Challenges in Managing Marketing Budgets for Game Companies

Challenges in managing marketing budgets for game companies primarily stem from the high-risk, volatile nature of the gaming market, the complexity of targeting and user acquisition, and the need for cross-functional alignment within companies.

Key challenges include:

• High risk and revenue volatility: Mobile gaming, in particular, faces a high failure rate and revenue decline risk, with over 40% of companies with $10M+ revenue experiencing declines over three years. This makes marketing investments risky and requires careful targeting to avoid wasted spend on users who do not engage long-term.

• Ineffective targeting and channel selection: Many companies struggle to tailor ads effectively. Generic or misleading ads can fail to attract the right players or cause poor retention. Successful marketing requires nuanced, platform-specific campaigns (e.g., TikTok vs. YouTube) and continuous optimization through A/B testing.

• Cross-functional misalignment: Marketing budgets can be wasted if game development, marketing, and finance teams are not aligned on priorities and performance metrics. Coordination is essential to ensure marketing spend supports both user acquisition and retention strategies.

• Balancing monetisation and user experience: CFOs face the challenge of allocating marketing budgets to acquire players without compromising user satisfaction through excessive ads or in-game purchases. They must use data analytics to measure KPIs like Cost Per Acquired Customer (CPA), Average Revenue Per Daily Active User (APDAU), and Return On Ad Spend (ROAS) to optimize spend.

• Rising development and marketing costs: Game development budgets, especially for PC and console AAA titles, are increasing faster than revenues. Mobile games face intense competition with many titles, forcing publishers to spend aggressively on user acquisition, sometimes exceeding development costs. For example, Scopely spent over $1 billion marketing Monopoly Go yet still turned a profit, illustrating the scale and risk of marketing spend.

• Market fragility and external disruptions: Changes like Apple's iOS ad tracking restrictions have disrupted mobile user acquisition, increasing the difficulty of efficient marketing spend. Additionally, much of mobile marketing spend goes into advertising within other games, effectively funding competitors and escalating costs.

• Seasonality and cash flow management: Marketing budgets must also account for seasonal fluctuations in player activity and revenue, requiring careful cash flow planning to avoid overspending during low periods.

In summary, managing marketing budgets in game companies involves navigating a volatile market with high user acquisition costs, ensuring precise targeting and cross-team collaboration, balancing monetisation strategies, and adapting to external market shifts—all while controlling rising costs and maintaining financial discipline. These challenges demand sophisticated data-driven approaches and strategic alignment across the organisation.