Hello, welcome to MAG's Q4 report. Here to present today is me, Daniel Hasselberg, the CEO of MAG.
Me, Magnus Wiklander, the CFO of MAG.
Today we're going to talk you through the highlights of the report for the period June, July, August, and then we're going to wrap up with a Q&A session at the end. As usual, throughout the day, you're welcome to write any questions on Twitter, and we'll do our best to respond. If we don't have time to answer your question now, there's going to be plenty of time during the day for sure. Here at MAG, we make mobile games targeting casual gamers, and our core markets are North America and Western Europe. We have development studios here in Stockholm and in Brighton. We are in the free-to-play space, so that means that all our games are free to download, and then we make money from in-app purchases, subscriptions, and in-app advertising.
Of course, as a free-to-play developer, there's two pieces that are equally important. You need to make really fun games, you also need to be on top of data and analytics, both from a product development perspective and from a user acquisition perspective. We've been around for about 10 years, we launch games continuously, that ends up now in a situation where we have a really strong portfolio with games in different parts of their lifecycle. All the way from very newly launched games, like New QuizDuel that came out globally just in May this year, all the way back to games that are more than eight years old. This mix, I think, is our true strength as a games company.
We don't rely on one single title, and we also have games that are in growth mode or in more of a harvesting mode with very high profit margins and smaller teams and so on. About 2 million people play our games every day, and they spend more than 1 million hours playing these games. This kind of high engagement audience is something that we're very proud of and focus on when we build our games.
Yeah. Since the beginning of September, we also have a new member of the portfolio, Primetime. This is a different dynamic with higher engagement, short playtime, specific broadcast times in the day, in the evening, and a lot of times several faces in front of the screen playing together on a single phone. We're very excited about this, and we'll come back to it during the presentation today.
Yeah. Two games that we've talked about a lot lately and we'll continue to talk about a lot are the games where we see the biggest potential for high growth in the near term. It's Wordzee and New QuizDuel. Wordzee is a game where we can create growth by user acquisition. That's what we plan to continue doing, invest more in user acquisition behind Wordzee. We see also a very exciting roadmap for the game, so new features coming out now at a higher and higher pace. Just a few days ago, we launched a new feature called Journeys, which is a new way to play Wordzee. All of these things are having long-term engagement in mind. Can we build the next evergreen game for MAG?
We already see that we have the by far strongest ARPDAU and monetization potential in this game, and we're really excited about the stuff we're going to do further in the future as well.
Exactly. Regarding New QuizDuel, that's also exciting, the moving all the users from the old QuizDuel into new. We're ramping up that effort now. We're 40% in to this, so 40% of users now play the new version of the game to date. The ambition and target is to have that done before the end of the year. One milestone in that work was to actually close down the old app in Sweden a couple of days ago. Now 100% of the users in Sweden play the new version. Also in doing this, the high volumes of users moving over creates effects on the chart position. We were number two in Sweden overall downloads in the weekend, actually.
Yes. It's big migrations of players, but it's really great to see them actually coming over, start playing the new game.
Yeah.
That's according to our plan. This picture positions the games in different categories. Bottom left here, we look at the new games. Of course, we have a number of really exciting new game development projects that haven't hit the market yet, but that we're really excited about. In the growth part here, you can see then Wordzee and New QuizDuel, where Wordzee is primarily fueled by user acquisition and New QuizDuel primarily fueled by user migration at this point in time. If you look at longer term, as you mentioned, 40% is already done, 100% will be done by end of year. Longer term, the continued growth would be from improving the product on that user base. Of course, the integration of Primetime is something we'll come back to.
It's a very exciting journey for New QuizDuel for this coming financial year.
Exactly. In the top right corner, we have our evergreens.
Yes.
As ever, that's Ruzzle and WordBrain being there with relatively high revenues, and with balanced size teams and no marketing support still being stable in income, and therefore producing good margins and good profits. We expect to have them with us for a long time going forward.
Yes. Then to Primetime. This is an acquisition we announced the last few days of August. Really exciting step for MAG. We believe that this live broadcast opportunity is going to put us in a place in the market where we have something that's truly unique. Both having this 24/7 all year round possibility to play asynchronously against your friends, then combining this with this real-time thing, gather around one single phone as a family or however you play Primetime. I think that's a really exciting addition to mobile games. Of course, we hope that. Over the years, more than 100 million people have played QuizDuel. Having this new exciting thing to come back to try out in this New QuizDuel is something we can drive a lot of attention in the lapsed player base as well.
Of course, it's also a new revenue stream as Primetime have this kind of sponsorship. This today's show presented by Sponsor X, and that's additional to the in-app purchases and advertising what we have in New QuizDuel. Of course, you could have live shows in multiple games in the MAG portfolio, but the most obvious fit is, of course, New QuizDuel, which is a trivia game where their live trivia show would fit perfectly. That's the first step for us now.
Exactly. We announced the deal at the end of the last quarter, and with some details. 20 million SEK upfront payment, and an earn-out based on a profit share. The earn-out will be paid out of the future profits of the acquired company over the next three years. The deal was closed on September 1, so that was quite close after the signing. Therefore, it's part of MAG from the start of the financial year that we're in, so Q1, and it's not part of the Q4 report at all.
Yeah, exactly. That's good to point out. Yes, let's look at some of the top KPIs.
Exactly. We have our monthly and daily unique users, what we call MAU and DAU, are relatively flat year-over-year. Those following the company know that it hasn't been flat throughout the year. We had a big bump based on COVID in Q3 primarily. A slight increase compared to Q4 last year. Throughout this year, we've had a strong development in our ARPDAU KPI, which is, of course, very important and a big focus. It's up 29% year-over-year. A big contributor to that is Wordzee with its strong monetization, but also the conversion of users from old to New QuizDuel.
Also if we look broader, the entire multi-player portfolio has improved ARPDAU since last year. It's a broad general ambition we have.
Yeah
To work with that.
I think that's great to see that all the teams are really trying to follow on to this challenge we set for ourselves to improve ARPDAU. It's basically all across the board that helps out here. That's great to see.
An increased ARPDAU translates into a similar improvement in net sales. It's up 28% to SEK 55 million. Notably, it's mainly the in-app revenues causing the increase. They are 76% up from last year. A lot of that is Wordzee with its strong in-app monetization. We see user acquisition going from 9 - 22. That's a big increase. Most of that goes into Wordzee as a game.
One comment there on the in-app revenue, 76% increase is a lot, and it is also, of course, driven by a lot of new monthly unique payers, which is another KPI you can follow in our reports. A lot of more players turn into payers, especially in Wordzee, and that really helps the user acquisition algorithm. Technically, when we run campaigns, they learn from the players we get in through the previous campaigns running. If more people become payers quickly, they learn quicker. This is a really good thing for our user acquisition activities to have a strong paying conversion game.
Exactly. Increased UA put some pressure on contribution that comes in at 26 million SEK in the quarter.
Yes, this is a picture that shows the development for MAG over the last two years. Two years ago, we went out and stated that we're now going to focus as a company on making multiplayer games. We also identified ARPDAU as a kind of key KPI where we think we can improve as a company. That meant that all of our teams have been focusing on multiplayer games and also on figuring out how to improve the ARPDAU. I think this shows that we are on a really good path in terms of executing on our plan. The multiplayer revenue has more than doubled since we started out on this strategy, and also ARPDAU, as we can see in this picture. The white graph here shows it's continuously improved over the last eight quarters, a pretty big jump up from Q3 - Q4.
This is, of course, just the start of the journey, but I think it shows that what we're doing actually works, and our teams are executing really well on our strategy. What we can also see here when we stretch out the timeline over two years is the seasonality pattern. We tend to have strong Q3s and always have a weaker Q4. We talked about that previous report as well, that Q4 is usually summertime. People tend to play games less and do more other activities. Also the CPM levels on advertising in general go down. That in combination always puts a bit of pressure on our Q4.
What's noticeable in this picture, of course, is that the drop that's usually maybe around 10%, that was a year ago, is bigger this year, and we attribute that to the so-called COVID bump we saw in Q3. We got millions of players coming in, especially Italy, France, and Germany in March and April, which bumped up Q3 to higher levels than we would have expected otherwise. Now we see a drop-down that's slightly bigger than usually. Still want to emphasize that this is our best Q4 in many years, and of course, a big jump up versus last year. This is the Q4, so that means that we have a full year that we wrap up and look at. Try to put that down in just a few sentences.
The highlights for this year, the revenue increase of 26%, and it's really based on the work we've put into improving ARPDAU, which is up 24%. Super happy about releasing two new games. Our games tend to peak after two, three years or sometimes even further out after launch. Since these games are new in the market, in our terms, we have a lot of growth to expect in the coming years as well. This is a great start of the financial year, having two fairly new games out in the pipeline.
Exactly. Of course, we ended the year with a Primetime acquisition, which we're excited about, and we're now at hard work to integrate that into first QuizDuel. We see lots of movements in the market, so we're looking forward to look at more deals going forward as well.
There's a lot of exciting stuff out there. To summarize what we're focusing on right now, so Q1 and forward for MAG, it's a continuous effort to scale up Wordzee, both in product development and user acquisition. We're going to continue to invest in optimizing infrastructure around analytics and back-end user acquisition, and of course, developing new games that will be the next growth engines for MAG. That's something that we continuously keep investing in. Finally, of course, the very new acquisition here, trying to integrate live broadcast into our games. That's really exciting longer-term bet for MAG, and see what can we do with a live broadcast component in our game portfolio.
I think that sums it up pretty well, the last year and how we look at going into this new year. That's really exciting for us. Let's see if we have any questions to go through here. We'll take some time going through that here on Twitch. Then, as I mentioned previously, we're also going to use Twitter during the day for written answers if you have comments. We have a screen here with some of the questions coming in. From the top here, Regarding the UA cost, how much of this went into New QuizDuel? The vast majority of all user acquisition in Q4 went to Wordzee. That's the game where we've seen the best returns and the best possibilities to create value. Almost all of the UA spend is behind Wordzee at the moment. Next one.
What can you do to improve the acceptance of subscription mode in New QuizDuel? That's a great question. Really interesting. What we've seen in Word Domination is that it's taken quite some time to gradually improve the subscription package to make it more and more exciting and interesting for the players. Starting out with an ad-free experience and maybe something else on top, and then building more and more exciting content into the subscription package. The recent update on New QuizDuel that came out have a much more fully fleshed avatar system, so you can make really great-looking and fun avatars that you use in the game. Some of that's locked into subscription package as well. There's going to be continuously adding more and more features that makes it interesting to be a subscriber.
As we've seen with Word Domination, it's gone from 10% of in-app revenues or something to almost 30% of in-app revenues coming from subscription. How sustainable do you estimate the ARPDAU increase is, as many players complain about longer and non-removable ads? Does this generally create more churn? It's also a really good question. Something we look at is, for example, pacing of advertising or complete removal of advertising for payers or certain kinds of payers and so on. All players don't necessarily get the exact same experience here when it comes to exposure to advertising. It's something we run as A/B test and optimize. It's sometimes not intuitive. You'd think maybe you should remove advertising completely for payers, but maybe that's actually not the best idea.
It's all very data-driven and something we continuously look at because I think that's for many mobile games, maybe all mobile games that contain ads, is one of the most frequent complaints you see in reviews is it's too many ads. You need to measure that against retention, and as the question mentions here, churn. If it doesn't affect the churn, of course, you should also try to make some ad revenues. Next question. Will we see Primetime content in New QuizDuel before the end of the year? That's something we can't promise right now. We've been working together with the Primetime team for six weeks, so it's really early days. What we can talk about is that it's a prime priority both from the Primetime side and for the New QuizDuel team.
Really hard at work integrating this, and then we'll see about timeline, how soon we can come out with testing this initially. As usual with MAG, we always A/B test and optimize how the feature is packaged before we ramp up to full audience where it really starts to have an impact on the revenue side. We'll have to come back to that when we see how this testing develops and so on, and always stay true to being data-driven in how we roll out products. Any new games in 2020? That's, of course, a super exciting question for everyone. We stay disciplined here, and we talk about games when they hit soft launch, and then we'll press release. That's how you will know about the next game as well.
How confident are you in funneling the remaining 60% of QuizDuel players to New QuizDuel this year? Will this be done with the same tools as used to move the 40%? Yes and no, I guess here. We're confident we can do it. What we've done so far is using different types of cross-promotion. We've had events that were only available in New QuizDuel to really encourage people to come and play the New QuizDuel instead. Some people have played the games in parallel, I believe. Some people just don't want to move, and we see a much stronger performance ARPDAU-wise and engagement-wise in the New QuizDuel.
We'll now start really forcing people to move, and that's something we've been testing out now over the last month or so, what kind of effect on churn you get from forcing update into a new SKU. It looks really promising. As you mentioned, Magnus, we shut down Sweden now.
I believe it's happening in a number of countries now in the not too far future. New tools, it's basically removing the alternative, the option of playing classic QuizDuel. If you migrate the whole player base from QuizDuel to New QuizDuel, what will ARPDAU be if everything will stay the same? ARPDAU is significantly higher in New QuizDuel versus old QuizDuel. Then, of course, this is the million-dollar question, will all of the old QuizDuel player base behave as the ones that are currently playing New QuizDuel? Of course, we hope so, and then the ARPDAU will go up on a pretty big user base, and that could create a lot of value for MAG.
It remains to be seen, and that's going to be really exciting now during the fall and see if we can move the player base with us, and they perform as the current player base does in New QuizDuel, then it's going to be a really good move for us as a company. When can we expect to see synergies appear on the product and business side related to Primetime? I think we have a few different kinds of synergies we see with Primetime. One is the standalone Primetime app is a successful game or app or show, whatever you want to call that experience. It works really well in the Nordics. It has a strong appreciated brand, and all traffic is organic. Where I think we can help is on the gamification and in-game monetization side.
Hopefully we can help the Primetime team monetize a bit better on the current Primetime experience. Of course, the biggest synergy is getting a live show within New QuizDuel, which has a much larger player base than Primetime has across the Nordics. When in time, that basically depends on how quickly we can have a first version out and start testing it, and if that performs really well out the gates, or if we need fine-tuning before we can scale that up. Definitely during this financial year, and then we want to do that as quickly as possible, but it's really hard to give firm dates right now. We want to get out and test it as quickly as possible. That's the timeline right now. Number of employees are growing quite steadily. What's the plan here?
This is basically the plan or the data I showed a few minutes ago on the eight quarters since we started focusing on this new strategy. I think we see that what we're doing actually works really well.
The ARPDAU is growing. The teams are doing a great job, and we have better and better use of our infrastructure in terms of both BI and user acquisition and optimizing back-end. We have more and more technology that's using across multiple of the games. I think we're going to continue to invest. As you see also, there's no dramatic increase in employees, and we don't plan for that either. It's going to be no drama here. We continue to believe that we have a good plan that's worth investing behind. What's the end game for subscriptions? Do you think it will be the majority of all IAP revenues next year? I think that's looking at the trend for Word Domination, where it's grown every quarter in terms of share of in-app revenues. We don't see that as to be the only business model.
No.
It's a complementary business model, and might work better in some games, worse in other games. If you have a really huge in-app purchase volume already in a game like in Wordzee, probably subscription is going to be a smaller percentage, even if it works really well in that game. We see this as a puzzle where you have in-app advertising, in-app purchases, subscriptions, and in New QuizDuel, also sponsorships. These revenue streams are complementary. We don't think that MAG is going to turn into a subscription-only company in the future. Although it's a really exciting business model, of course. Can we expect a faster product development rate going forward? It seems like new development takes a lot of time. Why is that?
I think that eagerness to get stuff out is something everyone shares, both within a team, within a company, or outside a company. You want things to go as fast as possible. What we do is, of course, to try and make sure we do the right things, and when we test features that don't work, cut them and try to get something that works better. Sometimes you don't see all the development from the outside, even though there's a lot of stuff going on. As a company, of course, we're always focusing on increasing output of valuable things. When it comes to Wordzee, for example, when I look at the roadmap for Wordzee, it's a lot of exciting stuff coming out.
I think there is going to be an increased pace versus previously, because you kind of work through some core things that makes it easier to build new stuff. We talked about that with New QuizDuel as well, that it's a much better foundation than old QuizDuel that makes it possible to add a big thing like live broadcasts into the game.
Mm-hmm. How will the additional purchase price of 80 million SEK be reflected in your balance sheet from next quarter We will publish that in our Q1, the purchase price allocation. Part of the earn-out, of course, will be in the balance sheet with us from Q1 and onwards. We'll come back to it.
We will publish that in January.
Yeah. Why don't you include subscriptions in Wordzee? That's on the roadmap. It's going to come in Wordzee as well. This is again about priorities, and we have a very strong ARPDAU in Wordzee and a strong conversion to payer. We see that the biggest value for the game right now is to keep players engaged over a long time and do more of the stuff we see working really well. The subscriptions is definitely part of what's going to come into the game, but it's not the top priority in terms of time. This is the team looking at what moves the needle the most, and that's not going to be subscriptions in the short term. Brighton office have communicated that they have two games in production.
How many games do you have in production stage green-lit totally? I guess this is someone looking at ads for recruitment maybe. We do have games developed in Brighton. We both have the live operations team that do WordBrain 2, and Wordalot. Then we have the Wordzee team, plus another game that they're working on. As I mentioned earlier, to this point, we have chosen not to communicate exact number of games that are green-lit and on a path to a potential soft launch, rather just talking about the games when they do hit soft launch. I can't really comment on the exact number, but we have some exciting stuff in the works for sure. Are there any negative effects on revenue from ads related to the transition from QuizDuel to New QuizDuel? No.
I think we see both ads and IAP performing better in New QuizDuel.
Absolutely.
The mix is slightly different. In New QuizDuel we have more rewarded ads. If you play the games, you know that there is a game mode called Arena where you can replay against the leaderboard in different categories and so on. If you run out of tickets, you can look at rewarded videos to get more tickets. I think the mix is slightly different. In general, I'd say no, but we do see a bigger percentage of in-app revenues in the mix overall, which is of course very positive. Do you expect Primetime's business, excluding New QuizDuel, to be stable, growing, or declining in the next 12 months? I think that's too early to tell. We've seen from the last 12 months or so of Primetime standalone that they grew compared to the previous 12 months.
Now it's going to be up to how well do they execute? Can we find synergies where we can help each other out in terms of creating growth for the standalone Primetime business? I think it's too early to tell where it's going to head, but it's a really strong product offering. Of course, we hope they will grow and continue on a great path, and we're going to try and help to make that improve as well as the new QuizDuel integration.
Yeah. Are you able to increase the UA spending even more, or are you not able to do that while keeping the 180-day payback goal? I guess first of all, we talk about 6-9 month ROI or ROAS time for us, where, of course, we aim to be at 180 days.
Yeah.
We can extend it further. No, I say definitely yes, we can increase our UA spend. It's not the 180-day as such that is the limiting factor. I would say yes, there are many other factors involved.
Our goal is definitely to increase our investment in UA going forward.
I think the complexity here with user acquisition is that there's so many moving parts.
It's our own ability to create well-performing games and be in front of the market. Of course, you have the competition.
All kinds of other movements in terms of how do Facebook and Google and other important channels work with their algorithms and the tools they can give to our teams in terms of how we run campaigns. It's a lot of moving parts, and that's why we've chosen to invest a lot in our BI infrastructure to make sure that we can see into the future as much as possible and adapt to what the value we can model will come from what we did last week and so on.
Absolutely.
The aim is always to increase if we can, but we will not do it if we can't keep our profitability goals. Okay. Can you say something about performance and future of Ruzzle, WordBrain, and Word Domination? Ruzzle and WordBrain are in this evergreen category where we see stability, or actually in Ruzzle's case, it's been growing compared to last year thanks to great work on ARPDAU. I think we mentioned that in the previous report, and then maybe in this report as well, that we've rebalanced or refined the in-game economy in Ruzzle. It's also getting an improvement in terms of in-app revenues, and I think it could be another good year for Ruzzle. Word Domination, we still have in the growth category. We believe a lot in the product. We have a lot of really exciting stuff on the roadmap here for that game.
As I mentioned earlier, majority of the UA spend has been behind Words in the last quarter, which of course affects the growth possibilities for Word Domination. It's still a game we hope can grow into next year. How do you expect the ad business to be affected from the coming changes of IDFA? Just to explain what IDFA is, that's identifier for advertising that's used in the iOS ecosystem, and Apple has announced that they will change how IDFA works. Users will have to opt in to say, It's okay for me that you track my behavior. I think this is something that the entire industry is looking into trying to understand, but it's actually no one that knows what's going to happen exactly when that turns on.
Apple had planned to do it already in September when iOS 14 launched. They said, We're going to postpone it to next year. I think there's a lot of stuff we actually don't know yet. We'll see what happens. It could be, is this glass half full, half empty metaphor. Maybe it opens up new possibilities for user acquisition when we don't compete with companies in the same way, or maybe it affects ad revenues in a negative way, or maybe brand advertising or other advertisers fill up whatever demand goes away. It's really hard to predict, but it's of course something that we and every other company in the mobile business prepares for and try to handle in the best possible way when it happens. Not a great answer, but that's what it looks like.
Yep. What exactly is the research and development deductible of SEK 7.6 million approximately? The Swedish tax authorities give a subsidy or a tax relief on research and development, forsknings- och utvecklingsavdrag in Swedish. We have backdated that a couple of years. We also, on a running basis, we make that deductible, so SEK 600,000, SEK 700,000 per quarter, roughly, on an ongoing basis. This number is the retroactive amount that we have applied for.
We'll count on those SEK 600,000, SEK 700,000 per quarter going forward in continuous reductions of salaries.
Exactly
Cost. That's a good thing. Thank you to the Swedish government for that, I guess. Will Primetime's income be regarded as ad revenue? We haven't talked about how to define it, but I'd say that sounds reasonable.
At least in accounting, I'd say the big difference between ad revenues and IAP is that on IAP you also have a cost of revenue, like the platform fee.
Exactly.
Ad revenues is net.
Yeah. We do differ between the programmatic ad revenue and Primetime's revenue, which is different in the way it is sold, and then that makes a much closer relationships with the brands advertising. It's still under the ad umbrella.
Yeah.
It's different, but it's still ads.
Cool. Thank you for all the great questions. We're wrapping it up here. If you have further questions that we didn't have time for now or come up with something during the day, feel free to address us on Twitter, and we will respond there as well. Thank you so much for watching.
Thank you.
Bye.