Brands should think of the $US200 billion gaming industry not as a series of channels but as a form of entertainment, around which a unique set of consumer behaviours has evolved. That’s our key take away from a new report by Essence, a global data and measurement-driven media agency which is part of GroupM.

However, investors in the sector caution of a need for further market maturity and stronger commercial infrastructure before the sponsorship dollars can safely chase all those hundreds of millions of eyeballs. And executives in the major esports organisations say it is critical for brands to build genuine relationships with the community and not assume traditional marketing tactics will work.

Called Gaming in the 2020s: Reach, Reward and the New Meditation, the authors note that while interest from marketers in the gaming sector has steadily grown, it is yet to become a mainstream consideration. 

This is despite its huge appeal – one in nine people on the planet are gaming, and the immutable law of advertising tells us that money follows eyeballs.

Yet, the authors of the report say that prior to the pandemic, gaming had neither been seriously appraised for its reach potential, nor wholeheartedly embraced as a lever for driving brand connection.

“Enter a global pandemic — an enforced focus on home entertainment and folks spending more time with their children. One of the many effects was a huge increase in exposure to and exploration of gaming, resulting in a greater understanding of its appeal amid widespread news coverage of family-friendly, stand-out titles such as Animal Crossing.

Published by Nintendo, the success of Animal Crossing last year demonstrates how rapidly games can build an audience. After a slow build from its 2017 launch, the game enjoyed a surge of popularity last year after an upgrade, generating six and a half million downloads in March and April 2020.

Touchpoints

According to the authors of the report, there are two main reasons for brands to engage, and that these will determine how building gaming touchpoints into the communications plan should be approached:

  • Incrementality for non-endemic brands — gaming touchpoints should be evaluated in line with any other video, display or out-of-home opportunity.
  • Building equity in the service of growth —  gaming touchpoints can be leveraged in the service of campaigns that are not specifically relevant to the genre, just like all kinds of campaigns can sit happily on the cinema screen, for example.

Gaming consumers operate across a hugely fragmented space. For marketers the challenge of engagement is understandably daunting. Gaming includes vastly differing devices, platforms, locations and types of content, according to the report.

There are many different ways to engage with consumers and – crucially, say the authors – many reasons for doing so.

The report says the key to navigating the space for brands is understanding this considerable variation in behaviours and motivations behind them. 

“This is not only true because the category is so broad but because individual players drop in and out at different points, roaming the ecosystem depending on their momentary need states.”

While it is tempting and partly useful to think of gaming audiences in terms of ‘tribes’ the needs of gamers are seldom fixed so it’s more helpful to think of gaming in terms of moments in time, the authors argue.

“From this perspective the full potential of gaming starts to reveal itself; some gaming moments present a social occasion while others are akin to deep meditation. For many players gaming is their passion, so each moment is about indulging in their hobby. Conversely, many other gaming moments represent nothing more than a desire to pass the time.”

Ecosystems

Report co-author Yasser Ismail, Associate Vice President, Strategy, APAC at Essence, told Which-50, “Return on investment (ROI) is still a question mark in gaming. Gaming in general has a rabid and huge fanbase, however, whether that truly translates into successful ROI is unique to each brand and organisation. Due to the unique nature in which gaming audiences interact with the media in general, a customised approach to measuring success is needed. Some marketers may not have the experience or knowledge to execute that.”

Yasser Ismail, Yasser Ismail, Assistant Vice President, Strategy, APAC at Essence

Brands also need to recognise that gaming interest behaviour extends far beyond just the act of playing. “As leveraging fans’ interest in film, sport or music is possible outside the cinema, live broadcast, or streaming of a playlist, so gaming has a whole ecosystem of content wrapped around it. From video streaming to publisher content, from subreddits to live esports events, gaming fans are thoroughly spoiled with ways to engage.”

However, while the demographics of the gaming community look solid and attractive to advertisers there are still key pieces of market infrastructure missing. Take esports, a subcategory of the gaming sector which the report defines as organised forms of competitive gaming using tournaments or leagues. This subset alone attracts a huge and affluent global audience.

NewZoo estimates that the global audience for esports reached almost half a billion in 2020 and they predict it will rise to 646m in 2023, with around 45 per cent of that audience watching at least once a month. In mid 2020, McKinsey and Company estimated global esport industry revenues for 2019 at $950 and is predicted these would reach $1.1 billion in 2020.”

Most of the revenue (58 per cent) is forecast to come from sponsorships, which grew an estimated 17 per cent compared with 2019.

The Essence report meanwhile says that the is sector growing everywhere, but that current esports awareness varies widely by market. According to YouGov, for example, 72 per cent of the Chinese population is aware of esports compared with only 46 per cent in Singapore and 26 per cent in the UAE.

“Remarkably, they report that 14 per cent of the esports audience don’t play games themselves,” says the authors.

Market infrastructure

However, while the audience scale is impressive there remain gaps in the market infrastructure that need to be plugged according to Clayton Larcombe, the Managing Director of investment firm PAC Capital, which has specialist practice knowledge of, especially esports.

He told Which-50, “There needs to be a better understanding of the audience data. McKinsey reports that total audience reach for esports events are usually directly derived from streaming platforms and could be inflated. The numbers need to be evaluated and adjusted to a meaningful measure of relevance. Key is to get better measures of unique impressions versus overall impressions.”

Network infrastructure also remains problematic, he says, and this is an issue which is especially acute in esports.

Clayton Larcombe, chief investment officer, P.A.C. Capital

“Clearly this a key aspect of the eSports ecosystem. There is an asymmetry in the reliability of network connection across different regions. While most tournaments go off without a hitch, there have been stories of gamers losing tournaments due to lag or disconnection. This could potentially discourage sponsors who don’t want their name associated with a tarnished gaming event.”

And in terms of competition, the market is still maturing. The competition leagues for instance need stronger league infrastructure. “[That would] help attract sponsors by providing stability and longevity, encouraging larger multi-year contracts. Leagues also create narratives and drama which advertisers can leverage.”

A stronger league infrastructure helps attract sponsors by providing stability and longevity, encouraging larger multi-year contracts. Leagues also create narratives and drama which advertisers can leverage.

There are particular issues in the local sector relative to more developed gaming and esports markets overseas, he says.

The global esports landscape is dominated by large multi-billion dollar companies like Tencent, Microsoft, Activision Blizzard, Nintendo, Sony and Electronic Arts among others.”

 These are established businesses with global reach, huge-scale and deep pockets. They also have diversified revenue streams and are leaders in their areas of expertise. 

“Amazon owns the largest gaming streaming platform Twitch, Nintendo is a leading hardware and game developer and owns the two leading titles and associated brands and alongside Microsoft and Sony dominate the market share for gaming consoles. The global investable universe is far more diverse and established and from an investor standpoint, these businesses are far easier to understand and to value.”

In comparison the investable universe in Australia is comprised of micro-caps and tends to be concentrated in software development pertaining to streaming and gaming platforms, says Larcombe. “Proof of concept tends to be lacking and expected cash flows are distant and uncertain. Investing in these companies is highly speculative and substantial risk is inherent.”

While more than 10 per cent of the world’s population is engaged in gaming, that scale is still not reflected in the brand dollars going into the market. 

We asked Larcombe what he believes needs to change for esports in particular to grow its share of marketing dollars.

“Sponsorship is still in its infancy in esports, but many brands both endemic and non-endemic have launched major sponsorship campaigns in esports. Typically, the securing of non-endemic sponsors in a high growth industry is an indication of a high-value property,” he says.

Cord-cutters

Larcombe believes that brands clearly see esports as a way to engage with the cord-cutting younger generation. “And esports is being seen as a way for advertisers to reach a highly engaged and passionate audience.”

He references studies showing that esports fans are highly receptive to advertising and are accepting of advertisers, knowing that they are necessary to support the esports ecosystem. 

Yet, as anyone who has ever spent time on channels like Discord can attest, gaming consumers can also be brutal. 

Brands need to take the time to understand the market, he cautions. “Typically those making the decisions to sponsor are of older generations who may not fully understand their target market. Reading a comments section on one of the online streaming platforms will reveal how cut-throat the audience can be when they suspect insincerity.  Brands must ensure they make the right partnerships and engage the community in a relevant way.”

And they also need to be willing to genuinely support the community.

“Esports fans understand that advertising is necessary to support their community but want brands that are transparent. They tend to be savvier and do not want to feel they are being duped by advertising. If done effectively, brands can positively engage highly passionate fans.”

Those sentiments where echoed by the esports gaming organisations executives we spoke to for this story

Realignment

At a time when traditional methods of community identity are being rejected by a very connected generation, Michael Carmody, business management at Legacy Esports says, “We are seeing rapid alignment and then re-alignment by this generation to the games they play and the resulting spaces created by these properties.”

He says the local pub, football club or other in-real-life (IRL) venue had been replaced by subreddits, twitter hashtags, discord servers and in-game communication environments, as the preferred place to just chill with your friends.

“While a publisher can make a title, and hope for the community to form around it, the most significant communities have come from a high volume of authentic effort, a lot of it non-publisher originated, and can sometimes be risky in that the community may direct itself and their interaction with a publisher’s property in unexpected directions.”

Michael Carmody, Business Manager, Legacy Esports Australia

Carmody told Which-50 that for brands looking to engage in this space, it can be very hard to bridge the abyss of inauthenticity. “Many brands default to just paying influencers to spruik for them. This in itself has become a “meme” of “getting paid to sell out” and these engagements eye-rollingly endured and mocked.”

Essence’s Ismail, struck a similar note saying, “Marketers must make the effort to understand the nuances of the gaming audience intricately to build a proper strategy for the brand or organisation they work for. ”

He also noted however that “The gaming audience can be easier to engage because of such non-traditional channels, with time spent by gamers across platforms like Twitch and Discord likely indexing higher than most traditional channels.”

However, Carmody says that where brands have gained genuine community engagement is where the brand’s own staff, authentically express their interactions in gaming, allowing the community to identify and align with real people. “This needs to be very carefully navigated away from a “paid for, now say the gamer thing” engagement and be more aligned with ensuring the internal culture of your staff are gamer aligned already, and then empowering those voices to speak for your brand.”

This drives a genuine authentic relationship between a brand’s staff and a gaming community and can lead to long lasting mutual benefits,” he says.

A second gaming organisation manager we spoke to said, “Gaming communities bring a unique camaraderie and trust, brands who get involved in the industry and do a good job of being inside the ecosystems of the players can enjoy massive support. Players are very loyal to those who support the industry. For spectators this differs slightly in that the brands will get the most benefit from the exposure to a wider, diverse and sometimes hard to reach audience for whom typically want to support those who are inside the industry.”

Impediments

This executive said one of the key impediments holding marketers back from investing further in gaming was their lack of understanding about the marketplace because of the diversity of titles, audiences, and the influence that a gaming brand can have.

“The biggest cut through we have seen has been those brands who genuinely seek integration to the industry through specific efforts rather than trying to replicate traditional or old-fashioned marketing theories. This lack of wanting to understand the market due to the complexity of the audience is probably the biggest impediment.”

Carmody meanwhile had a different take on the roadblocks. “The main impediment for marketers is the increasing sophistication of this generation which seems to form the core demographic for gaming culture, even though it spreads across generational age ranges.”

He says brand can no longer rely on the naive assimilation of marketing messages. “Gamers are more likely to rely on personal referrals for expensive technology spends, than a comprehensive multi-channel marketing campaign.”

Marketing to gamers is about finding figures and heroes who are able to relate to a community more authentically. “The homegrown hero, the self made champion; this can be a minefield of a space given the nature of influencer culture, and engaging authentically as a gaming brand. This often necessitates a more “whole of company culture” approach, which is not something that can be turned on for a campaign.”

He cautions that there is a temptation for marketing to use short term tactics rather than building something substantial.
“There is often a culture shift needed for a brand to become to authentically community focused.”

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