[2012] eMarketer -Gaming for Marketers - Let the Mobile Games Begin

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  • 1. December 2012 Gaming for Marketers: Let the Mobile Games Begin Paul Verna pverna@emarketer.com Contributors: Rebecca Chadwick, Christine BittarExecutive Summary: US audiences for mobile games are growing rapidly, while audiences for more maturecategories such as social and online casual gaming are expected to grow more modestly in the next few years.Ad spending associated with these forms of gaming will increase accordingly, with advertising in mobile expandingfaster than in other venues.148525 Mobile, social and online casual games present a wide range ofUS Mobile, Online Casual and Social Gamers,2010-2014 opportunities for marketers to integrate their brands into gamingmillions content. This report focuses on games that are monetized in large2010 part through marketer-supported activity such as advertising, 61.5 branded virtual goods and opt-in videos. It does not cover the 84.9 traditional hardware-based console game business, other than to 53.0 indicate a contraction of the hardware-and-packaged-goods model2011 as newer forms of monetization for game publishers take hold. 80.8 89.5 69.6 Key Questions2012 ■ How many people are playing social, mobile and online 102.0 casual games? 93.7 76.5 ■ How much revenue are social and mobile games producing,2013 and how is this revenue derived? 121.3 ■ How are brands using gaming content to reach audiences? 97.3 80.9 ■ What online and mobile venues are game developers and2014 brand marketers using, and how is the venue mix evolving? 141.2 101.0 85.4 Mobile gamers Online casual gamers Social gamers Gamers and the Gaming Market 2Note: gaming audiences are not mutually exclusive; there is overlap Marketing Opportunities 6between groupsSource: eMarketer, Aug 2012 From Social to Mobile 9148525 www.eMarketer.com Gaming Venues 10 Conclusions 11 eMarketer Interviews 11 Related Links 12 Copyright ©2012 eMarketer, Inc. All rights reserved.
  • 2. Gamers and the Gaming Market Mobile Gamers Mobile gaming is undergoing significant growth asAudiences for marketer-supported games are expected to smartphones and tablets gain sophistication and usersincrease in the next few years, with the most aggressive become accustomed to transporting the gaming experience across screens. The US mobile gaming audience grew bygrowth coming from the mobile sector. By comparison, 31.4% in 2011 and gains will continue in the double digitsthe more mature social and online casual categories will through 2015. By 2016, growth will taper to 9.5%, at whichlevel off to single-digit percentage increases starting this point 52.9% of the US population will be mobile gamers.year and for the remainder of eMarketer’s outlook period. US Mobile Gamers, 2010-2016Revenues associated with gaming will follow similar trend millions, % of population and % of mobile phone userslines, with mobile showing the highest year-to-year increases. 174.0Social gaming revenues will also grow thanks to momentum 158.9in virtual goods monetization and advertising, but growth in 141.2social will be less spectacular than in mobile. At the same 121.3time, the pillars of the old guard—sales of packaged video 67.0% 102.0 62.0%games and console units—will show signs of contraction. 56.0% 80.8 49.0% 42.0% 61.5 52.9%The Gaming Audience 34.0% 43.8% 48.8% 26.5% 38.0%Audiences for free-to-play, marketer-supported games will 32.2% 25.8%increase through at least 2014 in three major categories: social, 19.8%mobile and browser-based casual (a category that includessocial). These are not discrete categories, however, since gamers 2010 2011 2012 2013 2014 2015 2016often play on multiple platforms. Most of the growth will occur Mobile gamers % of mobile phone users % of populationin mobile, which overtook the other segments this year and will Note: mobile phone users of any age who play games on mobile phones atcontinue increasing at double-digit rates through 2014. least once per month; excludes pre-installed games on feature phones Source: eMarketer, April 2012; confirmed and republished, Aug 2012 138237 www.eMarketer.com 138237US Mobile, Online Casual and Social Gamers,2010-2014 A survey by Frank N. Magid Associates indicated that gamemillions playing topped the list of mobile content activities among US2010 tablet owners in June 2012, with 59% of respondents having 61.5 done this activity. Mobile gaming was also one of the top 84.9 activities among smartphone owners, tied with accessing 53.0 maps and behind only looking up weather information.2011 80.8 89.5 69.62012 102.0 93.7 76.52013 121.3 97.3 80.92014 141.2 101.0 85.4 Mobile gamers Online casual gamers Social gamersNote: gaming audiences are not mutually exclusive; there is overlapbetween groupsSource: eMarketer, Aug 2012148525 www.eMarketer.com148525 Gaming for Marketers: Let the Mobile Games Begin Copyright ©2012 eMarketer, Inc. All rights reserved. 2
  • 3. Gamers and the Gaming Market US college students are active mobile gamers on bothMobile Content Activities of US Smartphone andTablet Owners, June 2012 smartphones and tablets. An MRY study showed that this% of respondents activity was more prevalent among this age group than Tablet Smartphone were downloading apps, watching videos, reading books, owners owners and checking local news and weather. Gaming even bestedGames 59% 52% listening to music among tablet users, though not amongVideo 54% 33%Social networking 48% 50% smartphone users.Read books 47% 10%Weather 45% 56% Tablet and Smartphone Activities of US CollegeLocal news 38% 30% Student Tablet and Smartphone Users, July 2012Maps 37% 52% % of respondentsMovie info 31% 24% Smartphone TabletNational/international news 30% 19% Access the internet 90% 98%Online shopping 29% 14% Use social networks 85% 85%Sports scores 26% 23% Check personal email 84% 85%Local reviews 22% 20% Play games 73% 78%Shopping list 19% 21% Download and use apps 70% 77%Business apps 17% 13% Listen to music 74% 67%In-store shopping assistance 15% 9% Watch video 57% 66%Stock market/business info 14% 6% Read books 25% 58%Source: Frank N. Magid Associates, "June 2012 Mobile Content Study" as Get weather information 68% 57%cited in "The Accelerating Mobile Landscape," July 31, 2012 Get local news 31% 39%145545 www.eMarketer.com145545 Note: n=500 ages 17-25; activities done regularly (at least once per week) on each device by owners of that deviceA demographic breakdown by Adobe and Keynote Systems Source: MRY, "College Students and Mobile," July 16, 2012 143497 www.eMarketer.comshowed that gaming was the most common activity among 143497tablet owners in both the 18-to-29 and 30-to-49 age groups.This finding points to the popularity of mobile gaming across a Social Gamersbroad range of demographic groups, particularly older adults Although social gamers are a subset of online casual gamers,who might not gravitate toward more immersive games. the difference between these groups has been narrowing and will continue to do so through 2014. In 2010, social gamersMost Common Tablet Activity According to US Tablet made up 62.4% of the casual gaming population, but by 2014Owners, by Age, March 2012 this percentage will reach 84.6%. This indicates two trends:% of respondents in each group 18-29 30-49 50-64 ■ social is growing at a greater pace than online casualPlay games 28.6% 26.7% 11.4% ■ casual gaming is transitioning from a browser-based to aShopping 16.1% 7.0% 8.6%Reading books 15.2% 17.4% 14.3% social-network-based activityEmail 10.7% 20.9% 28.6% Following a period of double-digit growth that culminatedSports 8.9% 4.6% 5.7% with a 31.2% increase in 2011, the US social gaming audienceNews 5.4% 4.1% 5.7%Reading magazines 5.4% 4.7% 2.9% will grow by relatively modest, single-digit percentagesView videos 5.4% 6.4% 14.3% through 2014. By then, there will be 85.4 million US socialEducation 2.7% 2.3% 2.8% gamers, representing 50% of social network users and 34% ofWeather 0.0% 1.2% 2.9% internet users.Other 1.8% 4.7% 2.9%Note: numbers may not add up to 100% due to roundingSource: Adobe, "2012 Mobile Consumer Survey Results" conducted by US Social Gamers, 2010-2014Keynote Systems, July 25, 2012 2010 2011 2012 2013 2014143739 www.eMarketer.com143739 Social gamers (millions) 53.0 69.6 76.5 80.9 85.4 —% change 27.1% 31.2% 9.9% 5.8% 5.6%It should be noted, however, that interest in tablet gaming —% of social network users 39.4% 47.1% 48.5% 49.3% 50.0%trailed off considerably among baby boomers, who preferred —% of internet users 23.7% 30.0% 32.0% 33.0% 34.0%to send email, read books and watch videos on their tablets. —% of population 17.1% 22.2% 24.2% 25.3% 26.5%This is a clue to marketers who might be trying to reach older Note: social network users who play games on a social network site at least once per monthdemographics through brand integration in mobile games. Source: eMarketer, March 2012; confirmed and republished, Aug 2012Adults in their 30s and 40s are likely to be receptive, but older 137394 www.eMarketer.com 137394adults might not be as tuned in. Gaming for Marketers: Let the Mobile Games Begin Copyright ©2012 eMarketer, Inc. All rights reserved. 3
  • 4. Gamers and the Gaming MarketIn October 2012, Facebook estimated that 251 million people The Gaming Marketworldwide were active monthly Facebook gamers in 2012, upfrom 226 million in 2011. This represented an 11.1% increase, As sales of packaged games and hardware consoles trendwhich lines up reasonably with eMarketer’s estimate of 9.9% downward, the video game industry is continuing to evolvegrowth in US social gamers in 2012. toward free, platform-agnostic games supported by a combination of advertising and virtual goods revenue.Slowed growth for social gaming is partly the result ofthe leaders in this space, Facebook and Zynga (creator of Mobile Game MonetizationFarmVille and Words With Friends, among other popular social US mobile gaming revenue will triple to $3 billion in 2016,game titles), struggling to sustain the pace they set in 2010 up from $1 billion in 2012, according to eMarketer. Gamingand 2011, when social gaming was a novelty and interest was revenue will eclipse video revenue during the forecast period.building rapidly. Both companies stumbled in their transitionsfrom private to public enterprises, and Zynga in particular has US Mobile Content Revenues for Select Categories,fallen short of investors’ expectations since its initial public 2010-2016offering in December 2011. Understandably, this has raised millionsquestions about the future of social gaming. 2010 2011 2012 2013 2014 2015 2016However, other competitors—including gaming and entertainment Gaming $313.5 $572.3 $1,082.3 $1,558.5 $1,991.5 $2,516.0 $3,021.4 Video $454.2 $735.8 $1,003.6 $1,253.3 $1,580.0 $1,899.1 $2,264.4giants such as Electronic Arts (EA), Disney, and AOL—still see Music $109.5 $220.1 $429.3 $684.0 $1,057.4 $1,424.4 $1,678.8plenty of upside in social gaming. Some are transitioning console Total $877.2 $1,528.2 $2,515.2 $3,495.9 $4,629.0 $5,839.4 $6,964.7game franchises to Facebook while others are building their own Source: eMarketer, Oct 2012gaming portals. These and other developers are convinced that 145511 www.eMarketer.com 145511gaming is becoming an increasingly social endeavor, and they aredetermined to take advantage of the trend. As they work toward Broken down by source, US mobile gaming revenue comes fromthis goal, they will create a more fragmented, more mature social a combination of paid downloads, in-game purchases of virtualgaming industry that is less dominated by Facebook and Zynga but goods and in-game advertising. Advertising will contribute thestill capable of growing. least throughout the forecast period, while in-game purchases will trade places with downloads to be become the top-“We know users are playing more games and spending more generating revenue category in 2013 and beyond.time in games than ever before. The places they’re playingmay be shifting, so we’re trying to build out a platform-agnostic US Mobile Gaming Revenues, by Type, 2010-2016solution,” said John Fox, general manager of AOL’s Games.com. millions 2010 2011 2012 2013 2014 2015 2016Online Casual Gamers Download $144 $261 $502 $632 $777 $923 $1,041The online casual gaming category has been growing at slow but In-game $129 $233 $408 $667 $883 $1,157 $1,456 Ad-supported $41 $79 $173 $260 $332 $437 $524steady rates over the past few years. Even though social gamers Total $314 $572 $1,082 $1,559 $1,992 $2,516 $3,021make up a large and growing segment of this group, the social Source: eMarketer, Oct 2012gaming boom of 2009 to 2011 did not dramatically affect growth 145508 www.eMarketer.comrates across online social gaming as a whole. Gains in online 145508casual gamers have held at single-digit percentages and are Social Game Monetizationexpected to stay in this range through at least 2016. Social game ad revenues are rising steadily. They are expected to reach $371 million by 2014, up from $210.9 million in 2012,US Online Casual Gamers, 2010-2016 according to eMarketer estimates. This means the category 2010 2011 2012 2013 2014 2015 2016 will have grown by double-digit percentages from 2011Online casual 84.9 89.5 93.7 97.3 101.0 104.4 107.9gamers (millions) through at least 2014.—% change 4.7% 5.5% 4.7% 3.9% 3.7% 3.4% 3.4%—% of internet users 37.9% 38.6% 39.2% 39.7% 40.2% 40.6% 41.2%—% of population 27.4% 28.6% 29.6% 30.5% 31.3% 32.1% 32.8%Note: internet users of any age who play games via web browser at leastonce per month on a desktop or laptop computer; includes social gamesSource: eMarketer, March 2012; confirmed and republished, Aug 2012137400 www.eMarketer.com137400 Gaming for Marketers: Let the Mobile Games Begin Copyright ©2012 eMarketer, Inc. All rights reserved. 4
  • 5. Gamers and the Gaming MarketUS Social Game Ad Spending, 2010-2014 US Social Gaming Virtual Goods Metrics, 2010-2015millions 2010 2011 2012 2013 2014 2015 $371.0 Social gaming unique 81 87 109 117 146 170 users (millions) Paying users (millions) 5 8 11 12 15 17 $285.1 Gross bookings* $199 $219 $241 $265 $265 $265 per user Revenues (millions) $968 $1,704 $2,620 $3,099 $3,877 $4,496 $210.9 Note: *revenue generated by the sales of virtual goods; includes the 30% fee that Facebook and other platform owners levy on virtual goods on top of what goes to the games company $135.4 Source: Business Insider, Feb 21, 2012 $111.6 147664 www.eMarketer.com 147664 It should be noted that these forecasts predated Zynga’s disappointing business performance starting in early 2012 2010 2011 2012 2013 2014 and Facebook’s lackluster initial public offering of May 2012. ItNote: paid advertising only; excludes spending by marketers that goes would be reasonable to assume a slight moderation of thesetoward developing or maintaining branded social games; numbers may notadd up to total due to rounding numbers given a more guarded outlook for social gaming as ofSource: eMarketer, Sep 2012 the second half of this year.147782 www.eMarketer.com147782 Furthermore, the Business Insider forecast assumed a higherHowever, it is important to note that advertising represents a base of social game players than eMarketer estimated forsmall portion of the social gaming economy compared with the years in question. In addition, Business Insider assumedvirtual goods, which are the largest contributor. US virtual that 10% of gamers would pay for items, which is a highergoods spending has been growing over the past three years, percentage than the 3% to 6% range that others havedriven by the success of social games that are monetized estimated in the past.mainly by incentivizing users to buy digital items that enhance However, even if Business Insider’s figures are inflated, thegame play. Three research firms noted the increased spending company offered a solid rationale for growth in a note fromtrend in the period from 2009 to 2012. analyst Pascal-Emmanuel Gobry: “We are still in the early days of monetization. Micropayments are getting easier, and usersComparative Estimates: US Virtual Goods Spending,2009-2012 are becoming more accustomed to paying for virtual goods.”billions Forbes estimated that Facebook users spent $1.26 billion 2009 2011 2012 worldwide on virtual goods in the first half of 2012. ThisInside Network*, Dec 2011 - $2.2 $2.9 estimate was derived from Facebook’s reported figure ofJavelin Strategy & Research**, June 2011 $0.6 - $2.4 $378 million in “payments and other fees” during that period.Frank N. Magid Associates and PlaySpan, Feb 2012 $1.8 $2.3 -Note: *includes virtual goods within social networks/apps/games, mobile Forbes assumed that the entire sum consisted of payments,apps/games, casual and hardcore massive multiplayer online games(MMOs) and console games; **includes virtual currency and other since other fees were immaterial, and that payments wereintangible objects purchased for use in online games or communitiesSource: various, as noted, 2011 & 2012 generated almost exclusively from games. Furthermore,148070 www.eMarketer.com Forbes assumed that the $378 million represented 30% of the148070 total, since Facebook reportedly takes a 30% cut of paymentIn February 2012, Business Insider projected huge increases in revenue, with the rest going to game developers.US virtual goods revenue tied to social games. The companyestimated that spending would reach $4.5 billion in 2015, up Slowdown in Traditional Console Businessfrom $2.6 billion in 2012. The growth in mobile and social game monetization marks a shift in the broader video game industry. An NPD study of US video game sales revenues showed that the console sector contracted to $8.8 billion in 2011, down from $9.9 billion in 2009, while the “other” category—which includes subscriptions, digital games, mobile apps and social gaming—grew to $7.3 billion from $5.4 billion. Gaming for Marketers: Let the Mobile Games Begin Copyright ©2012 eMarketer, Inc. All rights reserved. 5
  • 6. Gamers and the Gaming MarketUS Video Game Sales Revenues, by Type, 2009-2011 Marketing Opportunitiesbillions $16.9 $16.6 Social, mobile and online casual games present a $16.0 growing range of options for brand participation. $5.4 $6.8 $7.3 Whereas in-game ads were ancillary revenue sources in traditional console games, newer genres are more $0.7 dependent on in-game brand monetization. $0.7 $0.5 Marketers are tapping into gamers’ appetite for free play through branded virtual goods, opt-in videos, activity-based $9.9 $9.4 $8.8 ads, product placements, sponsorships, custom games, advergames, interstitials and traditional in-game ads, which can be inserted statically or dynamically. Here’s how these ad 2009 2010 2011 types play out in the gaming space. Console games Computer games Other*Note: includes subscriptions, digital full games, digital add-on content,mobile apps, social network gaming and other physical delivery Branded Virtual GoodsSource: The NPD Group as cited in Entertainment Software Association(ESA), "2012 Essential Facts About the Computer and Video Game Virtual goods are the main monetization engine for the currentIndustry," June 5, 2012141504 www.eMarketer.com generation of social games. Only a small percentage of gamers141504 choose to buy digital items, but their purchases add up toIBISWorld also noted a significant drop in US video game industry billions of dollars per year.revenues to $34.2 billion in 2012, down from $41.2 billion in 2008. While most virtual goods consist of generic items that theAlthough IBISWorld did not issue a post-2012 forecast, the game maker uses to incentivize players to purchase, growingcompany’s gaming analyst, Dale Schmidt, noted that the numbers of marketers are featuring their brands in theseindustry’s growth prospects will be moderated by a transition items, turning generic items into premium ones. Companiesto lower-margin segments such as mobile. such as General Mills and 7-Eleven pioneered this practice in popular Zynga games as early as 2010, and the practice has“While the releases of next-generation video game consoles, continued to gain momentum since then.expected in late 2012 and 2013, should rekindle interest in themore expensive console gaming market, the rise of the low-cost, In April 2012, gaming giant EA and Unilever’s Dove brandlow-margin mobile gaming market may act as a weight on the announced a partnership for branded virtual items in EA’soverall gaming market, pulling revenue downward as consumers The Sims Social game franchise. The venture included a freepay, in aggregate, less per hour of gaming entertainment,” said Dove-branded virtual hair spa that was redeemed by moreSchmidt in a statement. than 1 million players in the first two weeks, according to an EA statement. Ze’ev Rozov, CEO and co-founder of licensing company Iconicfuture, wrote in a July 3, 2012, post in the blog GAMESbrief: “We have found that users are willing to spend a lot more money on a premium item than on a generic item.” Opt-In Videos Seeking alternatives to video pre-rolls, which are interruptive and often unwelcome to users, social video platform providers such as JunGroup and game developers such as EA began experimenting with opt-in videos in social games. The premise was that players would be rewarded with virtual items or points for watching a video ad to completion. EA’s senior vice president of global media solutions, Dave Madden, said, “We have a platform we’ve rolled out across not just social but mobile and online games where we give the user the choice to view or engage in ads. It might be generic Gaming for Marketers: Let the Mobile Games Begin Copyright ©2012 eMarketer, Inc. All rights reserved. 6
  • 7. Marketing Opportunitiescontent in the game or something specific to a brand. For The company’s publisher partners include AOL’s Games.com,example, McDonald’s is running promotions for their direct CrowdStar, Boston.com and Hallmark. Among the brands thatMcDonald’s Monopoly program, so you engage with a 15- or are participating in activity-based ads through appssavvy are30-second McDonald’s ad and it unlocks special items in American Express, Coca-Cola and Nestlé.the game. It’s all about a value exchange and giving userssomething they would otherwise have to work their way Product Placementsthrough or buy. This is a big direction for EA, and I would argue Product placements have been part of the video gameit’s a big direction for digital media.” marketing landscape for years, but technical barriers haveThe value exchange Madden referred to has long-term benefits prevented this practice from taking flight to the extent that itfor brands, according to MediaBrix CEO and co-founder Ari has in movies and television. For a product image to appearBrandt. He told eMarketer: “Brand favorability goes up during this realistic in a gaming environment, engineers typically have totype of exchange. The ads appear during what we call rescue invest hours in hand-coding graphics.moments, where the user might be having trouble completing a “There were so many pain points [with in-game productlevel. That produces a positive brand association that you can’t placement] that the [social game] industry settled uponreplicate in any other digital media experience.” virtual goods,” said Blake Commagere, founder of startupIn its September 2012 report “The State of Opt-In Video & MediaSpike, which is developing a platform designed toConsumer Engagement,” JunGroup noted that opt-in videos facilitate the product-placement process. “The goal that we’redelivered completion rates of 98%, compared with 64% for heading toward is self-service product placement.”standard pre-roll videos. Similarly, opt-in videos showedengagement rates of 3.5%, compared with 1.2% for pre-rolls. SponsorshipsBesides McDonald’s, other brands that have experimented Brand sponsorship has emerged as an effective strategy towith opt-in videos include Century 21, Champs Sports monetize mobile games and apps, which have limited screenand Claussen Pickles. Century 21 chief marketing officer space for the types of banner or video ads common in web-basedBev Thorne said her company has participated in brand social games.integrations with EA’s SimCity Social and ngmoco’s mobilegame We City. Those partnerships have included virtual For example, Century 21 sponsored ngmoco’s mobile gameCentury 21 real-estate offices within the games and videos We City and restaurant chain SUBWAY sponsored a Superthat unlock virtual currency and other game assets. Bowl-themed game app from PrePlay. Other brands such as Diet Coke, Cigna, Pizza Hut and ABC News are helping raise“We’re always looking to be in front of our target consumer, money for charities via game sponsorships.which is the next generation of homebuyers and sellers,”said Thorne. “The classic social gamer, if you will, is very close Custom Gamesto our target customer. We want to increase awareness ofCentury 21 with this group, and we want them to have an Custom games are typically created by established brandsaffinity for the brand.” when existing games do not meet the company’s marketing objectives. Often the marketer will partner with a game studioActivity-Based Advertising to develop these games.Ad technology firm appssavvy has developed a publisher-facing For example, in February 2012, The History Channel launchedplatform that serves ads based on users’ in-game activity. This the Facebook game Top Shot to promote its reality show of theconcept, which the company markets under the brand name same name. The network could have advertised in an existingadtivity, marks a departure from more traditional ad targeting social game, but it determined that the Top Shot brand wasapproaches that involve users’ profile data or prior history. strong enough to stand on its own. What helped was that by the time the game launched, the Top Shot Facebook page hadAppssavvy co-founder and CEO Chris Cunningham explained: nearly 400,000 fans. As of November 20, 2012, the number had“Our platform supports publishers that want to trigger ads in grown to more than 545,000.a way that’s conducive to the user experience, and that couldbe a poll, a comment, leveling up in a game or completing a Other companies are also trying to capitalize on the potentialmission. Our technology spawns a frame that calls out what of custom games. AOL’s recently relaunched Games.comyou just did, so it might be, ‘Congratulations on Level 3. Good portal is offering branded gaming as one of a suite of premiumluck with Level 4.’ This is the first time you see the notion of ad opportunities designed to integrate brands and targettargeting people not based on their profile data or the sites specific user bases.they visit, but based on their activity.” Gaming for Marketers: Let the Mobile Games Begin Copyright ©2012 eMarketer, Inc. All rights reserved. 7
  • 8. Marketing OpportunitiesAdvergames US Video Game Ad Revenues, 2010-2016Advergames are ads that use interactive elements such as millionsweb-based game applets or mobile apps to engage users. $700Expedia, The Guardian, Friskies, BMW, Scandinavian Airlinesand Vodafone are among brands that have used noveladvergames concepts over the past year. $470 $440 $425To coincide with the London 2012 Olympics, The Guardian, $410 $395 $380a UK newspaper, launched a retro-style game that allowedusers to create avatars that competed against top sprinters.The Guardian’s branding was visible along the wall of the racetrack. BMW ran a contest that allowed participants to use theirtablets to compete in a virtual racing game that was projectedon giant screens throughout South Africa. 2010 2011 2012 2013 2014 2015 2016 Source: PricewaterhouseCoopers (PwC) and Wilkofsky Gruen Associates,Interstitials "Global Entertainment and Media Outlook: 2012-2016," June 12, 2012 142863 www.eMarketer.comThe practice of inserting interstitial ads at game launch or between 142863levels has been ingrained in web-based, social and mobile games.Although some players consider these splash-screen ads intrusive,they accept them as part of the bargain for free game play.In September 2012, automaker Lexus launched an integratedcampaign in Zynga’s social game Draw Something that usesinterstitial ads. The ads link to a page where users can browseimages, features, specifications and colors of two Lexusmodels. The spots also point to a section where users canbrowse purchase and lease options.In-Game AdsIn-game ads have been part of the gaming landscape sincethe console games of the 1980s. Static billboards in car-racingor football games emulate real-world racetracks and stadiums,lending realism to the playing experience.As gamers started playing through internet-connectedconsoles in recent years, marketers and game developersbegan experimenting with dynamic ads that could be updatedafter the game was sold at retail. This innovation initiallyhelped drive increases in in-game advertising, but the practicehas since lost steam as a result of the shifting focus towardsocial and mobile games.PricewaterhouseCoopers (PwC) estimated US video game adrevenues began a downward trend in 2011 and will continueto decline through 2016. At that point, revenues will shrink to$380 million, off from $700 million in 2010. Gaming for Marketers: Let the Mobile Games Begin Copyright ©2012 eMarketer, Inc. All rights reserved. 8
  • 9. From Social to Mobile Change in Time Spent with Gaming Platforms According to US Gamers, Q4 2011The three-year boom in web-based social gaming that % change vs. same period of prior year iPad 971%started with the launch of Zynga’s FarmVille in 2009 All other mobile phones (e.g., Android OS, RIM BlackBerry OS, 53%has given way to a focus on mobile as the industry’s Windows Phone OS, etc.) iPhone/iPod touch 23%next growth sector. The well-publicized struggles Free-to-play online PC games 22%of Zynga and, to a lesser extent, Facebook have Microsoft Xbox 360 17% Purchased/subscription PC games 5%centered on those companies’ lack of strength in the Sony PlayStation 3 0%mobile arena, and savvy game developers are filling Nintendo Wii -22% Total 7%the void by prioritizing smartphone- and tablet-based Note: ages 13+games and apps. Source: Nielsen, "US Gaming: A 360° View," Feb 7, 2012 140444 www.eMarketer.com 140444When asked for his thoughts on broad trends in the gamingindustry, JunGroup founder and CEO Mitchell Reichgut said, “Ican sum it up in one word: mobile. That’s where it’s all going,dramatically, and those who have a great mobile presenceare flourishing. Others that haven’t been nimble enough arereally suffering.”Zynga itself has acknowledged a need to build up its mobilepresence and is taking steps in that direction. The companyhas begun launching some of its most popular web-basedgames—including Zynga Poker, Words With Friends and RubyBlast—as iOS versions.In a November 15, 2012, statement announcing the iOSlaunch of Ruby Blast, Roy Sehgal, Zynga’s vice presidentof games, said, “We’re actively working to make … greatweb experiences available on mobile. Zynga’s multiplatformapproach focuses on accessibility—letting players pick upand play with (or against) their friends no matter the deviceor platform.”Other companies that were built for the social gaming realmare also making a concerted push into mobile. DeveloperCrowdStar announced in April 2012 that it would stopdeveloping new social games for Facebook and focus insteadon mobile platforms.A Nielsen study provided further evidence of a shift fromtraditional and social games to mobile ones. Use of the iPad asa gaming platform underwent spectacular growth in Q4 2011,compared with more modest growth for free-to-play online PCgames, and zero or negative growth for time spent with twoof the three console systems. This indicates that tablets aremuscling into the space that consoles have long held at thecenter of the gaming-hardware universe. Gaming for Marketers: Let the Mobile Games Begin Copyright ©2012 eMarketer, Inc. All rights reserved. 9
  • 10. Gaming Venues Facebook’s role in this segment is not quite as dominant as it once was.Social gaming was born of a symbiosis between a This does not mean Facebook is no longer a gamingpopular game (Zynga’s FarmVille) and a popular social powerhouse. It is still the most popular forum for web-based social games and a convergence point for gamers, developersplatform (Facebook). The extent to which Zynga and and brands. However, other gaming companies are focusingFacebook have depended on each other was made on developing direct connections with their audiences andclear when they filed their initial public offerings in relying less on Facebook as a middleman.December 2011 and July 2012, respectively. More than90% of Zynga’s revenue came from Facebook at thetime of the filing, while Facebook derived 11% of itsrevenue from the gaming company.Since then, Zynga has taken steps to reduce its reliance on thesocial network. The company has built its own gaming portal,explored new business areas such as internet gambling, andfocused on mobile platforms.In November 2012, Zynga and Facebook announced they hadrenegotiated their agreement in order to provide each othergreater levels of independence. The new terms, which willgo into effect in April 2013, will give Zynga more freedom todevelop its gaming platform but may force the company toincrease spending on promotion, brand building and customeracquisition as it ventures outside the Facebook ecosystem.This will be a delicate tap dance for Zynga because it stilldepends heavily on Facebook for its business. Other companies,such as Electronic Arts/Playfish and Disney/Playdom, are in asimilar position, needing to both nurture their relationships withFacebook and prove they can stand on their own.A review of AppData statistics showed that worldwidemonthly active users on the top 15 Facebook games declinedslightly over the past two years. In 2010, monthly usersnumbered, on average, approximately 326 million. In 2012, thisfigure declined by 4.5% to approximately 311 million.The following caveats should be noted aboutAppData’s statistics:■ The user numbers are approximate because some months’ data was not available in both 2010 and 2012.■ While the user estimates are rounded to the nearest million, the percentage decrease is based on unrounded figures.■ This data applies only to the top 15 games on Facebook, not to Facebook gaming as a whole.■ This data measures monthly active users as opposed to daily active users, which is another metric that AppData tracks.Even with these points in mind, the AppData figures suggestthat Facebook gaming is losing strength. While the socialgaming category continues to grow per eMarketer’s forecast, Gaming for Marketers: Let the Mobile Games Begin Copyright ©2012 eMarketer, Inc. All rights reserved. 10
  • 11. Conclusions eMarketer InterviewsMobile gaming audiences have been increasing morerapidly than other gaming sectors and are poised for Bev Thorne Chief Marketing Officercontinued growth. US mobile gamers surpassed onlinecasual gamers in 2012 and will remain the largest audience Century 21 Interview conducted on October 23, 2012segment through at least 2014. Developers are tailoringtheir offerings to players who are increasingly turning tosmartphones and tablets as preferred gaming devices. Ari BrandtRevenues from mobile and social gaming activity will CEO and Co-Foundergrow along with audiences. Virtual goods and advertising MediaBrixare the primary revenue generators in these games, and Interview conducted on November 29, 2012both are expected to increase substantially. At the same time,sales of traditional video games and hardware consoles are Chris Cunninghamdeclining, indicating a secular shift from a packaged-goods Co-Founder and CEOeconomy to a digital one. appssavvyThe new gaming economy presents a wealth of Interview conducted on October 29, 2012opportunities for brand marketers. With gamingcompanies relying on marketer support and virtual goods John Foxfor revenue, brands have an opening to participate to a General Managergreater extent than they have in the past. Marketers are Games.comactively experimenting with innovations such as branded Interview conducted on November 9, 2012virtual goods, opt-in videos and activity-based advertising insocial and mobile games. They are also continuing to pursuemore established forms of advertising, including product Dave Maddenplacements, sponsorships and banner ads. Senior Vice President, Global Media SolutionsThe boom in social gaming that started with the Electronic Arts Interview conducted on October 23, 2012runaway success of Zynga’s FarmVille in 2009 hasgiven way to a focus on mobile. Gamers, developers,platform providers and marketers see smartphones and Mark Ortiztablets as the next frontier in gaming. Companies are National Interactive Marketing Managerinvesting heavily in following their audiences and making Hondagames transportable across screens. This trend is expected to Interview conducted on November 12, 2012continue as growth in mobile game audiences and revenuesoutpaces other segments of the gaming ecosystem.Although Facebook remains the most powerful gamingplatform, game developers and marketers are startingto look beyond the social network. Developers such asZynga and portals such as Games.com are building their ownbrands away from Facebook, and mobile gamers are using iOSand Android devices to access game content. This translatesto a slightly reduced but still dominant role for Facebook. Gaming for Marketers: Let the Mobile Games Begin Copyright ©2012 eMarketer, Inc. All rights reserved. 11
  • 12. Related LinksAdobe SystemsAppDataappssavvyBusiness InsiderCentury 21Electronic ArtsFrank N. Magid AssociatesGames.comHondaInside NetworkIBISWorldJavelin Strategy & ResearchJunGroupKeynote SystemsMediaBrixMRYPricewaterhouseCoopersThe NPD GroupEditorial andProduction ContributorsNicole Perrin Associate Editorial DirectorCliff Annicelli Senior Copy EditorEmily Adler Copy EditorDana Hill Director of ProductionJoanne DiCamillo Senior Production ArtistStephanie Gehrsitz Production ArtistAllie Smith Director of Charts Gaming for Marketers: Let the Mobile Games Begin Copyright ©2012 eMarketer, Inc. All rights reserved. 12
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