Users watched 7.36b hours of streaming content across Twitch, YouTube Gaming, and Facebook Gaming in Q2 2023. While this is a 8.4% dip quarter-over-quarter from Q1 and is down 18.1% year-over-year, these 3 platforms continue to command a strong audience. The power that influencers wield in the gaming world is high and some of the industry’s most well known influencers are beginning to explore building their own games.
There are two prominent recent case studies in the world of influencer-led publishing: 100 Thieves and One True King (OTK). Even though they are still early in the development process, given the teams and creators behind them, these studios have the potential to be very successful. The 100 Thieves studio (currently developing a “AAA” game called Project X) created an experience in Fortnite called Bank Heist which garnered over a million players within a few weeks (Sports Business Journal).
Given how new this type of structure is, this week we will be diving into the strengths and weaknesses of an influencer-driven publisher model and where we would like to see further experimentation in the future.
Influencers as a growth hack: 3 benefits
1) Cheaper marketing: Where partnering with influencers adds the most value is in user acquisition. Today, popular live streamers (>15k concurrent users) can earn $25-35k an hour during a big game launch, with top streamers getting up to $50k an hour (Wall Street Journal). For a studio, marketing as a whole can make up almost 50% of a game’s budget - the Competition and Markets Authority reported that a major franchise that cost $660m to develop spent almost $550m on marketing. Instead of individual ad-campaigns, influencer-based publishing utilizes different upside structures (equity, revenue share, pay per download/install) which locks in an influencer as a long-term marketing partner instead of something that looks more similar to a contractor.
2) Better user acquisition targeting: Partnering with individual influencers also enables games to target a player base directly. For the most part, influencers have specific niches which translate to their audience base. For example, DrDisRespect, a streamer focused on first-person shooters (FPS) founded a studio (Midnight Society) which is developing the game Deadrop. In addition to the studio filming playtesting videos with their streaming founder, they have also been working with another FPS streamer, TimTheTatman, in sharing gameplay videos, as both streamers have direct influence over a strong cohort of FPS players.
3) Jump starting player liquidity, engineering virality: According to Unity, 77% of gamers play multiplayer games. The top three things that are essential for gamers to enjoy a multiplayer game are quickly finding a game (36%), matchmaking at the same skill level (33%), and being able to join a match or party with friends (29%); meaning over a third of gamers prioritize player liquidity as a need. Influencer-led publishing allows the game to tap directly into a massive user base of players already interested in the genre, solving the upfront player liquidity required to initially enjoy a multiplayer game. For example, when Riot launched Valorant (their first foray into the FPS genre), they ran a unique creator-driven marketing campaign that garnered 1.7m peak concurrent viewers (Bleeding Cool). This directly translated to users - when Valorant first launched in June 2020, the game had started with 800k players. over a single month, that number increased by 500%, to 5m (Tracker Network).
For any game, multiplayer or not, studios try to engineer “virality” as much as possible. As Lenny’s Newsletter highlighted earlier this year however, when we see a product going “viral,” it is very rarely driven by a many-to-many spread through word-of-mouth. Instead, it is usually the result of someone with a large audience broadcasting it (i.e. one-to-many). Influencers are a strong example of this one-to-many broadcast strategy and an influencer-led publishing strategy can be a cost efficient approach.
Why influencer-led publishing will not work: 3 points
1) Misaligned incentives: Influencers spend years building up their core businesses and even in cases where the industry overlap is very similar (in this case; gaming), more often than not there are misaligned incentives between the game publishing entity and the influencer’s core business. The game entity cares about building a fun, long-term, revenue-generating game while the influencer ultimately must prioritize their brand. These are not necessarily constantly conflicting values, but they can affect business decisions at a micro level. For example, if a game publisher wants an influencer to publish one video a week for two months but the influencer notices at week three that they have quadrupled subscriber churn after branded videos are posted, the influencer will want to reduce or spread out the cadence of the videos to normalize subscriber churn. Incentives are rarely fully aligned for this type of partnership.
2) Influencers are not game developers by trade: It is unquestionable that big influencers are great at what they do - creating an entertaining brand and sphere of influence within a specific area. The value they bring is primarily in the marketing sphere, not the game design and development sphere. As we highlighted in the prior section, influencers can jump start a demand funnel, but they cannot fix a leaky bucket. Studios that solely rely on partnerships with influencers, over building compelling games, will not be able to retain users and succeed in the long term.
3) Monetization gap for live streaming influencers: There is a large delineation between what gamers are willing to watch and what they are willing to pay for. In gaming, this is best illustrated by the monetization problem in esports. While there are 532m people that watch esports, the market size has remained stagnant at $1.4b. From an hours spent by consumers to monetization perspective, live streaming has one of the worst conversion rates.
Areas of improvement and experimentation
Influencer-led Publishing is still a very new concept and while there are many potential pitfalls, we are interested in seeing more experimentation in marketing strategies, feedback loops and partnership structures:
- More points of attack through complex collaboration: The return on investment (ROI) per video and social media marketing posts degrades over time. This inevitable decline can be spread out or reduced over a period of time by layering influencers with different audiences over one another over the same time period so that user acquisition to the company does not look "choppy" based on the posts of a single influencer. A creative example on how to do this would be a cohort approach like Twitch Rivals or influencer groups which take advantage of competition or camaraderie to boost engagement and fan buy-in. As we touched on earlier, more points of attack mean more opportunities to ignite and re-ignite virality (e.g., rewards systems can be tied to re-engagement within the game or via social media support).
- Fan-driven feedback: Instead of a "one-way" influence approach where the influencer pushes out content for passive consumption, influencers can encourage their audience to become active contributors. One way to do this is through “insider alphas” (where some fans get early access to the game) or even through traditional Twitch livestreams which give fans a sense of ownership and influence over the end product.
- Flexible partnership structures: As we touched upon earlier, influencers are incentivized to protect their core business. While giving an influencer purely upside may “sweeten the pot” for them to join an early-stage game concept, it is low stakes to throw away that partnership in favor of their core business. On the other hand, creators might not sign on to structures that expose them to the downside scenario as they are too risky. We are interested in seeing more variable partnership structures, distinct from typical advisor equity packages. Some examples include equity vesting schedules based on the ROI of marketing efforts, convertible revenue shares (e.g., a creator can earn 70% of revenue gained from a certain promotion and has the opportunity to convert that to equity), and exclusive features on the platform that give shared upside (e.g., prioritized exposure on the homepage and a social media funnel towards the influencers core business).
Takeaway: While an influencer-driven publishing model may provide a business with a great jumpstart to user acquisition, a sustainable, long-term marketing strategy and a great game development team is necessary for these games to survive and monetize in the long-term. This nuance within influencer publishing strategies is still very new and we believe there is room for businesses to explore more complex influencer partnership strategies and structures. We are interested in investing in innovative companies that are exploring these strategies.