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Home / Technology / Analysts say Google wants more than ads to sustain its new gaming service

Analysts say Google wants more than ads to sustain its new gaming service



Google Wowed the World When It's Unveiled Its New Game Streaming Service, Stadia, on Tuesday. But it left one important question unanswered. How much does it cost to play?

The answer is not just for gamers, but Google's business as well.

Depending on how Google plays it, Stadia could take the internet giant's business model at an entirely new level that's struggled to reach for years.

Right now, the speculation is that Google's forthcoming game streaming service wants to make consumers pay to play. Google would have mastered over the years.

Patrick Moorhead, Principle Analyst at Moor Insights and Strategy, said that it would be extremely unlikely to have a revenue stream for Stadia, given Google's spotty track record with subscription-based services.

"In a perfect world for Google, it would be an ad-based model as the company is not successful in 'for-pay' services," Moorhead said. But he thought it unlikely that Google's expertise could be parlayed successfully into the gaming world, at least not in the near term.

"The reality is that it would take decades to get the gameplay and content optimized for that model," Moorhead said.

In an interview with Business Insider, Jack Buser, Stadia's head of business development, declined to provide any details on how the service would be offered to consumers. "We're not talking about the business side of things," he said.

Is it iTunes, or is it Apple Music?

Google's silence on the matter has left investors, competitors, and other insiders wondering how the company wants to make money on an ambitious and expensive venture.

Google has built a $ 840 billion business empire on ads, while it has struggled to establish a winning subscription-based product. For instance, the company has tried launching a subscription to Netflix and Amazon Prime with YouTube Premium, but last November, it has gone back much of those efforts.

Google Stadia

Some observers think ads are a fundamental part of Google's DNA that the company lacks the commitment and mentality to create a successful for-pay consumer service. And if Google does opt to charge consumers on Stadia, it wants to make some important decisions.

"Is it iTunes, or is it Apple Music?" Wondered Michael Pachter, Managing Director at Wedbush Securities. An iTunes model means Google would head down to the traditional route of having users buy each game individually, while at the Apple Music approach would turn into a monthly subscription service.

Read more: Google's weird name and logo for its new gaming service is part of a clever disappearing act

The difference between subscription and pay-per-play could prove consequential. Google envisions Stadia as proving a platform that connects to an Internet connection and Chrome browser. For that reason, some think a "pay-per-download" model could create too much friction.

Follow the Fortnite

So Google needs to worry about competition. Microsoft has announced it's working on a dubbed project streaming project Xcloud, which could go live this year.

Some Wall Street analysts, like Wedbush's Dan Ives, think Stadia wants to adopt a hybrid model that is Google's ad expertise with a subscription model.

" which is a clear advantage on the front versus the likes of [Microsoft] which do not have that in their repertoire if they go down that path as well," Ives said. "[But] We believe in a blended monetization of strategy around steaming and ads [will be the business model]."

Google Stadia

Ads in games are a $ 3 billion market today, according to Eric Haggstrom, a forecasting analyst at eMarketer. Stadia plans to offer.

Still, Haggstrom thinks having space within Stadia games could be a compelling offer for game publishers.

"If you're new to a royal game that just came out and you want to play your game, it's the best place to advertise," Haggstrom said.

Haggstrom thinks the Google service is likely to adopt a similar approach to the mega-popular Fortnite, which does not charge players to download their game, but instead allows for in-game purchases of "skins" and other cosmetic items. Stadia has been touting on open platform with very few barriers to entry.

Not everyone's in the dark

For one important group however, Google is being a bit more forthcoming. Google's Buser said he's been sharing Stadia's revenue model.

"Some games can take years to make, so do you have to make them financially viable for them," Buser said.

Given what's a stake, Google can not afford to loose game developers.

If Buser and the Stadia team finally find a way to create a meaningful business outside of Google's advertisements, the ramifications for how that could have been applied across the tech giant's properties could be massive.

Got a tip? Contact this reporter via Signal or Whatsapp at +1 (209) 730-3387 using a non-work phone, email at nbastone@businessinsider.com Telegram at nickbastone , or Twitter DM at @nickbastone .


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