We’ll see how mobile gaming growth affected the real world. In the last weeks, GameStop, an American company operating in the video games industry, saw its stocks (index name GME) skyrocketing up to +2,300% over two months. In early January, a person could buy a GameStop share for about $4 dollars. After the coordinated actions of a Reddit channel’s users, the shares went up to $347,51 dollars each.
A GameStop background, the Mobile Gaming ancestors
Gamestop Corporation is an American video games, consumer electronics, and gaming merchandise retailer. Leonard Riggio, Daniel DeMatteo, and Richard Fontaine founded the company in Dallas, TX, in 1984. The original name was Babbage’s, however, it took on its current name in 1999. In its headquarters, based in Grapevine, TX, they will be having hard times these days. They were quite successful between 2004 and 2016, but now they are walking on Sunset Boulevard.
In fact, the American video games retailer is having big losses. In 2019 they have lost $795 million dollars, fired hundreds of employees, and many shops were closed. The pandemic in 2020 hasn’t helped, it’s expected that GameStop figures will be even worse.
Knowing this situation, Wall Street sharks, like hedge funds, capital investment funds, and big brokers, started betting on GameStop’s bankruptcy. How? The answer is simple. Doing short-selling.
What does it mean “short-selling”?
It’s a financial speculative transaction, made by someone who thinks the share value of a company will go down and down. A short-seller borrows a certain amount of shares (e.g.: 100 shares) from a broker, hoping these shares will go down. After that, the short-seller offers the stocks at today’s value (e.g.: 10 per share), gaining $1000 dollars. If the share index goes down (e.g.: 8 per share), the seller re-buys the 10 stocks, paying them $800 dollars. Then he’ll give them back to the broker he borrowed the 10 initial shares. This operation would produce a $200 dollars profit.
Why short-selling GameStop?
GameStop is having big losses due to the times we are living. Unfortunately, the pandemic situation locked us at home, that alone should boost console video gaming. However, the modern times we are living in gives us the possibility to bypass the physical stores. In fact, we can buy anything on Amazon (an example). Some modern game developers even sell the digital version of video games, and there is no need for a delivery.
On top of it, these days, everyone has a smartphone, sometimes even more than one. We always bring our smartphones with us, while the GameStop business model is focused on home video gaming. But the company had to close temporarily the shops due to the pandemic situation. Some other GameStop stores were closed down for good because of the American video games retailer’s financial condition.
For these reasons, this current pandemic situation is the straw that breaks GameStop’s back. The Wall Street sharks could feel the company bleeding. And in fact, they started short selling the GameStop shares.
The Reddit action
Reddit is a vast platform of channels. It was born as a social news aggregation, web content rating, and discussion website. University of Virginia roommates Steve Huffman and Alexis Ohanian founded Reddit in 2005. Since then, hundreds of subreddits (or channels) have been created by users (Redditors). The site has almost 350 million users. So it’s unsurprising that some of them could be trustworthy.
Every channel is similar to a Facebook group, where the users interact with each other. The GameStop frenzy began in the r/wallstreetbets channel, where users try to recommend each other small investments. The channel had almost 2,7 million users (now they are 3,5 million). The situation can become really tricky.
Tons of non-professional investors, inciting each other, started buying the GameStop shares using their smartphones. This happened because in the Reddit channel appeared refined analyses about the GameStop situation (and others, like BlackBerry and AMC Theatres). These analyses asserted that the big Wall Street funds were short-selling the GME stocks. They were right.
The share value started skyrocketing. People began earning thrilling amounts of money. DeepFuckingValue (a.k.a. Keith Gill) was the first one who gave a boost to the enthusiasm. He posted an image showing he gained $17 million dollars. After the frenzy, he had lost $13 million but still ended the day with $4 million dollars.
On the other hand, hedge funds, capital investment funds, and all the big speculators who had short positions on GameStop started losing billions of dollars. For example, Melvin Capital Management had lost 30% of its value. This caused what in the financial market is called a short squeeze. The short-sellers, to cover their losses, started buying the GME title, an action that pushes up and up the title’s value, in a virtuous circle.
Why did the Mobile Gaming Industry cause the GameStop decline?
In this current situation, everyone started playing mobile games, more than ever. In fact, the Mobile Gaming Industry had an impressive growth in these years, especially in 2020. It’s expected that the mobile gaming industry won’t stop and will generate $120 billion dollars in 2021.
Thus, the pandemic seems not to afflict the Mobile Gaming Industry. The 2020 statistics saw many mergers and acquisitions, and 2021 seems to be no different, as we saw in our Weekly Mobile Gaming Industry news roundup in the past week. Especially Embracer Group, which made acquisitions for $2,4 billion dollars in one week.
The Mobile Gaming trends prompt that we are going more and more towards immaterial gaming, like the AR/VR technologies and cloud gaming suggest. This kind of technology is still a bit potential at this very moment, and it’s ready to explode. When they will, the world will go beyond traditional console gaming. Physical supports such as CD, DVD, maybe even televisions, will be unnecessary to the gaming industry. This growth will, then, kick out of the market all the related companies. Something that the publishing industry already experienced.
What can we learn?
Consequently, our opinion is that the Mobile Gaming industry is killing physical supports-retailers. This already happened when the DVD era arose, and Blockbuster went bankrupt. If these kinds of companies will be able to reposition themselves, they can survive. Maybe they can start selling VR devices, or they can start a cloud gaming platform. But if they are not reactive, they will be the next GameStop.
This means that the Mobile Gaming industry had a role in this story, as one of the causes of the GameStop frenzy. Other companies hit by the Reddit investors went down because they couldn’t renovate themselves (like the BlackBerry), or they are being overtaken and start being obsolete (it’s the case of the AMC Theatres).
The Mobile Gaming growth made it possible for normal people to fight against the Wall Street giants. Then, we saw that it has a true power to impact the world. We can only imagine what can happen when the current trends will be developed. In-app purchases games will begin adopting ad monetization at higher rates, for example.
Mobile Gaming Industry trends
Some exciting changes will hit the Mobile Gaming tech, in the next few years. We have to say that these innovations are still at their potential stage. Nevertheless, experts are sure the following will shake the market and will create many opportunities for the gaming studios. But they must be able to take advantage of them. We are not discussing if these innovations will represent the next big thing, but when. For now, the high costs of these technologies prevent them from being mainstream. But everyone is sure that in a few years these will be the main guest of the party.
- Cloud gaming: imagine you want to play a game you don’t have. Now you should exit your home, travel to the retailer, buy the game, go back home, and start play. In a few years, a simple idea can change everything. If you will want to play a game, you’ll need only a subscription. And that’s all. Just like a gaming Netflix. Tons of games in a unique catalog. The applications of this idea are simply wonderful. A gamer will have a lot of choices, as we have these days on what movie to watch.
- AR: the Augmented Reality was elaborate back in 1992. But it was in 1997 that someone made the connection with the gaming world, by a pair of South Korean scientists who discussed their plans for making a handheld augmented reality gaming device. Then, Google launched the Google Glasses, showing that it can be done. The AR can offer an immersing experience with the world around the gamer, interacting with the object he would be able to see because of the AR.
- VR: the Virtual Reality let the spectator have a complete sensation of an alternative reality, with which he can interact. Morton Heilig invented the first head-mounted VR display in the 1950s. Today, VR headsets like the HTC Vive Pro Eye can even track your eye movements to make gaming experiences even more immersive.
The following are less specific trends. Surely they will affect the Mobile Gaming Industry. But they will be able to affect more points of view of our life. For example, the first one could help the surgery world, while the second can affect home automation.
- 5G: The unbelievable fast download and upload speeds bring the ability for players to get to content immediately. 5G even brings lower latency, i.e. time a request takes to get to the server and come back. The multiplayer sessions will have their zenith point, given that the 5G can handle a crazy amount of simultaneous connections. 5G speed affects the advertising too. The playable contents will be more immersive and engaging. In addition, the 5G will help the AR and VR growth.
- AI: Artificial Intelligence lets a machine or piece of software demonstrate intelligence, like pattern recognition, speech identification. Also, AI can help with the generation of content like creating levels and non-playable characters, based on the past choices of the gamer. As we saw, AI analyzes the player’s behavior. For this reason, machine learning and the AI can be a powerful tools in the hands of a well structured mobile gaming designer. They are powerful tools not only to tailor the gaming experience but also to maximize the revenue of the ads. In fact, by evaluating the gamer’s behavior, AI can help to decide where and when to place ads and in-app purchases.
Where could Mobile Gaming go?
The Mobile Gaming Industry is growing really fast. Ironsource gives us an overview of the directions this growth could take.
- Gametech will continue fueling the growth. That can be on the development side, they should empower their products to create more engaging games. The ad tech and monetization tools used by mobile games developers will become even more advanced. In terms of platforms, gaming firms will use more and more footage and music in their products, to offer a more immersive experience.
- IAP games will begin adopting ad monetization at higher rates. Ad units such as rewarded videos are adding much value to the experience of gaming. For many players, they are perfect alternatives to real-money payments. The best growth managers are just understanding the potential of opt-in ads like offerwalls to boost IAPs further down the line.
- Apple’s ATT framework will force UA managers to adapt. AppTracking Transparency (ATT) is one way Apple will give users more control over their data. This will force UA managers to change their strategy. The users must give their permission to use their data, and probably most of them won’t grant it. The existing method for ad monetization won’t be possible. Apple gave SKAdnetwork as an alternative for mobile games developers. You can read our past blog regarding this topic, here.
- Social features will continue to rise. Retaining users longer is a must-have for developers. Every mobile game integrates social mechanics like in-game chats, push notifications, groups. Social networks like Twitch testify to the trend. Zynga, for example, released multiple games exclusively on Snap Games, partnering with Snapchat. We expect more joint ventures like this in the next few times.
- Increasing consolidation. This one is already happening. For example, Embracer Group made acquisitions for $2,4 billion dollars in February 2021.
Act fast, no regrets
Mobile game developers should act right now and take the lead on others. As every economics student knows: the first mover, takes advantage of others. This advantage can be reaching out to more users, or maybe landing before the competitors on new markets. Being a first mover and securing such a competitive advantage, could potentially bring users to extend their gaming. With the main video game developers striving to go streaming (for example, Ubisoft), the console market will be most probably shut down. This will create more and more spaces for growth for the Mobile Gaming Industry. It’s expected that there will be enough space for newcomers to join the movement with some mouthwatering innovations. To acquire fast know-how in new markets, a mobile game developer should monetize its apps as soon as possible.
Of course, Mobile Gaming can’t offer the graphic level and the game engine of console gaming, at this very moment. But the industry is expanding its scope, ambitiously aiming for more comfort. In fact, the mobile controller world reaches more and more devices. For these reasons, acting now can represent the most clever thing a mobile game studio should do. Even if a mobile game studio has come up with the Netflix of cloud gaming, without a monetization strategy, the sun won’t shine on such a firm. Obviously, technology and innovation alone can’t be enough. A solid business model with an effective cost structure and a steady revenue stream is crucial.
What can Pointvoucher do for you?
The monetization platform and the SDK you use can be a true ball and chain for a mobile game studio, if these are now performing are expected
You can achieve both efficient monetizations and enlarge your user base with Pointvoucher. Pointvoucher is a danish company that can help mobile game developers. We offer a platform that rewards people with points for investing time in things they already do, like playing games. Points can then be exchanged for real-life rewards. From Amazon gift cards to a €350 Asset Bundle for Lords Mobile, we offer great brands’ rewards to users that play on our platform. The aim to win something for free is driving us more traffic than ever. This brings both satisfaction and monetization for the game studios that already work with us.
Recently we launched our Premium membership. It gives the users lots of exclusive rewards and prize draws, like the 1-year Netflix subscription. There are also dedicated games, just for the Premium members. This gives the users a more immersive experience, so they will want to play more with the games we offer on our platform. Discover more about the Premium membership here.
Our platform is free, simple to use, and doesn’t force the game developers with strict contracts. If you have some ongoing revenue stream, our platform doesn’t interfere with it. These days we are still offering to the mobile game studios that join us a 50% net revenue share from the users LTV on our platform.
What do you think? Is Mobile Gaming the cause of the GameStop experience? Or do you have other answers? Let us know in the comments below. Book a call with us if you are interested in our platform for your mobile games!