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Gaming is upstream of all consumer tech

Justin Rowell by Justin Rowell
30.03.2022
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In the innocent, waning days of 2019 — before COVID gripped the world, and before Apple unveiled its App Tracking Transparency (ATT) privacy policy — I wrote a piece titled Gaming is the ascendant consumer tech category in which I argue that gaming, categorically, possess traits that render it immune from the market conditions that constrain the launch and growth of new social media platforms. In the piece, I mention three market constraints:

  1. The advertising duopoly as a hard distribution gate;
  2. The mobile platform “duopoly” of Google Play and the App Store as a soft distribution gate (in the piece, which was written in September 2019, nine months before ATT’s introduction, I specifically speculate about deprecation of the IDFA as a means of Apple wrestling control of content distribution back from Facebook as an application of this soft gate);
  3. Sharply renewed interest in consumer privacy protections that has resulted in the erection of a competitive gate through the crafting of platform policies and privacy regulations that benefit incumbents and create barriers to scale for upstart firms.

From the piece:

And what’s more, the forces that have limited the ability of social products to aggregate audience either don’t apply to games or are not nearly as acute for them. One reason for this is that the rigid edges that differentiate “mobile games” from all other classes of games have softened as gaming goes cross-platform. Fortnite serves as a great example of this: it exists on mobile but it certainly isn’t a “mobile game,” and notwithstanding the fact that Fortnite is a global phenomenon, Epic can acquire users wherever its connection to them is the strongest and the least expensive. The platforms that serve games outside of mobile — Steam, the Epic Store, etc. — are every bit as difficult to penetrate as the App Store and Google Play, but there are more of them, and cross-platform game developers can aggregate audience across them in a way that benefits their presence on mobile. Game streaming, although it is by no means a proven concept, would magnify this reality: if games, even those played on mobile, aren’t subject to the distribution gates of the mobile platforms, then they can acquire users anywhere.

My point — that Gaming as an explicit product ‘vertical’ within the broader consumer technology landscape is immune to the primary obstacles to growth faced by more general social media products — was seemingly proven under the stresses of a global pandemic. Gaming revenues and the consumption of gaming content on streaming platforms like Twitch saw unprecedented growth during COVID. But more than anything, the dramatic growth in capital availability* for upstart gaming companies and projects over the last two years has underscored an important reality with video gaming: that gaming historically has been and continues to serve as the tip of the spear with respect to the innovations, technological and commercial, that can be applied to consumer technology products broadly.

4/ Gaming is not some small, provincial niche. Gaming is the crucible in which these new technologies are honed and perfected and prepared for broader deployment. And not just through technological innovation but through commercial innovation, as well (eg. the Freemium model)

— Eric Seufert (@eric_seufert) March 11, 2022

The notion that gaming serves as a testbed for technologies, product use cases, human-computing interfaces, and commercial frameworks that can be delivered across the broader consumer technology landscape is neither new nor novel and has been explored exhaustively. Video gaming is a mature category with a long and winding history — unpacking the ways in which video games either inculcate a new behavior or present a new technology to consumers that can be co-opted by other types of products dates back, at least, to 1971’s Computer Space.

A more modern treatment of this effect can be found in mobile: gaming was the first mainstream commercial application of the iPhone’s App Store (recall: “it’s not a phone, it’s a console experience“), and the freemium model reached mainstream scale in the West primarily through mobile games. Early personal computers allowed gaming to become established as a technology-forward, hobbyist niche. Games consoles expanded the core demographics of gaming across a mostly homogenous cross-section of demographic and socioeconomic profiles. But the smartphone transformed gaming into a truly universal phenomenon. Almost every person on Earth is a potential gamer as a result of the smartphone.

Thus, gaming is the initial front from which new consumer-centric business models and technologies can be launched. I see this manifesting currently across a number of initiatives:

  • The privacy enhancing technologies (PETs) being built as a reaction to Apple’s App Tracking Transparency privacy policy are mostly designed with mobile gaming advertisers in mind. This makes sense, given that mobile gaming is likely the largest single category of mobile app advertising spend. These PET technologies will allow mobile gaming advertisers to measure and target new users while preserving consumer privacy, and, ultimately, they will benefit advertisers across the entire mobile spectrum;
  • Web3 gaming is likely the first scaled consumer use case for crypto assets (beyond speculation). With the first wave of web3 games giving way to the second, I believe that web3 games will be responsible for more wallet adoption in the next two to three years than any other use case for crypto assets, and it is on that foundation that a broader web3 consumer tech ecosystem can be established;
  • The Metaverse has its roots in VR and AR gaming, although I believe it will evolve substantially beyond being used as a synonym for virtual reality.

The case of The Metaverse is an interesting one because it also showcases how gaming can be used as a means of shifting consumer behaviors against the status quo. My interpretation of The Metaverse, as I detail in this article, is that of a cross-context, device-agnostic, persistent pool of content. The total control of the mobile landscape that Google and Apple enjoy with their platform stores is obviously a dynamic that every other large social or content platform would like to disrupt. As I argue in my three-part series, The future of mobile content platforms, the notion that content distribution can be moderated or dictated by the manufacturer of a hardware form factor is quickly becoming anachronistic given the proliferation of on-demand, cross-device streaming services — delivering both streaming video and streaming game content.

In this case, The Metaverse as a concept is really a marketing vessel: an abstraction used to accelerate the consumer shift away from hardware-tethered distribution models. The reason the buy-in on messaging related to The Metaverse has been so aggressive and pervasive is that the current digital content distribution model almost exclusively benefits the mobile platform “duopoly” described above, whereas widespread consumer recognition and adoption of The Metaverse creates commercial opportunities for all other technology companies.

Gaming is the content format by which that model can be leapfrogged. Microsoft just last week announced that its Xbox Cloud Gaming service has achieved improved performance on iOS despite being forced to run through the browser because Apple has barred games streaming services from the App Store. Consumers must be trained to see off-store content portals as being as accessible — and every bit as legitimate — as the platform native stores (especially since, per the video above, the platforms are not adopting a progressive stance around relaxing off-platform payments alternatives). Again: gaming, because it is upstream of all consumer tech, is the vector through which this is accomplished.

*it’s interesting to contrast the current fundraising environment for gaming with that of 2013, when consensus opinion (but not mine!) was that the gaming category couldn’t support VC-fundable businesses


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