Storyboard18 - Stacks & Strategies | Why gaming companies are acquiring adtech firms and capabilities

The online gaming industry could be worth Rs 1,500 crore by 2024, according to Statista. (Representational image: Priyam Raj via Unsplash)

User base for gaming companies in India grew in 2020. The user base for both old and new companies grew manifold during the year, leading to the next bout of growth for these brands in 2021 in terms of monetization. In 2022, gaming companies are making their sales pitch stronger with advanced targeting options for their advertisers and acquiring adtech firms to help them to do so.

According to domain experts with better targeting, the gaming companies are selling more inventory at better prices and also getting newer brands to advertise on their platforms.

First-party data, as experts say, is always the deal sweetener and gaming companies want to make the most of it. The two options that they have to make this happen is to either partner with an adtech firm or to build one in-house.

In January 2022, Nazara Technologies Limited announced that it has entered an agreement to acquire a 55 percent stake in programmatic advertising and monetization company Datawrkz where they’d acquire a 33 percent stake in the first tranche by April '22 and reserve an option to acquire an additional 22 percentage points in the second tranche that is expected to close in the fourth quarter of financial year 2023.

This is around the same time when Microsoft also announced plans to acquire American video game company Activision Blizzard in an all-cash transaction valued at $68.7 billion.

This acquisition, according to a statement issued by Microsoft, would accelerate the growth of the company in gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse.

Big game: M&A deals, gaming focused adtech 

Similar plans are fueling more and more of such M&A deals across the world including India. Nazara, for instance, believes the partnership will help them deliver highly optimized performance based marketing solutions and improve its overall offerings across the spectrum.

Nazara Technologies CEO Manish Agarwal says that the growth of gaming focused adtech will be exponential in the coming decade across geographies with the growth of gamers and game publishers across freemium, web3.0 and skill based real money gaming.

“Adtech companies with deep data processing capabilities and first party data ownership will emerge as winners in gaming focused adtech,” he said in a statement.

While the online gaming industry across India was valued at around Rs 790 crore in the year 2021, up from about Rs 650 crore in the previous year, according to business intelligence firm Statista, the sector is expected to be worth over Rs 1,500 crore by 2024. A significant chunk of this growth will come from ad revenues, predict experts, and that’s where the role of adtech comes in. Targeted ads like any other platform are expected to bring in better ad volumes and push revenue growth in the process.

Explaining how partnering with adtech companies strengthen a gaming company’s scope for monetization, Niraj Bora, Founder and MD - Surmount Business Advisors Pvt. Ltd, says, “Partnerships like these maintain the dominance and increase the differentiation in the offerings. Changing market dynamics makes these acquisitions keep up the innovations in core business alive.”

What’s in it for the companies? 

Picking up Nazara as an example, Bora tells Storyboard18, “Nazara’s core business of gaming generates huge data and ads are one of the primary sources of revenues. With Datawrkz on board, they will now improve the overall offerings across the spectrum.”

Companies that are not looking at partnering with these companies are investing in an in-house adtech model to accelerate the growth of advertising on their platforms.

One such example is Rooter. The game streaming platform is working on developing its own adtech model. The model that is expected to be ready by the end of the year will increase the effectiveness of all ads on the platform by 40-50 percent, says founder Piyush Kumar.

“We work with more than 100 brands every year and want to automate the process to serve the advertisers better and make their ROI grow. This helps the overall ecosystem bringing in growth to both us and our partner advertisers,” Kumar says.

Kumar also believes with better targeting with first-party data, the demand for advertising on their platform is expected to increase by up to 25 percent.

As per Statista, the revenue in the mobile games segment is expected to show an annual growth rate (CAGR 2022-26) of 7.01 percent and experts believe advertising will contribute heavily to this growing number.

Note to readers: Storyboard18’s new Month In Focus initiative spotlights themes and topics that are pushing marketers to reshape and rethink how brands interact with today’s customers. Our theme for this month is Stacks & Strategies, a martech and adtech spotlight on how decision makers and marketers are advancing the adoption of new technologies and tech-driven strategies  in the brand marketing ecosystem. From the defining trends and preparing for a cookiepocalypse to how progressive martech strategies help fast track business and brand growth. Catch this special on Storyboard18.