Top gaming investor: Bringing performance marketing from mobile to PC and console is ‘super interesting’

If there’s one constant about the world of gaming is that it never ceases to change. The need to drive revenue and growth across new markets and new audiences makes sure of that. PC & console (PC&C) games have been around for decades, then came mobile apps and took the world by storm in the last several years. But only now are these siloed universes starting to come together.

To talk about the exciting world of cross-platform gaming and PC&C, we talked with gaming  industry veteran and investor Eric Kress who brings with him 26+ years of experience in the video games industry, investment advisory covering video games for investors and strategic advisory to industry (EA & Kabam, Advisory: WB Games, Sega, Google, Amazon and others). He is also the host of the Deconstructor of Fun podcast, driving the growth of the largest business leadership community in the video games industry.

Is there a specific type of mobile gaming company that stands to gain the most from the expansion to PC and console and the ability to actually run performance marketing with the right targeting and attribution in these platforms?

Eric Kress: I could see it in two different ways. One, the bigger companies will gain the most because they have the bigger games, right? So they’ll be able to reach more people and target more people effectively, and have the budget to execute against that from a marketing perspective. But there’s also a notion that smaller players may actually gain more traction because they get more visibility from marketing directly than they do from spending large amounts of money on TV advertising for example. 

The holy grail would be to have proper targeted advertising and attribution, and understanding parts of the mix. We’re bringing people in to actually purchase the game. And so I think some of these tools and technologies are very interesting. The fact is that this is going to be super valuable. 

So I think it helps the incumbents for sure. But it also could help startups and smaller players compete in the space. And one of the general trends we’re seeing in console as well as mobile is that the big players are just generating so much revenue and there are no rooms for double A and single A games out there, because the top 10 games are exactly the same every year. So having other tools at their disposal to try to fight is great. That trend would be pretty helpful for some smaller players, potentially.

Do you see the monetization models changing on PC&C. Will there be a shift from purchasing games to F2P with in-game purchases?

Eric Kress: I’ve kind of shifted around on this a little bit. I mean, it looked like Fortnite created a new era of the potential for free to play on console. But besides Fortnite, there really haven’t been great examples of games that have done well from a free to play perspective, particularly on console. There were a few here and there but none of them scaled and none of them maintained the audiences.

My whole thinking is that premium plus is probably the best method for console because to some degree you’ve already converted right? Anybody that’s bought a console for $500 is a convert right from 0 to one. You need to convince them that this content is good enough for them, and that they’re willing to spend whatever it takes. And in some ways there is no elasticity for demand for console games. If you charge $50, $40, $60, $70 for a game it’s gonna sell just about the same amount of units?

And so in that kind of model, it makes sense to sell something premium and then add in the micro transactions — the key learnings that you get from mobile. I think that is the proper strategy. The problem with that is that it’s expensive, right? It’s expensive to build a game that people are willing to spend $60 or $70 for. But I think that’s the model for console and PC. For the most part. Now, obviously, PC has some huge incumbents that are free to play like league legends and dota, etc. but those are relatively unique beasts from a revenue perspective. 

So if there were a mobile gaming studio with a portfolio comprised mainly of midcore maybe even a little more casual games. Not any of the hardcore games. And they are seriously looking into expanding to PC&C now that there’s performance marketing and attribution, which is their bread and butter on mobile. What advice would you give them?

Eric Kress: I think there’s only a few genres that actually make sense from that perspective on consoles in particular. I think that’s going to be a real challenge. There’s obviously Genshin which has done a great job. But those games cost millions of dollars so that’s going to be really hard to replicate. 

The biggest challenge is the genre mismatch of mobile versus console in particular, mobile versus PC gets a little easier, right? Because I think people could play. A lot of the different types of games that do well on mobile can do well on PC, so that seems like a better opportunity. But you can’t have a genre mismatch, right? Otherwise, you’re not going to have much success. You have to pick the right type of genres like RPGs or shooters or things that can be replicable across multiple platforms: console, mobile, and PC.

I think fundamentally, the business model is clear. If you can build your own standalone skew or title, then I think that you just save a lot of margins there. and I think the PC market is absolutely massive. So to the extent that you could figure out a way of acquiring users profitably on PC, I mean, that could be huge. I think it’s a challenge. But that’s definitely possible. It’s a huge channel. And it’s also worldwide so it’s a massive opportunity. 

The console business has also never been stronger. We’re seeing hardware fly off the shelves. Every game is outperforming the next, I mean, Harry Potter has done like 15 million units at this point which is just insane. And then we see Diablo is coming. Both console and PC. We have a final fantasy. GTA. I think the console business is going to be huge. It’s going to be the strongest cycle ever for consoles, and shaping up for the next cycle as well. so I’m very bullish on the console business, and the PC business kind of follows the console business to some degree in terms of titles. Expansion to PC is the way the market is shaping up for mobile. 

I do believe gaming studios have to start thinking about how to make new games. Different types of games. You can’t focus on the core. Creating new entrances to compete against the incumbents is going to be harder and harder because you’re not going to be able to scale the way you used to. You have to change the design. You have to basically come with ideas of mass market gameplay, and deep monetization design. So things like Monopoly Go. That’s a great example of one survivor, I/O, another one Marvel Snap, which was a successful game last year.

Mass Market IP and dumbed down gameplay as much as possible are the type of games that can break through. But if you’re making traditional puzzle games, or traditional strategy games, I think you’re gonna really struggle out there. It’s going to take time for people to adjust and when you talk about mass market games with deep modernization design, the monetization is going to be far lower overall per user. 

So when the strategy game is making $20 per user, these new types of games are going to make let’s say $5 per user. And so if you’re moving the audience from one to the other, the overall market is going to decline. And that’s going to be really challenging, because these same whales are just not going to get the access to these new games.

What kind of benefits do you see from attribution on PC&C? 

Eric Kress: if you are successful at building the graph of your consumer base across all these different platforms and connecting it all, I think that’s very powerful. Having the capability to target them based on their activities across all platforms. So I think ultimately that will be very valuable and strategic particularly with Apple and Apple’s privacy policies on their platform. 

What gets you excited when we talk about PC&C? Because it’s kind of like a brave new world out there.

Eric Kress: If you can actually prove that your programs and your marketing is having a direct impact on sales, that’s super valuable. It just hasn’t been done before. So it could be huge to find effective ways of attracting people to both console and PC. It’ll be interesting to see how it evolves and what channels are actually the most effective, in terms of marketing games, whether it’s like Youtube, or the standard advertising or Twitch or whatever channels that you want to figure out.

In the beginning the marketing guys just had no clue as to how to market mobile games. It took a while before these gurus of performance marketing became table stakes for most publishers, and as a quant guy I was always like, well, this makes more sense to me now, right? If you could bring that to console and PC, I think that’s super super interesting.

With the launch of Apple’s Vision Pro, will gaming now, perhaps, have the platform to lead the way in terms of AR/VR?

Eric Kress: The short answer is, no. But there’s a much longer answer. The fundamental problem people seem to have is their memories are too short. The reason that Apple revolutionized the phone market is because they created an amazing device and a device that has a total addressable market of 7 billion. 

Because everyone is going to use a phone and that was actually relatively clear from the get go. Not that Apple was going to succeed, but that the market for consumer devices for mobile phones was endless since everyone already had a feature phone. They also created this subsidized model from the carriers. So these $500 to $800 devices, where you’re paying like peanuts every month, and that was much much easier for consumers to adopt compared to this $3,500 device from Apple. 

Also, this is more of a productivity device and a consumption device. Gaming was like a footnote. I believe that the killer app for this environment is not gaming. I mean the best experience for gaming out there right now is a dedicated console on TV, right? It’s been established for the last 20 years. 

So I think gaming on that headset is not going to be the way they’re going to sell this thing. It’s going to be some kind of interactive social type experience in which you’re experiencing worlds like the holodeck on Star Trek. I’m a firm believer that it’s ultimately going to happen. But my point is going to be a long long time before it becomes a mass market device and something interesting. As an objective industry analyst this is just not a mainstream device.

How do you see the space evolving? Which platforms are going to work? 

Eric Kress: I think the console business is going to be bigger than ever in the next 5 years. So this is actually a banner year for consoles. I think Nintendo is going to come out with the next Switch, and that’s going to be absolutely massive as well. It’s going to maintain and continue the progression. IP is going to be more valuable on the mobile side as well to get the organics.

I don’t see any other major platform shifts in the next 5 years, not in VR/AR, or blockchain, or any of that stuff; I think that stuff is basically a product without a market. And then I do think the PC market is kind of having a renaissance right now, and a lot of people are talking about it.

A lot of it is happening because blockchain failed and mobile has become challenging. So people are focusing more attention on the PC market which is a huge opportunity for everybody because it is one of the biggest and broadest markets. It’s like a self fulfilling prophecy. If people are interested in it and focus on it, it’s just going to grow and get more attention. Steam and Epic and web games.