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

First-party data, as experts say, is always the deal sweetener and gaming companies want to make the most out of it. The two options that they have to make this happen are 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 monetisation company Datawrkz where they would acquire a 33 percent stake in the first tranche by April 22 and reserve an option to acquire an additional 22 percent in the second tranche that is expected to close in the fourth quarter of FY23.

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

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

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

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According to Nazara Technologies CEO Manish Agarwal, 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 79 billion in the year 2021, marking a leap from about Rs 65 billion in the previous year, according to business intelligence firm Statista, the sector is expected to be worth over Rs 150 billion 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.”

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.”

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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 very 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 Piyush Kumar, Nazara’s founder.

“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 added.

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 2022-2026) 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.