Is Gaming Recession-Proof? Record Revenue For $160 Billion Industry With 2.7 Billion Players – Forbes
A screenshot from one of the Talking Tom mobile games from Outfit7.
Outfit7
Recessions suck.
What doesn’t suck is being part of a recession-proof industry, if indeed such an animal exists. According to Unity vice president Julie Shumaker, it does. And gaming is it.
That’s a big statement. And it definitely requires some evidence.
Gaming is a massive global industry that’s worth over $160 billion annually, and boasts a community of over 2.7 billion gamers, according to a Unity report. Right now, during a Coronavirus-inspired recession, gaming is seeing record engagement, record revenue, and record numbers of new players. Mobile game ad revenues are up 59%. “Pandemic players,” the newbies of the gaming world, are converting to paying users 24% more than than a pre-COVID baseline. Mobile gamers are installing 84% more apps than before.
We’re also seeing an explosion in the number of people playing games of all sorts.
While typically Unity, a development platform used by half of all mobile, console, and PC games would see 55 million new gamers a week, the company saw 95 million early in COVID-19, and is still averaging over 88 million new players weekly. Gamers are spending 46% more time in “high-definition” games on PC, and console games on PlayStation or X-Box.
It all adds up, Shumaker says, to a recession-proof industry.
“Escapism is really important, right?” Shumaker told me in a recent TechFirst podcast. “Gaming is now the wave that maybe radio was a hundred years ago, television became 50 years ago, gaming is now, and that does translate to a recession-proof industry.”
That would seem to be counterintuitive.
After all, in a recession, even devoted hard-core gamers have less money to spend, theoretically. And in a typical industry, fringe participants would drop their new guilty pleasures in favor of cheaper pursuits.
In-app purchases are up 24%, according to a report by Unity.
Unity
But free-to-play ad-monetized games are a difference-maker, Shumaker says. Even in a world where brands are curbing ad spend up to 30% to cut costs, they’ll increase it in the mobile gaming space due to simple economics.
“Take a moment and think about brands spending decades sitting on the sidelines of games,” Shumaker told me. “They’re spending $30, $40, $80 CPMs [cost per thousand views] to have a 30-second TV spot that cost them, by the way, $10 million to produce. What if these brands get incredibly agile in developing immersive content for very low dollars — I’m talking a couple thousand dollar production quality — and take advantage of what is now becoming one of the most important mediums in the world?”
Then it’s simple math, Shumaker suggests.
Right now, mobile ads in games are getting 18% conversion rates. Those conversions can cost just 20 cents, and while often that’s another mobile game seeking to find new users, it could be Tide. And if Tide can acquire a new customer for 20 cents … Tide is going to advertise in mobile games.
CPI, or cost per install, has trended down since the beginning of 2020.
Unity
In other words, the economics of ads that fuel revenue are going to disproportionately draw ad dollars to mobile gaming, so even in an overall down market, gaming wins.
It’s a compelling argument.
While it’s true that we’re seeing historically low cost per acquisition numbers, and they’ll absolutely go up over time, there’s a lot of headroom here. The $0.20 Shumaker references is heavily influenced by hyper-casual games, which gamers install and delete easily and quickly. Longer and more lucrative games typically have cost per acquisition rates of $3-5 or more, but even that is far below the $30-80 CPMs Shumaker references for TV ads.
And that isn’t really an apples-to-apples comparisons.
A $5 mobile cost per acquisition isn’t just a view. It isn’t just a click. It’s an actual app install — a significant multi-step action with significant barriers for consumers. The TV cost-per-thousand-viewers is just that: cost to show someone something. No action required, and they might even be in the bathroom or skipping ahead on a PVR.
Given the size of the gaming audience at almost 3 billion people and its quick growth, traditional advertisers are going to find attractive opportunities here.
The only question will be: can they figure out how to turn mobile impressions, clicks, and installs into sales.
If so, Shumaker might be right, and gaming might indeed be recession proof.
“I believe that even a continued downturn in the economy is going to only increase revenues … for the smarter marketers who are getting more flexible in their thinking,” Shumaker says.
Get a full transcript of our conversation.
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