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Last year was pretty bad for everyone, personally. But the game industry did well as people turned to games to distract themselves from reality and find socially distanced friends. The game industry’s revenues grew 19% to $174.9 billion in 2020, according to market researcher Newzoo.
Mobile games led the way, accounting for 58% of revenues in 2020, according to SuperData Research. Mobile insights and analytics firm App Annie estimates mobile games, already the biggest segment, will grow 20% to $120 billion in 2021.
But the question is whether growth can continue as game companies have to top the stellar quarterly and annual results they had in 2020. Was the bump we saw in new gamers and more spending an anomaly, driven by the fact that gamers didn’t have other things to do, like physical sports?
That’s a big question we’re wrestling with at our Driving Game Growth online event today. I spoke with Rick Kelley, the head of Facebook Global Gaming; and Steve Webb, director of global sales and operations and Facebook Audience Network, in the opening talk.
“There’s no doubt 2020 was a crazy year,” Kelley said. “Despite the fact that it was horrible in so many ways, gaming had a pretty good year in many different aspects. There were more players than ever before. You’ve got this influx of VC money that has come in because of the time spent. You have consolidation in the industry.”
There is regional diversity. Cross-platform games are becoming the norm. There are new kinds of games for home design and makeovers, and they’re reaching new audiences, Kelley said.
Facebook Gaming’s report on Games Marketing Insights for 2021 found new players in the U.S. grew by 28 million (up 28%) since March, and they’re still playing and engaged, Kelley said.
“There are challenges that we’ll get into in 2021, but the opportunity is big,” Kelley said.
The new gamers are playing more hours per week than existing players, and they’re more social and they’re spending more, said Webb.
Webb noted that a report from market researcher IDC in the third quarter of 2020 found that mobile gamers were playing games for 10 hours a month on average. And where the users go, the advertisers go, and that is strengthening the game market, Webb said.
The odds are good that people who played games in 2020 will play again in 2021. App Annie believes it takes about 66 days for the average person to adopt a new habit. And many people adopted gaming as their entertainment of choice during the last 11 months of the pandemic. Those people are probably going to continue to play, even as the rest of society slowly comes back. App Annie also found that mobile games were the platform of choice in the home, even though people were no longer commuting and they could also play on other platforms like the PC and consoles.
But the game industry also depends on the winds of change in broader markets. China has slowed its approval of new games, and most of those approved are domestic titles. High unemployment could curb spending by gamers.
And there is the possible headwind for growth from Apple’s move to prioritize user privacy over targeted advertising with its changes to the Identifier for Advertisers (IDFA). That change will happen sometime soon, and it could affect Facebook’s revenues as well as that of many smaller game publishers and developers, according to user acquisition expert Eric Seufert.
“We know that this year IDFA is going to be disruptive. It’s definitely not helpful that we don’t know when it’s going to happen,” Webb said. “Developers are having to plan their businesses with this hanging over them.”
Apple will now require users to opt-in to share their IDFA data for ads. That could blunt the precision of ads, making it harder to efficiently recruit new players with advertisements.
“Despite this cloud that is hanging over everyone’s head because of IDFA, there’s never been a better time to be in gaming,” Kelley said. “The growth that we’ve seen in the last 12 months is immense.”
To counteract the risks related to IDFA, Facebook is helping developers focus on better quality for the creative material in ads, and more automation in optimizing ads in games. Improving monetization will help those affected by the uncertain IDFA situation.
Free-to-play games have helped lower the barriers to entry for games. Game companies have to knock the barriers even lower and make their games even more accessible all around the world. If you think about that big picture, then you can see the opportunity. New technologies like instant games and the cloud are removing barriers to accessibility, and getting around the app stores could also help bypass costs.
New money from huge institutions from Blackstone to Tencent came into games. Market analyst InvestGame said that deals in games hit a record $33.6 billion across 664 transactions in 2020 when it comes to acquisitions, investments, and public offerings. Game companies like Playtika are exploiting a historic window with initial public offerings, and that window is still open for more to come like Roblox, AppLovin, and more. InvestGame said acquisition values hit $12.6 billion across 219 closed deals in 2020.
All of this money could help gaming emerge further from the nerd ghetto. Last year, I had a conversation with a young influencer. I said that I grew up when gaming was considered nerdy. She said that for as long as she has been alive, gaming has been cool. That’s going to be the prevailing attitude as nerds get their revenge.
If gaming gets rocket fuel to expand further and invest in better games, then we could definitely surpass the growth of 2020. There’s a lot at stake here. The Entertainment Software Association reported that games directly contributed $40.9 billion to the U.S. economy in 2019.
But as we all know, gaming has gone global, and it has created an interdependent ecosystem around the world. Mobile gaming has helped the industry reach more than three billion gamers, Webb said.
“Even with the expected headwinds for IDFA, it’s still poised for massive growth,” Webb said. “There’s more gamers. More playing time. More advertisers. That equals higher revenue. There’s a lot we should be excited about, but we do recognize there is some short-term disruption while we navigate the IDFA trends. Stay encouraged, and be excited.”
So much depends on the continuation of growth. Hopefully, the game industry will make it happen as it becomes the biggest form of entertainment.
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