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Wednesday, May 25, 2022

Why portfolio diversification is top of mind for gaming studios

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To drive user acquisition, all gaming companies want to go cross-platform and create new touchpoints for players of any type of console or game genre. To this end, we are seeing an increasing trend of consolidation among sports firms. Big studios, for example, that have historically specialized in hardcore, first-person shooter games, are getting smaller studios to make mobile versions of those games. Portfolio diversification is fast becoming the name of the game, and industry consolidation is something that developers and advertisers should keep an eye on.

The driving force behind this trend

2020 brought a lot of uncertainty for the industry and the world at large, with many industries battling the lockdown. Fortunately, gaming didn’t really gain momentum among all demographics and helped us stay connected to the rest of the world.

According to DDM Market Research, investment in the gaming industry reached a new high of $13.2 billion in 2020, up 77% from 2019, while M&A agreements grew 33% year over year to 220. 2021 is going to be an even more record breaking year. Some of the most notable M&A deals done this year are; EA is paying $2.1 billion in enterprise value to buy mobile game developer Glu Mobile; Microsoft’s $7.5 billion acquisition of ZeniMax Media, the parent firm of Doom and Fallout creators Bethesda Softworks; Embraer Group paid $1.37 billion for Borderlands producer Gearbox Entertainment, $765 million for mobile developer Easybrain and $450 million for porting specialist Aspire.

Why are big studios taking this step?

The data restrictions of iOS 14 have made life difficult for advertisers, especially in the mobile gaming industry. Since these restrictions make it difficult for advertisers to target users with the same level of detail as before, the accuracy of their targeting campaigns was affected. In addition, smaller studios that relied on monetization through large advertising platforms such as Facebook, Snapchat and Google are having a harder time doing so because of the new restrictions.


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It’s worth noting because acquiring smaller studios is a kind of UA strategy in itself. This opens up access to a new user base and a trove of first-party data. This allows them to improve the game experience, retarget campaigns, and access games that are already trending in the market. Larger studios can also take advantage of Apple’s IDFV (Identifier for Vendors), which allows them to cross-promote those new users.

Additionally, the acquisition of new technology also helps drive this consolidation trend. Game developers are realizing the value of vertical integration and striving to incorporate technology that improves customer experience and LTV. This new technology need not come only from other gaming companies and is driven by advertising techniques.

It is now common practice for game studios to branch out and acquire programmatic UA, monetization and arbitration platforms to strengthen their product exposure. A perfect example is gaming giant Zynga’s recent acquisition of Chartboost, an integrated advertising platform that includes a demand side platform as well as a supply side platform and arbitrage capabilities. Combining a large gaming portfolio and advertising capabilities with high-quality content, direct player relationships, wide reach and full-stack advertising technology is the next step in the evolution of the next generation of mobile advertising.

Due to the recent Onramp surrounding blockchain gaming, companies should also keep an eye on new trends such as the metaverse and the advancement of high-value digital assets that exist only virtual, such as cryptocurrencies and non-fungible tokens. The size of the blockchain market is projected to grow from $4.9 billion in 2021 to $67.4 billion by 2026. In order to gain new market share recently, gaming companies must reveal their triple-A game-making skills as well as their IP. on this model. Also, for those with the power and money, a quicker way to access this market could be to acquire existing companies first, which makes perfect sense as M&A deals are at an all-time high.

Ad networks are also expanding

It’s not only the big game studios that are making the move, but ad networks have also joined the trend. Many ad tech firms have successfully forayed into mobile gaming, and this trend is expected to continue. Gaming divisions can be viewed as a revenue generator for an ad-tech firm, meaning it will be substantially revitalized and its performance directly tied to new revenue streams.

In the absence of mobile advertising identifiers such as IDFA, another factor driving ad network consolidation strategies is the competitive advantage that proprietary ad serving infrastructure will provide in portfolio strategy, yield management and user engagement optimization. Without that type of third-party data, first-party data becomes more important.

In addition, ad networks must develop their full suite of products, solving all kinds of client pain points, to meet all the needs of the developer client. Building a full-stack solution through UA, monetization, creative, arbitration and in some cases attribution will help target and retain more valuable users and reduce operating costs.

Ultimately, if ad networks are able to help developers in more aspects of their life cycle, they will inevitably generate more revenue. Offering multiple solutions and diversifying your revenue is a key driver for the stock price outlook and projected future growth. Companies like AppLovin, Unity, and Digital Turbine are already publicly traded companies, and Vungle is getting ready for its IPO, so they may have more acquisitions in the future before reaching an IPO.


Pandemic-driven gaming markets, a heated investment environment, and major studios attempting to increase their UA in the post-IDFA reality are the main underlying elements driving most of the 2021 consolidation efforts.

To remain competitive in a new privacy-focused world, game developers and ad networks have expanded their portfolios to include gaming and arbitration. Any strategy that helps a corporation gain a competitive edge by bringing in more legitimately collected data that doesn’t need to be acquired elsewhere or shared with others is always a good one.

Ad networks are adding gaming studios, arbitration platforms, and even MMPs to diversify their portfolio and provide more solutions to clients. It also provides an opportunity to get first-party data in a post-IDFA world. All of this in turn drives up revenue and stock prices.


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