Facebook launches gaming app to take on Twitch

Facebook has launched its own gaming app to tap into the fortunes currently being claimed by the likes of Amazon’s Twitch, Microsoft’s Mixer and Google’s YouTube.

While it might seem like a foreign concept to the vast majority of those who are above the age of 30, streaming gaming content is fast becoming big business. Whether it is following organised competitions or individual gamers, millions of Generation Z members are logging onto the content streaming platforms. This is a major advertising opportunity for any company which can build a substantial userbase.

“Investing in gaming in general has become a priority for us because we see gaming as a form of entertainment that really connects people,” Fidji Simo, who leads activities for the gaming app, said in an interview to the New York Times.

“It’s entertainment that’s not just a form of passive consumption but entertainment that is interactive and brings people together.”

The original plan was to launch the app in the summer, though the dramatic increase in gaming during the coronavirus outbreak encouraged the team to bring the debut forward. Facebook Gaming is now available to download in the Google Play store, while the team is still waiting for approval from Apple and the App Store.

Similar to the aforementioned apps from internet rivals, the app will act as an aggregator of content such as commentary on gaming videos, tips and tricks, highlights or live streaming of organised competition and all other forms of user-generated content. This gaming voyeurism might sound unusual, but if you have a look at the numbers Twitch boast, there is a major advertising opportunity; this is the Walled Garden business model which made Facebook a financial heavyweight in another setting.

Founded in 2011 as a spin-off of the general-interest streaming platform, the business was acquired by Amazon in August 2014 for an eye-watering $970 million. This might seem like a huge investment, but the same was said about Google spending $1.65 billion on YouTube in 2006.

Over the last nine years, Twitch has grown substantially:

While the platform was originally developed for gamers, Amazon has also built a bridge between this platform and the Amazon Prime entertainment product. Watch Parties on Twitch allows content creators to build new content on top of the existing content in the Amazon Prime library, layering commentary over TV shows or movies. Although still in the testing stages, eventually the content creators will be able to do this live, potentially taking Amazon further into the sports world.

With these sorts of numbers, and potential to diversify the service into new fields, this is the foundations of the Walled Garden business model.

This is a simple model in theory but a complicated one to get right in practise, as demonstrable by the number of companies who have failed. First, a company needs to create a free platform for users which is engaging. Secondly, the platform owner charges third-parties access to this audience through advertising services. The platform owner theoretically remains in control of the data, meaning advertisers have to come back month-on-month, creating recurring revenue streams.

Facebook was the first to take this idea to mainstream and generate billions in profit from it, and while others have tried, success has been incredibly varied. Google, for instance, has achieved this dream-scenario with YouTube, but has failed numerous times to create its own social media platform. Twitter sits somewhere in the middle, as it has cultivated an excellent platform and userbase, but has often struggled to monetize.

The gaming world presents a new opportunity, as can be seen from the Twitch numbers, but this is perhaps only the tip of the iceberg.

Although the gaming segments have been growing healthily over the last few years, the COVID-19 outbreak has acted as an accelerator. Without school to distract children or pubs to lure adults, there is much more free time in the household; some of this has been directed towards gaming.

According to Newzoo, revenues in the global gaming industry have grown from $138.7 billion in 2018 to $152.1 billion in 2019, with the team forecasting this growth to continue through to $196 billion in 2022. The benefits from the coronavirus might only be temporary, though this is a segment which is growing rapidly regardless.