Mobile gaming has exploded in recent years, with the proliferation of smartphones and tablets disrupting the hold of traditional console makers like Nintendo.
Addictive hits, from Angry Birds to Clash of Clans, have proved popular with so-called "casual gamers" and will help drive $30 billion of revenues to the mobile games markets this year, according to market research firm Newzoo. (Tweet this)
But despite near-8 percent growth forecast for the industry over the next four years, gamemakers are struggling financially as many of their one-hit wonders lose popularity, forcing them to look for new ways to keep people engaged.
Mind Candy, the U.K. company behind hit-game Moshi Monster, which boasts over 80 million registered users, saw its net profit plunge from £8.1 million ($12.7 million) in 2012 to a £2.2 million loss in 2013, according to its latest financial results.
On Wednesday, the chief financial officer of Mind Candy told CNBC that Moshi Monster, originally a web-based game, had failed to fully adapt to the increasing number of kids playing games on mobile devices.
"One of the real shames about Moshi is that it was only ever in English-speaking markets and we never got a chance to localize it, including kids consuming more on mobile rather than web," Divinia Knowles, who is also president of Mind Candy, told CNBC.
"Moshi generated a billion dollars at retail value and that could have been much bigger," she added.
The company is now diversifying its offering and recently launched a new game called World of Warriors. It is also looking to fully release Popjam – a photo-sharing app for kids – in a bid to turnaround its fortunes.
However, Knowles said that the company's financial results for 2014 would still look "difficult" as the company has been increasing investment in its most popular games and brands.
Knowles said Mind Candy was keen to learn from the mistakes made with Moshi Monsters and has launched its new game, World of Warriors, in several European languages, with accompanying merchandise such as toys.
Console gamemakers have always tried to cultivate brand images for their franchise characters, as seen with Nintendo's Super Mario or Sega's Sonic the Hedgehog. But this has become harder with the growth of mobile, analysts said.
"This market is exceptionally fickle. You are dealing with consumers who love variety and they like free or cheap so it's hard to make a lot of money," Heloise Thomson, gaming analyst at Enders Analysis, told CNBC by phone.
Often mobile games use the "freemium" model, where the app is free to download but users are enticed to spend money in the game to help them progress. As a result, Thomson said there was a "lot of exhaustion" from consumers tired of blatant attempts to get them to part with their cash.
This, coupled with intense competition for user attention from different directions, has forced mobile game companies to look for new avenues of growth.
Mind Candy's Knowles added: "In order to stand out you have to have something different and innovative to build awareness and bring your game alive."
Rovio Entertainment, the maker of Angry Birds, said it was going to tailor its products for China, which is forecast to be the biggest mobile games market by 2018. The Finnish company has failed to reproduce the success of Angry Birds, which was extremely popular when it launched, and recently cut around 110 jobs. Rovio already makes merchandise such as toys and is slated to release a film in 2016.
King Digital, the maker of Candy Crush, is also struggling with diversifying and its stock tanked when it went public last year. Its shares have been hurt by a lack of new releases, although the London-headquartered company has said a new game is on the way in the second half of the year.
Like Rovio, Mind Candy is also focusing its efforts on China, with a Chinese-language version of World of Warriors in the works.
"We want Warriors from the outset to be global especially on mobile," Knowles told CNBC.