The inconvenient truth of scaling gaming apps

Every successful mobile game reaches a pivotal moment when an untested product transforms into a profit-printing machine. When that happens, the ability to scale efficiently becomes a make-or-break factor. The inconvenient truth is that in gaming, you have to spend a lot of money to make a lot of money. Marketing isn't just a growth lever, it's the engine that powers the entire business.

Across industries, marketing budgets typically represent a small slice of revenue. Gartner's 2025 CMO Spend Survey found that global averages hover around 7.7% of total revenue. In gaming, that number looks dramatically different. PvX's internal benchmarking suggests that gaming companies routinely spend between 50% and 75% of net revenue on marketing. The reason is simple: user acquisition is both the biggest cost center and the largest driver of returns.

The Capital Intensity of Mobile Gaming

For most consumer categories, spending 10% of revenue on marketing would be considered aggressive. For gaming, that level of spend barely moves the needle. PvX's analysis of over 3,000 cohorts across Casual and Core games found that at month 12, the 60th percentile achieved 139% and 122% Net ROAS respectively. Even with lifetime gains, the majority of companies finish below 200%, meaning that for every dollar spent on marketing, the typical return is less than two dollars.

This dynamic explains why many top studios spend such a large portion of their revenue on user acquisition. It isn't wasteful; it's necessary. The industry's most profitable companies are those that sustain high spend with discipline, consistency, and access to sufficient capital.

The Dilemma of Growth Financing

If your game is scaling fast and generating predictable returns, the question shifts from "should we spend?" to "how do we fund it?" The answer isn't as simple as it seems. Equity can feel easy - it buys time and has no repayment schedule - but it's expensive in the long run. Debt, on the other hand, is rigid and unforgiving. It rarely accommodates the unpredictable timing of cohort returns, and traditional lenders won't take risk directly on UA performance.

When marketing performance is measurable and predictable, funding it with equity becomes a costly mistake. The true cost of equity - once exits are realized - can exceed 30% of enterprise value. Traditional debt isn't much better, as fixed repayments and EBITDA covenants make it incompatible with the way user acquisition actually works.

A Fourth Option: Cohort Financing

Cohort financing bridges the gap. It's a purpose-built solution for companies with predictable acquisition performance, designed to fund new cohorts while directly sharing in their outcomes. Unlike traditional debt, repayment flexes with performance, and the capital is secured by the cohorts themselves. Unlike equity, founders retain ownership and control.

This structure brings key advantages:
 

• No dilution: Keep your equity intact while scaling.
   
• Flexible repayment: Payments move in line with cohort ROAS.
   
• Covenants based on performance, not EBITDA: Spend limits are data-driven, not arbitrary.
   
• Downside protection: If ROAS underperforms, the lender shares the risk.
   
• Faster scaling: Up to 80% of marketing spend can be funded at any profitable scale.

Rethinking How Capital Powers Growth

Gaming is one of the most capital-intensive industries in the world, yet also one of the most data-rich. That combination creates opportunity. When performance data is strong, founders shouldn't have to give up equity to grow. Cohort financing offers a smarter, more aligned approach - funding growth at the pace of performance, not dilution.

As the industry matures, financial models must evolve alongside it. The challenge for gaming studios isn't simply scaling marketing spend, but finding the right way to fund growth without sacrificing long-term value.

For more information on UA financing, visit PvX Partners.