Esports: The whale in the room

Working Paper No. 19

Shedding light on the thriving yet mostly unknown industry

Even in 2022, many people still picture Esports as a nerdy community of spotty teenage kids gathering in musty, dimly lit basements to play computer games all night long. However, competitive electronic gaming – Esports in short – has since grown into a global, multibillion-dollar industry.

Today, some of these kids have become superstars with more clout than your average professional athlete, and the most renowned Esports events have considerably more reach than some of the largest traditional sports events.

Just for perspective: In 2021, the League of Legends World Championship Final was broadcasted in 18 languages by 19 broadcasters across 34 platforms and racked up a whopping 74 million peak concurrent viewers, signifying a +60% increase to the previous year. And this is just one of the many major Esports tournaments...

A global phenomenon, yet a no-man's-land for most brands

Let’s face it: Esports is the whale in the room. Along with gaming, it is becoming more and more embedded into our pop culture, and brands, investors, and fans all around the globe are taking note of its growing popularity. Clearly, companies who choose not to engage with Esports are already losing out on Gen Z and will eventually fall behind when it comes to communicating with a young, diverse and tech savvy audience.

Alexander Albrecht, Managing Director and Co-Founder of Esports consulting agency build a rocket, states: “Marketers are always looking for new ways to reach Gen Z, an audience of well-educated and tech-savvy young people, mostly in their early twenties, who are willing to spend money when there’s a purpose.  But they often overlook Esports and gaming, or have difficulties entering this market, even though it is exactly where this target group is native to.”

The unparalleled growth of competitive Gaming

This year, the Esports sector is expected to generate more than 1.3 billion USD in revenue, a staggering 22 percent rise over 2021. These are the kind of growth rates typically associated with booming economies. Worldwide sales will hit 1.6 billion by 2024, as per Newzoo's current predictions. The majority of this money comes from sponsorships, which accounted for almost 60% of the overall market last year.

The fandom is growing at the same speed: Globally, Esports viewership is projected to increase at an annual rate of 8% reaching close to 600 million by 2024. These are sizable numbers, especially in light of the decline in television sports viewership across almost all traditional sports in 2020.

“Watching Esports will become as mainstream as watching football, basketball, or Formula One, and the major Esports events will be as popular to follow as the Champions League, the Olympics, and other major sporting events. The difference is that the style of communicating with the audience is still being shaped, and there are lots of possibilities for brands to stand out”, explains Nuno Melo Cristino, Global Executive Creative Director at build a rocket.

From niche sport to lifestyle

The social component of live broadcasting and gameplay was the only way for many to sozialize during the pandemic and has helped catapult Esports into the mainstream media. Twitch and YouTube, the two most popular content streams, provide the community with a direct connection to the players and teams. Moreover, several Esports organizations, such as Faze and G2, are establishing themselves as full-fledged lifestyle brands. These teams' core business is no longer merely sports competition at the tournament level, but has evolved to include content creators, influencer activations and the distribution of their own merchandise, considerably increasing their fame and reach.

Authenticity is the key to success

When build a rocket launched as an Esports agency in 2016, the number of non-endemic brands in Esports was relatively low. Just a few years ago, almost nobody would have predicted that brands such as KitKat, Louis Vuitton, or DHL would join the Esports movement and win over the hearts of the community with authentic and compelling campaigns.

While the potential for brands is enormous, Esports may be intimidating due to its high dynamic and great complexity. If you do not speak the target group's language, your efforts will be in vain. Due to its dispersed environment and digital platforms, the Esports industry provides a plethora of monetization opportunities – but businesses must approach them appropriately, since authenticity is the single most critical aspect in determining the long-term success of any Esports or Gaming engagement.

“Over the years, we've seen how brands that you'd never expect in such an environment became accepted simply by communicating to the community in a truly authentic way, generating enduring brand love and loyalty that money can’t buy. Esports provides innovative methods to connect with a movement that this generation recognizes as far more than simply a sport or another media channel. Esports is also a manifestation of a digital and young person's self-image. It's not the budget that guarantees success in the industry, but rather an authentic and relevant dialogue with the target audience”, says Alexander Albrecht.

Understanding the complex Esports ecosystem

What is true for traditional sports marketing also holds true for Esports: Beginning with the selection of games, effective engagement also demands a perfect alignment of influencers, channels and platforms with the intended audience. It is vital to have a firm grasp of this ecosystem in order to maximize its potential. Due to the market's ever-changing technological breakthroughs, Esports with its high degree of digitalisation is a highly complex and ever-evolving market.

Similar to conventional sports marketing, companies may collaborate with teams, but also with professional players, leagues, influencers, or game producers. However, there are substantial regional variances in this area. While the World Series of the mobile game "Free Fire" peaked at 5,4 million concurrent viewers in Southeast Asia and Brazil, the title has little impact in Europe yet. And this is only one of the numerous titles whose tournaments attract a significant following.

There is no target group for all “Gamers”

The audience is likewise not as homogeneous as one might think. As is the case with traditional sports, the Esports fan base is split into various sections. The spectrum spans from enthusiasts who follow every game and event, to older generations that follow just the classic tournaments on a sporadic basis. Campaigns that merely define "gamers" as the target group will therefore quickly sink into the meaninglessness of irrelevant online advertising due to the high scattering loss.

“In Esports, having a well defined target audience is much more vital than in any other media. Just like sports are different from each other, every respective game title is unique and differs in its genre. Sticking with the traditional sports analogy, Esports is as broad as sports, if not broader, and while it may seem absurd to have a golf specialist discussing alpine skiing on a beach in the Maldives, this mistake is very easy to make in Esports if you don't have a thorough understanding of the communities you're talking to.”, Nuno Melo Cristino warns.

Bear in mind that we are presently discussing exclusively Esports. If we look at gaming more broadly, which is inextricably linked to esports, we find an even greater variety of different and quickly rising target groups, each with their own distinct traits. But do not let this unsettle you: The digital nature of the industry allows for granular targeting with maximum return of invest. Done right, it will open up a whole new palette of engagement possibilites for the brand.

We’re still only scratching the surface of Esports’ full potential

For us at build a rocket, the current state of the business is not a surprise, but rather a logical consequence of the ongoing digitalization of our lives, from commerce to education, social life, and, of course, sports. If a company understands its position in the gaming universe, Esports can be the next powerful tool for increasing brand exposure and, more significantly, brand loyalty in the long run. “Esports is perhaps the most exciting investment choice for forward-thinking and innovative companies and investors”, states Alexander Albrecht. “Due to the rapid development and the high degree of innovation, new opportunities are constantly emerging, allowing brands to establish a connection to millions of fans worldwide, on all channels, and in a relatively short period of time.”

Esports, an engine of digitalisation

Esports is the next big thing. In fact, it’s already here and roaring in with full force. Unlike other entertainment markets, the business is completely digital. The playing field has been leveled for many years, and now we're ready to take a swing at the bullseye, maximize the potential and capitalize on the benefits of digitalization.

A company that understands Esports and is capable of engaging in it, has a high degree of digitalization. The ability to reach the unreachable Gen Z target group demonstrates that it has matured to a certain extent. That's the promise for brands when they decide to embark on the Esports journey:  It's not only about reaching a wider audience or increasing short-term sales, it's about transitioning from a traditional mindset to a new way of communication and thus part of the digital transformation.

The pulse of a new, digital era

We are at the dawn of a new era marked by technological advancements. The rapid tech developments are affecting gamers and the gaming industry, but they also change the way people live, work, and interact in a completely digitalized environment. Gaming is more than a pastime or a sport; it is akin to the metaverse. It's a space where individuals of all ages and backgrounds join together for a variety of reasons to enjoy shared social interactions in virtual environments, and it is engulfing our whole society. The current generation will surely continue to play video games even when settling down in retirement communities.

No company that wants to continue doing business in the future can ignore this factor. Esports is a digitalization engine that is now operating at full speed, and brands will need to make a significant effort to come on board while it's already running.

Shaping our society’s digital destiny

Brands need to capture the bigger picture and need to understand that Esports is the melting point between communities. It is not a silo which can be targeted, it’s a lifestyle choice that individuals make throughout their lives. With billions of people playing, whether on mobile devices, consoles, or personal computers, it is the pulse of our digital future and it’s shaping the way we are communicating.

There are so many exciting angles to look at it. No business can afford to ignore this trend and the ongoing conversation about our society’s digital destiny. Gaming and Esports are not only a passing phase in our lives; they set the standard for new forms of virtual engagement.

tl;dr

Esports is a highly complex industry that is continually evolving, and thus the perfect playground for experimental disruptive marketing. Additionally, it offers unparalleled access to the hard-to-reach Gen Z audience. Along with gaming, the business will continue to flourish and merge into our pop culture. The figures show that the industry's explosive expansion is unabated, even by a worldwide cataclysm. That is why an increasing number of businesses will gravitate towards it, hence multiplying growth. We are certain: Esports is here to win!