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Why Google May Be Interested in Gaming

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Nov. 20 2020, Updated 4:33 p.m. ET

Google reportedly has in-house video gaming studio in mind

Alphabet’s (GOOGL) Google is looking to make a big move in the gaming business, according to a report by video gaming industry site Kotaku. Citing people familiar with Google’s plans, the report said Google was exploring a three-pronged approach to the gaming business. In one area, Google is said to be considering taking on the Nintendo, Sony (SNE), and Microsoft (MSFT) gaming hardware market.

In another area, Google is said to be having a game streaming service like Amazon’s (AMZN) Twitch. Google has also explored setting up a gaming studio where it would have an in-house team developing games for its console and streaming service. Creating an in-house gaming studio could see Google challenging Electronic Arts (EA), Zynga (ZNGA), and Glu Mobile (GLUU) for revenue. These video game makers increased their revenues 3.6%–43.4% year-over-year in the first quarter.

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Global video game market grew 18%

In 2017, IHS Markit estimates that $40.7 billion was spent on video game purchases and related hardware and services. That means the market expanded 18%. Game content spending rose 12% to $23.6 billion, and gaming hardware sales increased 33% to $14.1 billion. Spending on gaming subscription services grew 11% to $3 billion. Nintendo, Sony, and Microsoft are the world’s leading sellers of gaming hardware.

The global video game market is expected to continue to grow.

In-game advertising

Running a game streaming platform could boost Google’s advertising business. According to PwC, the video game advertising market in the United States was estimated at $1.4 billion last year. The market is expected to grow to $1.9 billion by the end of 2021.

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