Though the move was swiftly denied by both CMGE and Bytedance, the suggestion that the latter is looking to invest heavily in gaming is further indication of its increasing focus on the video games sector. In recent months, the social technology company has launched divisions focusing on a wide spectrum of gaming, including Pixmain (mobile, PC, and console); Danjuan (mobile puzzle and side-scroller); Pixdance and Nuverse (midcore and hardcore titles); and Ohayoo (free-to-play casual).

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With the success of Coin Master, and the disruption it is causing in the social casino space, many are looking to understand and replicate its success. Although Coin Master is unquestionably doing great and has found a Blue Ocean, it would be the second largest social casino product if it was officially classified in that category, you need to proceed with caution if you plan to imitate it.

Moon Active Games

I will be writing in the near future about the Halo Effect and Survivor Bias, two heuristics that often lead to flawed decisions. With both of these heuristics, people look at a success and draw conclusions from that success in retrospect and are not repeatable (i.e. Monday morning quarterback). They miss, either consciously or subconsciously, many of the factors that led to the success and are necessary to replicate it, while potentially attributing the success to dynamics that actually did not contribute positively.

Given its current momentum, it is very easy to dissect Coin Master and say A, B and C can help you make $250k/day. Rather than jump on the bandwagon, I decided to take a step back and look at what Moon Active is not doing well. I may look stupid in twelve months if Coin Master consolidates its position and continues to grow but there are some fundamental issues with the product that suggest it may decline rapidly, despite most social game franchises lasting for years (Slotomania, DoubleDown, Clash of Clans, Candy Crush, CSR Racing, etc.). The issues below suggest Coin Master might experience a much shorter life at the apex.

Lack of new content

Social casino products, and social games in general, drive most of their on-going revenue from new content. From the early days of Farmville and Mafia Wars to current top grossing games like Slotomania and Fishdom, new content most consistently contributes to revenue. New content drops are accompanied by much stronger player activity, including reactivating lapsed players and getting lapsed spenders to resume purchases, with little variance (unlike a new feature that may or may not resonate with the audience). This content can be a new slot machine, a new tournament format or theme, new virtual goods, etc., and for different games different content resonates (or falls flat) with its audience. Conversely, I cannot identify one top game where the content is largely unchanged from several years ago, let alone several months ago.

Coin Master, however, adds virtually no new content for the customer. They may add new villages for players who have completed every village, but that impacts very few players and those it does impact it touches very infrequently. Moon Active only has one slot machine that never changes. There are no new slots, new symbols or other new items to rejuvenate the gaming experience.

Deviation from random number mechanics

When I took my first social casino position, after being in traditional free to play games for several years, I quickly learned how strong casino mechanics are at driving monetization. Rather than finding artificial ways to “pinch players” or otherwise drive monetization, slots have generated revenue for over 100 years in a very straightforward manner tied to the core mechanic. Moreover, the random nature of casino games creates a fantastic roller coaster experience for players.

After playing Coin Master extensively, it is clear that rather than a random experience your outcomes are choreographed by Moon Active’s Product Managers. The patterns start to repeat and players see the same outcomes session after session. The hot and cold streaks that are part of gambling, driven by random numbers and the laws of probability, are absent. I have been involved with several social casinos where product managers believed they could create a better (or more profitable) experience than random number generation could and it never works. The gameplay gets stale or players realize they are being manipulated. In the long run (or even medium term as the experience is not as good), players enjoy a true random experience better than one created by product managers.

Moon Active Games For Kids

Uninspired elder gameplay

For a game to thrive for years, it needs to keep a base of loyal and valuable players and keep growing that base. Given user acquisition costs, you cannot grow a game to franchise proportions if you have to replace the entire player base less than six months from acquiring each player. It is this core of valuable players that provide a revenue floor each month that allows you to spend aggressively for new players without creating very adverse cash flow conditions. Most games appeal to their core of experienced players by adding new features or mechanics so the player is not doing the same thing day after day, month after month, year after year. Even in slot games, social casinos release slots with very different bonus games, graphic styles, math and mechanics.

Coin Master, however, is virtually the same game day one that it is if you have played it several hours a day for six or sixteen months. The mechanics do not change or evolve, depth is not introduced, and the experience is identical to past sessions. Even Microsoft Windows apparently evolves at a faster rate than Coin Master.

Poorly crafted advertising monetization

Advertising revenue is becoming an increasingly important part of the social gaming business model, an important additional revenue stream for games that rely on in-app purchases (IAPs) and increasingly it allows products to succeed even without IAPs. Hypercasual games, which now represent about 60 percent of app-store downloads, are almost entirely ad driven. Even more importantly, advertising works with the rest of the game to improve the overall experience and increase retention (watch to earn videos allow players to keep playing or earn premium currency).

Moon Active, however, still approaches driving advertising revenue in the conventional way. It identifies players not likely to monetize through IAPs, then forces players to watch ads. From the structure of how Moon Active uses ads, it is not concerned about users churning due to ads, instead it wants to get as much ad revenue as quickly as possible. This short-term approach is likely to reduce current user return rate (CURR), which is critical to maintain DAU. It is also important to deploy advertising smartly to optimize LTV, as it is better to have someone watch four ads per month for 12 month than force ten ads on them in a month and prompt the player to churn. Similar to the lack of new content and unsophisticated elder gameplay, Coin Master is not constructed to build its player and revenue base month over the long term.

Hygiene

In addition to these large issues, there are many smaller problems (often referred to as hygiene issues) that are likely to impact Coin Master negatively. As the genre gets more competitive, these issues can be enough to get players to switch to other games. Success in the social game space often reminds me of chaos theory, where a butterfly in Beijing can impact the weather in Chicago. Small issues can have big consequences. The hygiene issues in Coin Master include:

• Stability and tech. People often underestimate the impact technical issues have on KPIs. A small change in loading time or app size, which the player might not consciously notice, often impacts KPIs 10 percent or more. Anecdotally, I have noticed that Coin Master’s slot will crash occasionally, sometimes freezing the player out until there is an app update. Even small crashes can contribute to user churn. Related, the absence of deep linking for push notification, usually a coding or tech debt issue, limits the ability to engage players through CRM.
• Economy balancing. As players progress through Coin Master, the economy becomes a drag on the experience. While initially a reward (daily bonus, raid proceed, etc.) might be relevant, as the game progresses this relevance varies. As the player advances, less of the features are significant (for example, watching a video has so little value there is no incentive). This problem, coupled with the lack of new content and elder gameplay mechanics, make the game less (rather than the desired more) interesting for established players.
• Portrait only mode. Coin Master is only available in portrait mode, creating a sub-optimal experience for players on a tablet or large smartphone who are looking for an immersive experience. While some casino games are limited to either portrait or landscape mode, the decision is often driven by an abundance of content (and the need to modify so much art). With Coin Master enjoying an uncontested market space, this limitation obviously is manageable (hence the $250k/day), but again it leaves them vulnerable to a competitor taking away some of Moon Active’s players who desire a landscape experience optimized to their device.

Moon Active Games Hack

The future of Coin Master

It is impossible to predict the future and Moon Active has found an uncontested market space that protects it from many of its sins. That moat may protect it from the issues identified above and allow it to continue to grow Coin Master. More likely, Moon Active will either address these issues (it now has extensive resources available) or new entrants in the genre will surpass Coin Master.

Key takeaways

Coinmaster Facebook

1. Despite being a runaway success, Coin Master generates about $250k/day, some limitations in the product suggest it will not become a long-lived franchise.
2. Unlike most successful franchises, Moon Active fails to regularly release new content into Coin Master or provide a deeper experience for long-time players.
3. Coin Master’s deviation from a true random gaming experience, unlike other social casinos, also provides a discernable pattern that will take away from player enjoyment over time.