Opportunities in Gaming in 2022
Market drivers and shifts in the value chain create opportunities for gaming across the board - from Hypercasuals, to RPGs and the Metaverse.
Business opportunities show up at the convergence of market drivers and the value chain. Add in a growing market, such as gaming, and a bountiful landscape for innovation and shifts in ecosystem dynamics is created.
Gaming is one of the largest entertainment platforms worldwide, with 79% of the online population engaging with games and gaming content, according to Newzoo.
With a market size of US$222 Billion ion 2022, from consumer spending worldwide, it is also a very diverse ecosystem that is spread across form factors, from mobile (61% of spend), to consoles (19%), and PCs (18%), and which features a wide range of genres, from low-commitment Hypercasual experiences to immersive Role Playing Games.
The growth, not just in size, but also in breadth and diversity of consumers who play games and engage with gaming related content, opens up opportunities for new ways to build product, do marketing and capture value. And the innovation triggered by these shifts lays down the building blocks for the long-term and the potentially great transformations of the industry envisioned by the Metaverse.
Growth in player diversity means that more consumers of all ages and genders are turning to games. Adoption among female players is higher: among the top 100 games in the US in 2021, 47% are more likely to be played by females, up from 37% in 2019. And gaming is growing on both sides of the Millennial age group: 46% of Baby Boomers, 69% of Gen X and 90% Gen Z are engaging with games and gaming content.
This rise in game adoption is supported by growth on mobile. Smartphones represent one of the key drivers for the ecosystem and are growing 1.7 times faster than the overall market, with a forecasted CAGR of 12.3% from 2021 to 2026, according to IDC and Data.ai. And adoption levels have already bounced back from the post-pandemic slump, due to a 32% growth in gaming app installs in 2021.
At the product level, Hypercasual games represent the fastest growing segment. In 2020 and 2021, the Hypercasual genre generated 27% of gaming app installs, followed by the Action games with 17% and Puzzles with 11%, according to Adjust.
Where the Hypercasual genre is lagging behind the industry is player retention, especially between Day 3 and Day 14. According to Adjust, in 2021, Day 14 and Day 30 retention for Hypercasual games is lagging significantly behind the average for the entire segment, with 3.8% retention on Day 14 (compared to 9.6% overall) and 1.6% on Day 30 (compared to 6.2% overall).
Improved retention will increase word of mouth marketing and organic growth for the genre and improve the 3.2 ratio of paid to organic installs, to create room for other new types of marketing, such as brand partnerships. This, in turn, will improve retention and contribute to even more immersive gaming experiences and thus create a growth cycle.
Games are providing more than entertainment. At the same time that the gaming audience is becoming more diverse, it is expanding the use that it gets from the vertical. 75% of players say that they engage with games to connect to others, according to Newzoo. This leads to a deeper connection and, in places, convergence between the gaming and social media / communications verticals.
Game players are more likely to also be users of social media platforms and video streaming than the average Internet population. They are 2.1 times more likely to use Twitch, 2 times more likely to use Discord, 1.5 times more likely to use TikTok, and 1.4 times more likely to use Snapchat, according to IDC and Data.ai.
And the majority of gamers engage with the content beyond playing: 22% both play and watch video streaming of games, while 28% play, watch and use connected social media and communications around their gaming, according to Newzoo.
This shift in consumer behavior opens up even more potential for integration between social and communications channels and games, particularly for the more immersive genres, such as Role-Playing Games.
This opportunity is supported by growth in the time that players spend in-game. Session length, sessions / user / day and time spent in-app all increased in 2021, according to Adjust. Day 1 total time in-app increased from 50.3 minutes to 53.3 minutes, Day 3 from 44.9 to 47.2, Day 7 from 43.3 to 45.5, and Day 30 from 41.1 to 43.
Increased time spent in-game offers more potential for monetization, either through In-App Purchases or cross-promotion and branding possibilities.
The opportunity in the Metaverse comes from the creativity of artists, consumer fashion, fashion brands and ever more powerful Mixed Reality and live streaming technology to provide even deeper immersive experiences and blend the physical and digital spaces.
The desire to create ever deepening immersive experiences in games has been there from the beginning of the industry. Gaming sits at the intersection of technology and creative industries, and investments in both are needed for significant shifts in the ecosystem to happen. Improvements in technology such as Mixed Reality, massively concurrent video streaming and NFT are supporting creative work of artists, fashion brands, and sports companies to create early instances of the Metaverse.
The long-term possibility of the Metaverse would significantly expand the realm of gaming, social media and live events and it still requires a lot of investment and development to materialize. Some of the building blocks needed are being put in place today - they show us a prototype of the Metaverse and allow us to imagine them amplified to deeply immersive experiences.
These building blocks are:
Development of games as a platform, such as Roblox
Organization of live events that are video streamed, such as Ariana Grande’s concert in August 2021
Integration of digital fashion and NFT technology by consumer brands into their portfolio, such as Nike’s acquisition of RTFKT Studios
The early forays into the Metaverse have had resounding results. Ariana Grande’s Fortnite concert in August 2021 attracted almost 28 million unique users and streamed over 11 million live hours on Twitch and YouTube. At its peak, it amassed 1.3 million concurrent viewers. The first Metaverse Fashion Week in March 2022 spanned four days and attracted more than 60 fashion and luxury brands and 108 thousand unique visitors.
Dynamic markets such as gaming offer a plethora of opportunities across the stack, from technology, to product, to marketing and monetization. To succeed in capturing them, you need to pay attention to what the shifts in customer behaviour are and connect them with transformations in the value chain. The right strategy will highlight what the opportunities are and help design the competitive advantage needed to capture them.