This article first appeared in the AdNews May/June magazine. Subscribe here to make sure you get your copy.
The pandemic has thrown gaming and esports into the spotlight, but experts say it already had earned the attention of advertisers. We speak to those familiar with the space for more on the opportunity for brands.
Crowds outside of Melbourne’s Albert Park were turned away just hours before the first practice sessions for the Australian Grand Prix were due to start. The sudden cancellation of the event, which attracts some 300,000 people, came in response to fears of coronavirus spreading among crowds and workers. For the same reason, after the government advised against the gathering of people, a long list of Australia’s favourite sports competitions were suspended. From NRL, AFL and Test cricket locally, to the English Premier League, NBA and even the Tokyo Olympics internationally. Australia, a “sporting nation”, was left without live games during indefinite lockdowns.
But one sport was still carrying on relatively unscathed; esports. After the Australian Grand Prix was suspended, London-based Veloce Esports put together a livestream event called “Not the Aus GP”. It featured F1 driver Lando Norris, Formula E driver Stoffel Vandoorne, Real Madrid goalkeeper Thibaut Courtois, as well as some of esports’ top competitors. With just three days’ notice, the stream reached more than 175,000 concurrent viewers across YouTube and Twitch, an Amazon-owned platform for streaming games. Veloce Esports cofounder Jamie MacLaurin called the results “nothing short of insanity”.
Not the Aus GP was the start of a trend where esports, along with gaming, not only continued during lockdowns, but also began filling the void left by traditional sports.
While the terms gaming and esports are often used interchangeably, the two are separate sectors. Gaming is simply the playing of video games, from Call of Duty to Candy Crush. The Interactive Games and Entertainment Association (IGEA) organises gamers along a spectrum, from “casual gamers” who typically play 10 minutes twice a day, to “in-depth” gamers who typically play for at least one hour daily.
Weeks into the lockdowns, gaming companies began to report a spike in users. According to a report released by We Are Social and Hootsuite, weekly downloads of mobile games around the world jumped by 30% in March compared to weekly averages for the final quarter of 2019, with people downloading more than a billion games each week. Meanwhile, Twitch’s average concurrent views nearly doubled deep into lockdowns, according to TwitchTracker, rising from about 1.3 million in January to 2.5 million in April.
Lifestyles under lockdowns may have given the gaming sector a boost into the spotlight, but those familiar with the space say it had already entered the mainstream and is set to stay there even after restrictions start to ease.
“The advertising industry has no idea about the sheer scale and size of gaming in terms of how it dwarfs all the other entertainment categories by a mile,” Lance Traore, AdColony Australia and New Zealand country manager, tells AdNews.
“Over the next few years, it’s just simply going to take over everything more and more because the technological involvement is going to benefit gaming in a way that no other industry has.”
Esports, on the other hand, is the professional league of gaming. It has competitions and teams similar to traditional sports, with popular titles such as Call of Duty and League of Legends. Players and fans gather for tournaments held globally, with Australia hosting The Melbourne Esports Open, which grew its audience by 40% in the second year to attract 17,000 fans in 2019. Prize money for these local events run over $100,000, but globally this can reach much higher levels, with The International 9: Dota 2 Championship having a prize pool of more than US$33 million.
“Esports is another sport and another form of entertainment,” says Ashley O’Rourke who heads up Publicis Sport and Entertainment.
“The audience has their heroes and their teams they follow religiously, just like you might follow a NRL team or AFLW team.
“There are still people who don’t consider esports a sport but if you look at the way it’s managed and you look at the audience and their behaviour, I don’t know how much more like a sport it could be.”
Despite this boom, gaming and particularly esports are still frequently viewed as activities confined to a small group of teenage boys who sit, alone, endlessly playing video games. In reality, as generations move up, gaming and esports is a common activity used to pass time, keep entertained and interact with friends. And it’s showing signs of being a serious threat to more mainstream media players.
In its 2018 fourth quarter report Netflix said it was more concerned about the threat of Fortnite, a popular game streamed on YouTube, than entertainment giant HBO, which would seem like a more natural competitor.
“We compete with (and lose to) Fortnite more than HBO,” the company said. “When YouTube went down globally for a few minutes in October, our viewing and signups spiked for that time.”
While the local gaming sector hasn’t reached the heights of international markets, such as in the US or China, it’s still widespread.
Every two in three Australians play video games, according to a joint report by Bond University and the IGEA. Their Digital Australia 2020 report also shows that mobile phones play a big part in fuelling the sector, with 70% of people using mobile games to play and 65% using consoles. It also found that 78% of Australian video game players are aged 18 years or older.
“The massive king is mobile gaming, it was a $134 billion industry last year and is on track to being a $155 billion industry this year,” Traore says.
“If you look at the app stores, last year 72% of every dollar that went through the app stores went through a game, with all the other categories sharing the remaining quarter.”
Traore highlights that the entire gaming industry over the next five years is expected to grow into a $300 billion to $450 billion industry, putting it on path to dwarf every other entertainment category.
Meanwhile, 2.5 million Australians, or about 14% of the population, class themselves as esport fans, according to a report by Dentsu’s sport and entertainment marketing agency MKTG. Globally, Deloitte projected media revenue for esports to hit US$1.3 billion this year, just above podcast’s projected US$1.1 billion. But while audio has been in the spotlight for years, the attention for both esports and gaming only picked up with its spike during lockdowns and those that are familiar with the industry say it deserves more attention from brands.
One barrier to advertising in the space has been the stigma surrounding gaming.
“Most marketers know it’s a big thing and there’s significant opportunity, however I’d say a combination of a well-embedded stereotype of the reclusive geek and the fact it doesn’t feel mainstream results in a one-dimensional view that it’s ‘not right for their brand’,” says Chris Colter, Initiative national strategy director.
“Truth be told, if you dig into gaming – whether sport or socialised – there’s millions of areas to carve meaningful sponsorship and integration.
“Outside of brand alignment, I would say the other big generalisation that stops brands from exploring gaming is brand safety.
“I’ve had many conversations where clients have said they can’t be seen to align to ‘violent games’ and given Dota, Call of Duty and Fortnite are the biggest platforms in gaming you can see how they arrive at that belief - although, a lot of these clients happily put their ads before war movies so go figure.
“But that’s a one-dimensional view of the opportunity here, and it’s our job to educate clients and help them find their role in the gaming to esports spectrum.”
Another barrier is cost. Publicis’ O’Rourke says early interest in gaming and esports caused a spike in sponsorship costs but that’s beginning to taper off.
“There was a lot of hype, a lot of interest around the gaming and esports space truly from a data perspective,” O’Rourke says.
“The numbers spoke for themselves. There are a huge number of Australians who game on a regular basis and who watch livestreams of other people gaming on a regular basis.
“That got a lot of brands really excited, and I think a lot of brands jumped in too quickly without having a really clear and concise strategy. Therefore what you’ve seen now is a slight dipping in the financial barriers to entry for brands, making it a lot more accessible.”
Early advertisers in the space have been endemic brands such as Dell’s Alienware, Sennheiser and JB Hi-Fi. But advertisers have become more diverse, with brands such as Dare Iced Coffee, fast-food chain KFC, which would normally be seen advertising in traditional sports, and even fashion label H&M entering the space.
Melbourne Esports Open 2019
For brands looking to integrate into the space, there are plenty of roads to navigate, from integrations to sponsorships.
The key with esports and more experienced, or “in-depth” gamers, O’Rourke says, is to understand that the audience is primarily made up of digital-natives who are not used to advertising interrupting their entertainment, and know how to bypass it.
Therefore, to successfully work in the space and get the cut-through they desire, brands need to understand what value they can add to the community, rather than treat it like any another advertising channel, such as out-of-home or TV.
“We’re having a lot of conversations, a lot of clients who are really interested to get into the space, but rightly so they’re not looking to just plunge in,” O’Rourke says.
“Our advice to brands would always be, particularly in gaming and esports, you need to have a long-term view.
“For those brands that come in just as a way to shift products, there is going to be a huge amount of backlash from the gaming and esports community.
“They want to see brands that are there for a long time.”
O’Rourke outlines his three rules for advertisers when navigating the space.
“First, your brand needs to have a really clear reason for being, and a really clear value-add proposition,” he says. “For example, how is that brand being there going to add value to the community, and not just sell products to them or talk about them.”
“Second, don’t logo slap, integrate. Like traditional sponsorship, putting a logo on something and expecting cut through is unrealistic.
“Third, have a long-term vision. Brands who show a genuine interest and investment into the esports and gaming space over a period of time will ultimately see a genuine ROI.”
However, for advertisers looking to work with more casual gaming, Traore says brands shouldn’t be so cautious.
“When you run a campaign and you’re McDonald’s, you don’t go out and say ‘we’re going to reach people that love billboards’, nobody does that,” Traore says.
“To talk about a gamer or targeting a gamer is as useful as targeting a reader or a watcher, or a social media user.
“You only use that channel because it’s one strategy you have from a creative standpoint, and that your audience is there. In the same way that everybody watches and everybody reads, everybody games.”
The platform dominating gaming and esports at the moment is Twitch. The platform has on average 1.5 million users tuning in at any given time, with more than four million monthly average streamers and 17.5 million daily average visitors.
Twitch allows both amateur and professional players to stream their games, and can also be used as an exclusive broadcast partner for games such as Fortnite. Recognising the growth in the local region, Twitch recently appointed Unruly’s Ricky Chanana as its head of sales for Australia and New Zealand after establishing its first in-house sales team. The company also named Sunita Kaur as its first APAC managing director.
Chanana says he’s educating the “steady flow of newcomers” on the “young” esports scene, as more marketers take interest in the space. He says a key opportunity in entering the space is that it allows brands to reach young audiences which have switched off from traditional media, with Twitch research showing that 39% of its audience are unreachable via traditional TV, and 9% don’t watch traditional TV at all.
“Traditional media is very one-sided and with social media and user-generated content at their fingertips, such media is losing its appeal to young audiences,” Chanana says.
“Today’s young audiences grew up with social media and the ability to be not only close to media personalities, but control what content they watch and create themselves. This is why gaming appeals so much to this generation.
“On top of that, viewers see the benefit in connecting with like-minded people over content they love and creators see the benefit in real-time interactions around their content. That behaviour persisted before and should continue into the future.”
The biggest advertisers on Twitch are across entertainment, movie houses and gaming clients, but Chanana says there’s recently been a “big spike” across FMCG, electronics, beverages and broadband. He expects that in a post-lockdown world local brands will tap into the channel to reconnect with their community.
“As Twitch continues to gain awareness and grow outside of gaming, i.e. in music, food, and sports, we should continue to see increased interest from existing categories who have come on board,” he says.
“I also predict once things start to return to normal, we will see an influx of hyper local brands trying to reconnect and communicate with their audience. These brands can be anywhere from local fashion labels to events launches to even restaurants joints.”
Recognising the potential revenue in gaming and esports, other tech giants are also vying for its audience, and they’re making progress. For example, YouTube signed a deal with Activision Blizzard to exclusively stream the esport leagues for its biggest games Call of Duty, Overwatch and Hearthstone. The deal is reportedly worth US$160 million.
Meanwhile, Microsoft’s Mixer last year nabbed leading Twitch streamer and gaming influencer Ninja. While the value of the deal wasn’t revealed by Ninja or Microsoft, a talent management executive who previously worked with Ninja told US media he was paid more than US$20 million to make the switch, leaving behind his 15 million followers on Twitch.
Facebook is the latest entry with its dedicated gaming app Facebook Gaming, which was fast-tracked to capitalise on the spike in streaming during the pandemic.
As with many categories, such as fashion, food, travel, traditional sports and music, influencers are playing an increasing role in gaming and esports advertising.
Click Management, a Sydney-based talent management business which connects brands and gaming influencers, manages three of the top 10 influencers, all three of which are Australians.
The agency currently has a global audience of 750 million unique viewers per month across its channels, predominantly across YouTube and Twitch, with Australian audiences making up about 10% of that.
“The space has developed so rapidly,” says co-founder and director at Click, Grace Watkins.
“I would say when we started three years ago, we had six influencers on our books. And our roster made up about 20 million views per month combined, and it’s just exploded over the last three years.
“We now represent about 18 channels and it’s grown to about 750 million views per month.
“What’s allowed for that is that we’re really playing in a market that isn’t limited by geographical boundaries. So our audience is really untapped when it comes to the fact that it’s worldwide. The games industry is growing so rapidly in terms of revenue, now it’s bigger than the music and movie industries combined, and the fact that it’s a low barrier to entry just means that there’s so much potential for rapid growth.”
Watkins says there’s been a “massive” increase in spend from brands over the past year, as well as the emergence of non-endemic brands in the space.
“What’s most exciting now is we traditionally saw a lot of endemic brands getting into the space, so game developers, gaming hardware companies, that sort of thing,” she says.
“Whereas now, more and more we’re saying non-endemic brands get into the space. So over the past year, Adidas, H&M, and fast-food brands KFC and Chipotle in the US.”
Over the period she’s spent working with brands, Watkins has noticed that they have developed how they advertise in the space after noting that connecting with young people is tricky.
“More and more these days, young people are pretty attuned to what traditional advertising looks like and kind of have a high bullshit radar,” she says.
“With that more people are looking at influencers, looking at online creators and forming a relationship with them. Combined with the fact that a lot of young people use ad blockers online, working directly with creators is an amazing way to reach an otherwise quite difficult to reach audience, which is for us mostly teenage and early 20 males.
“All of these companies are recognising that gamers can’t just be put in that gaming box. They’re really huge influencers and have an incredible connection with their audiences, so when they recommend something, the audience really responds to that well.”
But Watkins says the space is still in growth mode, with more education around how to effectively advertise in it still needed across the industry.
“More and more people are aware of gaming as a major entertainment genre that carries with it huge audiences and huge revenues,” she says.
“But I would say that understanding how to penetrate that in an effective way isn’t 100% there yet.
“I think it’s absolutely trending there and it’s getting in the right direction.”
Chanana at Twitch also would like to see influencer marking be taken a step further by brands. “Young people are savvier than ever before,” he says.
“They want to play a role in creating an entertainment moment. When you invest in Twitch, you invest in an audience that participates and engages.
“All engagement on Twitch comes with various layers of intent when viewers consume brand messaging delivered by personalities they share a special real-time connection with alongside other fans. Leaning into this audience and their behaviours is how you maximise value for brands.”
One industry that has seen the oncoming rise in gaming and esports is luxury fashion. Brands such as Louis Vuitton are sponsoring esports events and releasing clothing that taps into gaming culture. This interest from high-end fashion isn’t a reflection of the demographic of gamers, but rather an indication of their culture impact.
“It’s interesting what they’re [fashion labels] doing with gaming now,” Traore says.
“Louis Vuitton hasn’t looked at the audience of League of Legends and thought ‘hey, there’s great affinity of people buying handbags worth $2,000 that play League of Legends’.
“Instead, they’ve identified that gaming is now slowly becoming the dominant force that inspires all of pop culture. This is something that they’ve [luxury fashion brands] done before.
“If you walked into their stores 15, 20 years ago, you wouldn’t see a single sneaker in there. But now all of them do sneakers and streetwear collaborations because they saw about 10 years ago that hip-hop went from being underground to slowly entering into popular culture. Now street culture is the dominant force across everything, and this is similar to what they’re seeing with gaming.”
The strong following behind gaming and esports means that audiences crave real-life events, much like experiential has boomed across other categories.
Tapping into the growing market locally, former Village Roadshow chief digital officer Jon Satterley and tech entrepreneur Adrian Giles have launched what they’re claiming is the “largest video gaming and esports entertainment venue in the Southern Hemisphere”. Called Fortress Melbourne, the precinct is located in the heart of Melbourne’s CBD and already has Dell’s Alienware on board as its technology partner, and Carlton & United Breweries on board as a supporter.
On its opening day, the venue pulled in 2,000 people, with the business aiming to get 25,000-30,000 unique visitors in a month.
“We figured there were a couple of things missing in the ecosystem for gaming,” Satterley, CEO and co-founder of Fortress, tells AdNews.
“Video games are mostly single-player at home, and we felt there was a unique opportunity to create a live and social gaming experience that hadn’t been done before.”
Satterley says that gaming consumption is as mature in Australia as it is in any other part of the world, but that it’s gaming “culture” that is considered niche.
“The difference between Australia and say China or Korea, is that games, games culture in Australia is still considered a niche or non-mainstream thing.
“Whereas if you’re in China or Korea, you quickly realise that gaming culture is 100% mainstream, it’s infiltrated the whole psyche and mainstream conversations.
“In Australia that’s not the case, games culture and gaming hasn’t really permeated to that degree. While that may be true around how the perception of games is in the media and society in Australia, it doesn’t mean that the actual playing of games and what’s going on isn’t hugely popular, it’s just that the media hasn’t caught up.”
Fortress offers a mix of partnerships and sponsorships, which the team has been educating the market on to avoid brands “slapping” a logo on a wall in their venue.
“We’ve done a lot of work around what partnerships and sponsorships look like,” Satterley says.
“We’re also thinking about the activations of spaces. In Fortress you have lots of really cool space you could promote, if it’s done in the right way by connecting the brand with a game, or working with endemic brands that are already involved in esports.”
Satterley, as well as Fortress’ head of business development Luke McInnes, says the opportunity for brands at the moment is getting into the relatively untapped gaming audience early.
Brands they think could particularly benefit are neobanks, rather than the big four, as well as car brands which saturate traditional sports advertising.
“At the moment it’s not a crowded playing field, so if you do as a company say ‘we’re going to go right after this gaming market’, we would say get in now before it gets busy,” Satterley says.
Another key thing for brands to remember is that the gaming and esports community shouldn’t be viewed as homogeneous, and brands could target them on a more granular level.
“Where brands failed in the past when going after the gaming audience is to think that gamers are just one single homogeneous group,” McInnes says.
“That audience sees through what they’re doing straight away and it actually has no cut through.”
One misunderstanding of this audience is that it’s mostly young males, but the split, as shown in a report by IGEA is more of a 60:40 balance between men and women. Additionally, the age group in Australia is wide, with the average age of a gamer being 33, and the average age of an esports fan 28.
Satterley says crowds at Fortress reflected this split across gender and age, with their customer attendance staff flipped, with 60:50 females to males.
“We’ve made it part of our business mission for Fortress to have a crowd that is more reflective of what you see walking down the street,” Satterley says.
“It’s a mission of our business to introduce millions of people to this idea of live social game playing and we’ll know we’re succeeding if we become a mainstream entertainment choice.
“People on a Friday night might go bowling, to the cinema, football or the pub, but right now a lot of these people probably never dreamed of going to a venue like Fortress - they don’t even know what it is and what they can do.
“Part of our mission is to make what we do here a mainstream entertainment.”
With the combination of tech developments, increased awareness and increasing demand from audiences, gaming and esports is set to receive a bigger slice of media budgets.
Initiative’s Colter expects to see a significant increase in brand spending in the space.
“Like anything, there’s herd behaviour around gaming sponsorship. The more big-name brands that get on board and experience disproportionate cultural velocity, the more others will follow,” he says.
“Also with the catalyst of COVID-19 I think it’s normalised gaming as a genuine alternative, relatively insulated passion point to support. One example I’m geeking out hard on at the moment is how Supercars have pivoted their real-world athletes into the gaming arena through their all-stars eseries. The production, commentary and telecast of this event rivals any real-world sport and would make any marketer see the real potential esports will bring in the coming years. The more we see this, the more marketers we’ll see jump on board.”
Traore expects to see the same trend, saying it’s still a “severely underutilised and cost-effective channel to advertise in”.
“With the challenges we have now, it’s going to probably drive innovation.
“When everything is good and everybody has money, you stick to and do what you did before. But I think a lot of advertisers are going to come out of this with less budget to deliver the same result. That’s going to drive innovation within the space, and gaming is probably one of the areas that will benefit from that.”
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