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The mobile gaming industry has a capital efficiency problem that most participants don’t realize they have.

Studios that could scale profitably sit capital-constrained, unable to deploy into ROI positive user cohorts via paid UA channels. Meanwhile, those with access to capital often misallocate it, chasing growth metrics that obscure whether they’re actually creating value when they start taking into account their cost of capital.

The missing ingredient isn’t more sophisticated attribution models or better creative testing. It’s a shared language between gaming operators and capital providers – one that treats user acquisition as what it actually is: a portfolio of cash-generating assets with measurable duration, yield, and leverage characteristics.

I spent years trading short-term credit products at UBS before founding Pollen VC in 2014 where we financed hundreds of millions in UA spend across gaming and app portfolios. The discipline that worked in fixed income markets – obsessing over yield curves, duration risk, and cost of capital – applies with surprising parallels to mobile UA. But almost no one in mobile gaming or apps thinks this way.

As various flavours of debt financing becomes more prevalent in mobile gaming, the studios and lenders who understand portfolio yield will have a structural advantage over those still optimizing for vanity metrics.

Why Marketing Metrics Fail Financial Scrutiny

Ask most UA managers how a campaign performed, and you’ll hear: “We hit 120% ROAS at D180” or “Payback in 90 days.”

Ask a CFO evaluating that same campaign for debt financing purposes, and they’ll want to know: “What’s the monthly yield on deployed capital, and how does that compare to our cost of capital?”

These are different questions, and they lead to different decisions.

ROAS and payback periods are incomplete metrics because they ignore the time value of money. A campaign that returns 150% over 18 months is not the same as one that returns 150% over 6 months – even though both report the same ROAS. The latter generates nearly 2x the annualized return and recycles capital three times faster.

When you’re self-funding UA from operating cash flow, this might not matter much. But the moment you introduce leverage – a revolving credit facility, revenue-based financing, or any other debt structure – time becomes as important as return. Because every day capital sits deployed in a maturing cohort, you’re paying interest on it.

This is where the fixed income parallel becomes useful. Bond investors don’t just ask “what’s the total return?” They ask: “What’s the running yield, what’s the duration, and how does that spread compensate me for the risk?”

Gaming operators financing UA with debt should be asking the same questions.

The Fixed Income Parallel: Mapping Cohorts to Bonds

Consider what happens when you acquire a cohort of users:

• You deploy capital upfront (UA spend)
• You receive a stream of cash flows over time (player revenues)
• Those cash flows follow a predictable but not contractual curve (the LTV curve)
• The “asset” eventually matures or churns out

This is structurally identical to buying a bond:

• You deploy capital upfront (purchase price)
• You receive periodic cash flows (coupons)
• Those cash flows follow a contractual schedule
• The asset matures at a defined date (redemption at par)

In bond markets, investors track running yield (also called current yield): the annual coupon income divided by the current market price. It’s a snapshot metric showing what annual return you’d earn from coupon payments alone at today’s price, ignoring capital gains or losses.

The UA equivalent would be: What monthly revenue is this cohort generating right now, divided by the capital I deployed to acquire it?

But here’s where it gets more interesting, and where the mobile gaming and apps industry should be paying more attention.

Duration Risk and Capital Velocity

Bond investors differentiate between short-duration and long-duration assets because they have different risk profiles. A 2-year Treasury behaves very differently from a 30-year bond when interest rates move. The longer-duration asset is more sensitive to rate changes and locks up capital for longer.

Mobile gaming cohorts have the same dynamic:

Short-Duration Game:

• Hypercasual, puzzle, or casual arcade
• CAC: $0.20
• Breakeven: 5 days
• D30 LTV: $0.30
• 50% return, but capital recycles in days

Long-Duration Game:

• Midcore RPG, strategy, or 4X
• CAC: $5.00
• Breakeven: 270 days
• D720 LTV: $9.00
• 80% return, but capital locked up for two years

Both can be excellent investments. But they serve different roles in a portfolio, and they respond differently to changes in the cost of capital.

When your cost of capital rises—because market conditions tighten, your lender reprices risk, or your business performance deteriorates—long-duration cohorts become less attractive. Just like long-duration bonds.

The sophisticated gaming operator should be constructing a portfolio with deliberate duration characteristics, not just chasing the highest absolute ROAS regardless of time horizon.

Where the Analogy Breaks (But Why It Still Matters)

Of course, UA cohorts are not bonds. The differences are important:

1. No Secondary Market / Complete Illiquidity

When you buy a bond, there’s (normally!) a live bid-ask spread. You can mark your position to market daily and exit if needed. When you acquire a cohort, you’re locked in. There’s no secondary market for “100,000 users acquired on iOS US in Q3 2024 playing your strategy game.” You cannot rebalance mid-cycle or sell underperforming cohorts to redeploy capital.

This illiquidity is a crucial distinction. It should mean you must be far more careful about portfolio construction on the front end, because you cannot easily correct mistakes.

2. Cash Flows Are Stochastic, Not Contractual

A bond’s coupon schedule is legally enforceable. An LTV curve is a probabilistic projection based on historical cohort behavior. Actual performance can deviate – sometimes significantly – from your Day 7 or Day 30 forecast.

This introduces estimation risk that doesn’t exist in fixed income. Your “yield” is constantly being revised as actual data comes in. A cohort you underwrote at 150% ROAS might realize at 180% – or at 110%. You’re making capital allocation decisions under uncertainty.

3. Asymmetric Information

In fixed income markets, credit ratings, covenants, and standardized disclosure mean everyone is working from roughly the same information set. In mobile UA, studios have dramatically more information than lenders about creative performance, platform changes, competitive dynamics, and forward-looking LTV.

This information asymmetry is why debt financing in gaming requires fundamentally different underwriting than traditional venture debt. Lenders cannot rely on binary outcome scenarios (company succeeds or fails). They need to understand portfolio construction, cohort vintage risk, and whether the borrower has the operational sophistication to manage capital efficiently.

Despite these differences, the capital logic holds. The discipline of measuring yield, understanding duration, and pricing leverage applies as cleanly to UA as it does to a bond portfolio. The studios that internalize this will make better capital allocation decisions. The lenders who understand it will price risk more accurately.

When Leverage Changes Everything

Self-funded UA is forgiving. If a cohort underperforms, you’ve missed an opportunity but haven’t paid explicit interest costs while waiting for it to mature.

Debt-funded UA is unforgiving. Every dollar deployed is accruing interest daily. Your true return isn’t gross ROAS, it’s should be thought of as you net return after financing costs.

This changes the math in several important ways:

Cost of Capital Becomes Your Hurdle Rate

Let’s say you’re running two campaigns:

Campaign A:

• 100% return over 90 days
• Normalized monthly yield: 33.3%

Campaign B:

• 150% return over 180 days
• Normalized monthly yield: 25%

On a ROAS basis, Campaign B looks better (150% vs 100%). But on a yield basis, Campaign A generates 33% higher monthly returns. [NB these calculations ignore the convexity of the LTV curve to keep the math simple]

If your cost of capital is 2% per month, Campaign A delivers 31.3% net yield versus Campaign B’s 23% net yield. When capital has a cost, velocity matters as much as magnitude.

Portfolio Spread Under Stress

The “spread” between your portfolio yield and your cost of capital is what creates value in a debt-financed UA strategy. Let’s work through a realistic example:

Your UA portfolio generates 10.8% monthly return (36% return over 100 days, normalized).

Your debt facility costs say 1% per month (12% APR + fees, roughly 15% all-in annually).

Your leverage return is 10.8x – meaning every $1 paid in interest yields $10.80 in incremental revenue.

That’s a compelling spread. You can borrow intelligently, deploy efficiently, and compound capital faster than you could organically.

But what happens when that spread compresses?

If cohort performance deteriorates by 20% (from 36% return to 28.8% return, or 8.6% monthly), your leverage return drops to 8.6x. Still good, but your margin of safety just narrowed.

If your lender reprices risk and your monthly cost of capital rises from 1% to 1.75%, your leveraged return drops to 6.2x. Still positive, but you’re now operating with much less cushion.

If both happen simultaneously – cohort performance drops 20% and financing costs rise 75% – your leverage return falls to 4.9x. You’re still generating positive returns, but your strategy has become far more fragile.

This is why sophisticated operators need to track not just absolute returns, but spread over cost of capital by cohort vintage, channel, geo, and genre. When spreads compress, you need to know which parts of your portfolio to dial back and which to protect.

Duration Mismatch Risk

One of the most common structural mistakes in debt-financed UA is duration mismatch: funding long-payback cohorts with short-term facilities.

If you’re acquiring cohorts that don’t break even for 270 days, but your credit facility has a 12-month commitment period with annual repricing, you have 9 months of exposure where your lender could reprice or exit before your cohorts have paid back.

This is directly analogous to the classic duration mismatch in banking: funding long-term assets (mortgages) with short-term liabilities (deposits). It’s profitable when it works, but fragile when conditions change.

The solution isn’t to avoid long-duration cohorts—it’s to match your funding duration to your asset duration, or maintain enough portfolio diversity that you always have near-term cash-flowing cohorts to service debt while longer-duration cohorts mature.

Cohort financing versus traditional facilities win here as they map directly to the duration of the cohort.

What Sophisticated Capital Allocators Track

If you’re financing UA with debt (as opposed to cohort financing for example) these are the metrics that matter:

1. Monthly Normalized Yield

Convert all cohort returns to a common monthly basis:

Monthly Yield = (Return % ÷ Days to LTV) × 30

Example: 36% return over 100 days = 10.8% monthly yield

This is admittedly a simplification. It assumes linear LTV accumulation, which isn’t true—most games show convex LTV curves (faster early accumulation) or concave curves (long tail monetization). But as a directional metric for capital allocation decisions, monthly yield is conservative and actionable.

2. Cost of Capital Spread

Track the difference between your portfolio yield and your fully-loaded cost of capital (interest + fees + unused line charges) on a monthly basis.

If your monthly yield is 10.8% and your monthly cost of capital is 1%, your spread is 9.8 percentage points. That spread is your margin of safety. Watch it carefully.

3. Duration-Weighted Portfolio Returns

Not all deployed capital is created equal. A dollar deployed in Day 5 of a cohort’s life is worth more than a dollar deployed in Day 200, because it’s had more time to compound.

Weight your portfolio metrics by how long capital has been deployed. This will tell you where you’re generating the highest velocity returns versus where capital is sitting idle.

4. Cohort Vintage Performance vs. Projection

This is your mark-to-market discipline. Each cohort should have a projected LTV curve at time of acquisition. As actual data comes in, measure realized performance against projection by vintage.

If your October 2024 iOS US cohorts are trending 15% below projection at D30, that’s a mark-to-market loss on deployed capital. You need to know this in real-time, just as a bond trader needs to know if their position is up or down on the day.

Track this by acquisition channel, platform, geo, and genre. You’re looking for systematic deviations that tell you where your underwriting assumptions are breaking down.

5. Leverage Return Multiple

The simplest summary metric: portfolio yield divided by cost of capital.

If you’re generating 10.8% monthly and paying 1% monthly, your leverage return is 10.8x. Below 5x, you should question whether the complexity and risk of leverage is worth it. Above 10x, you likely have room to deploy more capital.

The Emerging Standard

Ten years ago, only a few in mobile gaming talked about cohort-level unit economics. Today, any serious operator tracks D1/D7/D30/D180 retention and LTV as baseline metrics.

Five years ago, almost no one talked about debt financing mobile UA. Today, revenue-based financing, UA credit facilities, and cohort-backed lending are becoming standard tools in the capital stack.

The next evolution is applying fixed income discipline to portfolio construction. The studios that adopt this framework early will have an advantage: better capital allocation, tighter risk management, and a common language with debt providers.

The lenders who understand this will have better portfolio outcomes: they’ll know which studios are managing capital efficiently versus which are just spending aggressively, and they’ll price risk accordingly.

This isn’t about making mobile gaming more complicated. It’s about making it more rigorous. Because when leverage becomes a standard part of the growth toolkit, the discipline that’s worked in credit markets for decades becomes directly applicable.

Your UA manager doesn’t need an MBA in fixed income. But they should be thinking like a portfolio manager: tracking yield, understanding duration, measuring spread over cost of capital, and managing risk across cohorts.

That’s the difference between marketing spend and capital allocation.

And in a capital-efficient world, the best allocators win.