From being considered a vice a few years back to becoming a mainstream entertainment activity, the Indian online gaming industry has indeed come a long way in the last few years. The pandemic has fast-forwarded the industry’s growth by many years. This fact comes out very clearly in the KPMG’s report on the online gaming industry.
The report titled ‘Beyond the tipping point – A primer on Casual gaming in India’ notes that the Indian online gaming market is expected to touch revenues of Rs 29,000 crore with a total user base of 65.7 crore in FY25. In FY21, the industry had 43.3 crore users, while the revenue size was Rs 13,600 crore.
The report projects that the casual gaming segment will dwarf real money games (RMGs) and online fantasy sports (OFS) with revenue size of Rs 16,900 crore, followed by RMGs (Rs 6130 crore) and OFS (Rs 5430 crore). It also pointed out that there is an overlap in the casual RMG and OFS users, which results in the sum of the segment-wise users being greater than the total gamer user base. This happens on account of the same user playing more than a single genre within a year.
In FY21, the casual gaming sub-segment in India stood at a size of Rs 6000 crore. Of this, the ads contributed Rs 3620 crore with consumer spends bringing in the remaining Rs 2410 crore. In FY25, the split between ads and consumer spends is expected to be Rs 9890 crore and Rs 6970 crore respectively.
The online casual gaming ARPU is expected to jump from Rs 152 in FY21 to Rs 268 in FY25.
According to the report, the number of gamers in India grew From 25 crore gamers at the end of FY18 to 40 crore by the mid of CY20. India has the second-largest base of online gamers in the world after China thanks to the technology infrastructure development through the availability of high-speed internet, affordable 4G data prices, and rapid growth in digital payments.
Other factors include the growing device penetration with close to 50 crore smartphones in the country at the end of FY20 (including smart feature phones) and rapid expansion in supply and quality of games with the availability of high quality global and Indian titles, wherein the likes of Ludo King and Teen Patti appeared at the top of the app store charts.
Satya Easwaran – Partner and Head of Technology, Media & Telecom, KPMG In India commented, “Our report – Beyond the tipping point – A primer on online casual gaming in India aims to simplify the multilayered ecosystem of the world’s second-largest online casual gaming user geography. Poised at a 3X growth in revenues between FY21-25, we have been privy to the keen interest from corporates and investors who want to ride the incredible wave of opportunity that the business of online casual gaming has to offer.”
He further added, “Having seen rapid growth in the last five years on account of the growth in digital infrastructure in the country coupled with the availability of leading titles, India’s online gaming segment is now a serious business with India’s gaming market being overwhelmingly mobile-first.”
Girish Menon, Partner and Head, Media and Entertainment, KPMG in India adds, “The online casual gaming sub-segment in India has emerged as the largest in terms of consumption amongst overall online gaming, with close to 420 million gamers engaging in online casual gaming in FY21.”
Menon says, “Online casual gaming saw its tipping point in 2020, with consumption and engagement at an all-time high. The growth potential of this sub-segment is immense, with improve monetisation helping the growth of the developer and publisher ecosystem, resulting in the likely emergence of players of scale. Both consumers spends and advertising based monetisation, which is unique to India, are likely to see strong traction, with India’s movement up the maturity curve and, supply of world-class titles, the uptake of rewarded/incentivized ads and localisation of gaming titles being the key enablers. Further, with the emergence of ecosystem enablers such esports and game streaming, online casual gaming is likely to appeal to the masses and professionals alike.”
Indian online gaming operates on four key revenue models namely ads, In-App Purchases (IAPs), subscription and commission income. The ad remains the pre-eminent revenue monetisation model in the market.
The report noted that the dependence on advertising as a means of monetisation remains unique to India and is not likely to go away in the near to medium term as free to play games (With IAPs) dominate consumption in India.
With an increasing share of time spent on gaming, advertisers/brands are looking at online casual gaming as a viable means to reach their intended target audiences. This is especially important as online casual gaming reaches the masses, across demographics.
In FY21, advertising revenues in the casual gaming segment aggregated Rs 3600 crore (60% of casual gaming revenues) and is expected to grow at a CAGR of 29% to Rs 9900 crore by FY25.1 The current dominance of advertising-driven model in casual gaming in India is on the back of advertisers increasingly targeting online gamers and a relatively low proportion of paying users.
In online gaming, the following are the various types of advertisements that are prevalent:
Banner: These types of ads are one of the popular forms of advertising in the form of images encapsulated on the screen that showcases a product or brand. The purpose of such type of advertising is to attract users to visit the advertiser’s website. Such type of ads is believed to be economical, quantifiable, and effective in increasing brand awareness.
Banner ads are preferred as they do not intrude in the gameplay. However, such ads have relatively lesser user engagement and recall value to users as compared with video ads. Thus, over the years, such ads have lost their sheen to video ads.
Native: These types of ads are a paid form of advertising where the ad complements the form, appearance, and function of the user experience on which it appears. Native Ad formats include advertorial, instant content, sponsored listings, recommended content, search advertising etc.
Interstitial: These ads are interactive, full-screen ads that appear while the user is playing games, acting as transition points or breaks in an ongoing activity. These ads can be in the form of text, video, image etc.
Playable: These types of ads engage the user to play a demo version of the game, which is followed by a call to action for downloading the game. Playable interactive ads require a higher attention span of the gamer thus, provide the best engagement of the users
Developers and publishers are increasingly relying on tools such as rewarded/incentivized ads, to strike an optimum balance between monetisation and retention, and not hampering the overall user experience.
According to the report, rewarded advertisements provide an opportunity for users to watch a video or engage with a playable ad in exchange for a reward within the app.
For example, mobile game players will eventually ‘die’ or get stuck upon reaching a critical point. As the users would ideally want to continue playing instead of starting over from the beginning; they might potentially be comfortable watching an ad for a reward or continuing the game from the same position. In each rewarded ad “funnel,” there are four main events that can occur:
? Ad prompt, where the user is presented with the option to view an ad in exchange for a reward.
? Opt-in, when the user opts-in to watch the ad.
? Ad reward, whereby the user completes viewing the ad and receives a reward such as an extra ‘life’ or power-up.
? Item used, once the user consumes the reward and is able to continue playing the game from where he or she left off. As the users would like to keep playing, they’ll often convert throughout the whole funnel.
High click-through rates and balance between monetisation and retention
KPMG said that these types of advertisements are most popular amongst mobile gamers as it enables them to control when and where they want to watch the ad. Given the quid pro quo model of rewarded ad format, it draws the gamers’ attention as watching the ad takes them to next level of the game or provides them with virtual goods/ coins.
These ads have a higher click-through rate as compared to the other form of display ads such as text, image, etc.
Further, publishers are moving towards structures that provide a balance between monetisation and retention of users. Typically, rewarded ad formats tend to strike an optimum balance between monetisation and user retention, followed by interstitial and playable ads. For instance, Gogii Games – a casual game publisher – has not only experienced a positive impact on revenue and a rise in the time spent by users due to rewarded ads but requests from users to add rewarded ads to more games as players relished the opportunity to earn more in-game currency1.
Video-based rewarded ads seeing traction
Both image-based and video ads continue to monetise a huge number of games, however, with the rise of video and platforms that support it, static image ads today hold a less significant position in the evolution of mobile games and their monetisation.
Key evolving themes
Cloud gaming: With the proposed launch of 5G services, cloud gaming has the potential to transform the gaming experience for a mass of users, taking device capabilities out of the picture. This is especially important for markets like India, with limited capacity to invest in hardware.
Esports: Over the next five years, the esports segment is expected to grow rapidly due to increased interest from brands for sponsorship, publishers to promote games & entry of new players across the value chain ranging from organisers to participating teams. The India esports sub-segment is expected to grow by CAGR 27 per cent over FY21-25 to reach a size of Rs 5700 crore
Artificial Intelligence in casual gaming: AI is being extensively used across game development (using AI-generated storylines), player engagement, interactive experiences across gameplay, and personalization of each gamer’s journey with games.
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