Outlook 2021: Forward Momentum
Gaming Eats the World

Ten years ago, venture capitalist Marc Andreessen published a seminal article in the Wall Street Journal, declaring that “software is eating the world.” His belief, which has guided the expansion of Silicon Valley investment over the past decade, was that software would eventually disrupt and transform every industry, replacing non-digital processes and transforming how business is transacted. And while we are very much still in the middle stages of this transformation, we would like to add to Andreessen’s prediction: a second wave of software is coming to eat the world, and this one is rooted in the technologies and platforms of the gaming industry.

We can think of industry verticals as divided into two broad groups, the first wave and the second wave. The first wave industries are the ones which have largely been digitized over the past twenty years: news, media, entertainment, and retail. While there are of course legacy components to all of them, they all also have clear, established digital business models, winners and losers, and paths to market for new entrants. They are digitally mature. The next twenty years will be about digitizing the second wave: mobility, healthcare, education, food and agriculture, government, finance, getting them up to speed with internet assumptions, business models, and new go-to-market strategies. But while that is happening, the first wave won’t stand still. Instead, it will begin adopting a set of next-generation tools from the forefront of tech, which just happens to be where the gaming industry lives. This will expand the toolmakers in the gaming industry well beyond entertainment, subsuming everything we do online today, from shopping to working to socializing, challenging the FAANG companies as the most influential platforms in the world. As large as gaming is as an entertainment industry, it’s about to get much larger.

A second wave of software is coming to eat the world, and it is rooted in the technologies and platforms of the gaming industry.

This new layer of the internet is commonly referred to as the metaverse — an interconnected set of three-dimensional experiences, which may be accessed in VR or AR, but will also be accessed on our smartphones, televisions, and computers. It will be separate from the web and separate from the offline world, but connected to both, with frequent hops between them. The true metaverse will take decades to come together. We’re in the equivalent of the AOL dial-up era, where the pieces are becoming clear, but the infrastructure is not ready, and neither are consumers. But in this march toward the metaverse, the gaming industry — and particularly the platform players with the grandest metaverse ambitions — will increasingly steal time and attention away from traditional websites. And the pandemic gave them a huge head start.

More than half of all Americans were playing video games during quarantine, and those who spent more than 5 hours per week grew by 30%. As traditional sports were forced to shut down, many fans turned to esports to fill the gap. NASCAR’s quick pivot to virtual racing and the NBA’s live broadcast of their teams playing the NBA 2K video game helping recruit new fans to both the style and the distribution platforms for esports. And with a live event platform already in place, proto-verses like Fornite and Roblox were ready to host live concerts on their platforms, reaching up to 33 million unique viewers for their in-game events. Even Complex turned their music and streetwear event into a virtual venue this year. All of these contributed to trends that were already developing: an expansion of the gaming audience, now almost evenly split by gender, and strongly represented in every age group under 50. And an increase in use of games and gaming platforms for social activities and events that are unrelated to the game itself.

As gaming expands to swallow parts of the internet, the most important players to watch are the companies building infrastructure, and the platforms that are aggregating users. From the establishment, both Facebook and Apple throw the largest shadow. Facebook acquired Oculus back in 2014 because they saw the existential threat of the metaverse. And while it was slow going for awhile, 2020 was a breakout year for sales of their flagship device, the Quest. Where Facebook has stumbled so far is in software — Facebook Horizon is the company’s third attempt to build a social space on the platform, and while it’s still in beta, it doesn’t seem to have enough compelling content to attract the initial audience necessary to jumpstart engagement.

While Apple has a rocky track record with social and gaming, they have a stellar history with everything else, and a keen interest in augmented reality indicates that they will take a stab at a metaverse platform of some kind. At this point, the industry is largely waiting with bated breath for the launch of some kind of glasses, which might provide an entry point to more immersive experiences on Apple’s platforms. Similarly to how the iPhone developed, it’s likely that Apple will create at least part of the hardware and infrastructure powering a metaverse, if not the actual services themselves.

The pure infrastructure upstarts to watch include NVIDIA, widely regarded as the world’s best graphics processor designer, who builds the chips and cards that power high-end gaming computers and consoles. But GPUs are already widely used for other purposes, as the most important hardware for artificial intelligence and machine learning, NVIDIA has secured a place in the future of computing more broadly, as well as in ML-intensive applications like autonomous vehicles. And on the software side, Unity is the game engine that powers a large number of existing games, and which is rapidly expanding into other 3D and immersive fields. Both NVIDIA and Unity’s broad use within the industry all but guarantee them a place at the table as metaverse platforms develop.

For brands, it is well past time to figure out a gaming strategy, both in terms of how to reach gamers as an audience, and how brands should show up in immersive spaces.

On the software side, there are four massively multiplayer games which currently dominate attention: Grand Theft Auto, Minecraft, Roblox, and Fortnite. They each maintain between 70–120 million monthly active players, generating 1–1.5 billion hours of gameplay per month. GTA is probably the least advanced in terms of metaverse ambitions, but that fact belies its longevity: originally released in 2013, it is the only major title to now span three generations of gaming consoles. Minecraft is of similar vintage, first available to the public in 2009, but it’s acquisition by Microsoft in 2014 is what gave it the sustainability it needed. With a firm foothold in education and Microsoft’s backing, it will likely make the jump to a metaverse platform, and provide one of the true family-friendly on-ramps that will be necessary.

Roblox is a creative game that’s akin to a digital toy box, and is currently played by over half of all kids under 16 in the US. It’s also the first major gaming platform to let users monetize their own creations, selling everything from aesthetic skins and objects to use in your own creation to fully developed games-within-a-game. They are well on their way to being a default marketplace for digital goods, and will be the first metaverse company to go public early in 2021 on the basis of that premise.

Epic Games, maker of Fortnite and the Unreal Engine, may be the farthest along with their metaverse ambitions, and is the only player who is currently pursuing a vertically-integrated strategy. Not only does Fortnite itself still command many hours of gameplay every month, and serves as a de facto social platform, it also has become a melting pot of pop culture IP, the default place where Disney’s valuable catalog of Marvel and Star Wars characters appear in gaming, and host to the most technically advanced virtual concerts from popular musicians. But beyond Fortnite, it’s the infrastructure that Epic is creating with it’s Unreal Engine that might change everything. Those concerts are created at a special soundstage designed for the purpose of modeling and motion-capturing the artist in real time, creating a “digital twin” that can easily be imported into the game. It’s the human equivalent of the work they’ve done with Hummer on their first electric vehicle, which has a high-resolution model of itself in the dashboard, to display information and controls. Perhaps most interesting is the digital twin Epic created with the city of Shanghai, which can import real-time weather and traffic data, and help city officials simulate proposed changes to infrastructure. Along with their contributions to the digital sets of The Mandalorian and Disneyland’s Galaxy’s Edge, Epic is quickly building out a toolchain for production of digital twins of people, places, and things, but also the means to deploy them in game and in the real world. These tools and processes will all be key components in the buildout of the metaverse.

For brands, it is well past time to figure out a gaming strategy, both how to reach gamers as an audience, and increasingly important is how brands should show up in immersive spaces. While the former will vary widely from brand to brand, for the latter, it’s time to build out a 3D asset pack in widely compatible formats. As more of the internet begins to look and behave like a game, it’s time to start thinking about games as the new social — unique channels where users gather to hang out online, and where they build reputations and personas that can and will include brand affinities. It will be important to think through not just product design for virtual worlds, but interactivity as well — can players interact with your product, or use it with a custom emote, to show off to their friends? Can you create demand with limited releases, or generate engagement by providing a more practical value? And as you look to your product and packaging development, identify whether the tools your designers are using can be upgraded to the ones that game designers use, embedding the creation of a digital twin right into your core creative process.
['Adam Simon']
['Innovation', 'Disruption', 'Marketing', 'Technology', 'Media Criticism']