Manuel Prueter: Gaming gives Cyprus the opportunity to diversify away from tourism and shipping

Manuel Prueter, the CEO of Colossi Games suggests that Cyprus can provide many of the same conditions that helped make Silicon Valley a tech hub in the US, albeit in characteristics and not size.

Speaking to GOLD magazine as part of a cover story featuring 18 of the top gaming developers based in Cyprus, Prueter also shares his thoughts on why mobile game companies are relocating to Cyprus and how this can help the island diversify away from its dependence on traditional sectors such as tourism and shipping.

How did the focus on mobile gaming, particularly in the RPG genre, come to define your game development strategy?

In the last few years, especially since 2016 with the increased sophistication of measurement tools, a lot of emphasis has been placed on arbitrage models which turn the inefficiencies between ad networks into profit through hypercasual games that have snackable game loops and session times but low monetisation potential. Then come the more complex and tailored casual midcore games, which also rely on predictive modelling to calculate expected revenue with finite ad impressions. RPGs in particular offer a wide range of possibilities in terms of revenue streams – character development, gameplay bonuses and vanity items like costumes and skins. These require a player to develop an in-game identity, which results in more user longevity.

Walk us through your most successful titles. And what would you say makes a successful mobile game?

We have two titles: Gladiators and Daisho. Both games have the same tech stack but differ in their business game settings. Both contribute the same share to our bottom line but the former does it in less time with less long tail, while the latter delivers more stretched-out value but on a higher per-user level. The two games were voted best of 2022 and 2023, respectively, featured in Game of the Day and Spotlights, and have attracted a large number of players despite our short history. These days, success is defined by the ability to run at break even, with most companies expecting returns after a two or three-year period. I personally define success differently: as long as internal goals are met and the needs of shareholders and employees are catered to, money can be reinvested in further game development, or simply be considered pure profit. Top-line revenue and the number of downloads aren’t as significant. I believe that true value is mainly generated on the ad network side, not on the creators’ side.

Over the past five years, the games market has witnessed substantial growth, reaching US$187.7 billion in 2023 and is projected to hit US$212.4 billion by 2026, with mobile gaming taking the lion’s share. What major factors have fuelled the industry’s growth, particularly in mobile gaming?

The market has grown substantially due to the wider adoption of smartphones in emerging markets, alongside investment in 4G and 5G infrastructure, which has led to more users, but also because of the sophistication of ad networks. In the early years, you would set pricing and demographic targets to buy an ad. Nowadays, tRoAS (target Return on Ad Spend) or VO (Value Optimisation) campaigns allow platforms to find previously untargeted users who will help them achieve that gross margin. That said, this has also led to spiralling marketing costs, forcing developers to learn how to better extract value from users, contributing to overall market growth predominantly for ad networks.

How have privacy rules, such as the EU’s GDPR and Apple’s Identifier for Advertisers, impacted your operations, and how have you adjusted to them?

I would not necessarily agree that these measures had much to do with privacy in a traditional sense. What they achieve is a consolidation of data knowledge away from the developers of the product and their own marketing, shifting customer information to the big tech companies that utilise that data to sell ads while removing granularity. Under the old privacy laws, companies based in Limassol were able to set their ads to target people based in the city. Under the new rules, however, advertisers have no way of doing this and end up wasting money at the initial stage until Google figures out that Nicosians, for example, won’t click on an ad that is for a Limassol-based audience. Removing that increases the cost of predictive analytics and fills the coffers of those who have the data and can use it internally. For users, nothing changes other than cookie popups appearing on websites, alongside the CMP equivalent in mobile apps. By choosing to disable tracking, users will also get fewer relevant ads and developers will earn less money as a result – I fail to see how these changes help anyone other than Apple, Google or Meta.

In recent years, several mobile game companies have relocated to Cyprus. What factors have driven this migration?

We have to reference the favourable business regulations and tax environment but Cyprus has also demonstrated that its hospitality and openness to embracing change can help it emerge as a destination for attracting talent. Also, let’s not beat about the bush: As Cyprus is not in the Schengen zone, it can define its own immigration policy. It has set rules of minimum requirements instead of pandering to political prejudice. Moreover, the close proximity between gaming companies, most of which are concentrated in Limassol, helps propel everyone and attracts more companies to join. These are the very same ingredients that made Silicon Valley a tech hub in the US in terms of characteristics, if not size.

What specific changes – in terms of policy, infrastructure development or any other area – do you believe are essential to bolster Cyprus’ growth as a hub for the industry?

I firmly believe that there are two main obstacles to more efficient growth: affordable housing with proper urban planning, and banking.

Though Nicosia and Limassol are gradually becoming more liveable, both remain car-centric as most people live in single family homes. There are also too many abandoned buildings and empty land due to the lack of incentives for owners to develop them. Property value is rising so fast that buildings are left abandoned instead of being sold to developers, which has led to cities expanding outward, resulting in more car usage and the congestion issues that come with it. Banking is also a problem. Cypriot banks – still following the aftershock rules of 2012 – want to have 100% identification and verification of potential beneficiaries to the 4th degree in funds, an administratively prohibitive practice which scares venture investments away Another issue concerns fees – wiring fees, processing fees, incoming funds fees, maintenance fees, low activity fees, higher sum fees, and so on – while there is no interest paid as with US banks. Sidestepping is not as straightforward, as there are some cases where payouts or deposits to Cypriot banks are required, leading to capital being diverted away from productive use. A third issue is the development of the education sector: The local population needs to avoid being limited to specialising in tourism, law and accounting and to expand to more entrepreneurial or product development jobs, which have the whole world as their market, as opposed to Cyprus alone. That said, Cypriot universities are taking action over this, aiming to convince locals to study in their country, rather than abroad. Despite the above critiques, however, I must emphasise that the reason I am here in Cyprus is the opportunity it has to diversify away from tourism and shipping. As we’ve seen in the case of Singapore, transitioning to a digital service-based economy with a sound and business-friendly political framework is entirely possible.

(This interview first appeared in the January edition of GOLD magazine. Click here to view it.)