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Bidstack’s James Draper on the video game industry’s ‘revolutionary’ move towards Netflix-style streaming services

Since its entry to AIM last August at 6p a share, video game advertising business Bidstack (LSE:BIDS) has more than tripled in value to its current 19.4p thanks to steady news flow. Initially, the £38.8m firm was propelled by the keen retail interest in its unique model – which sees it insert adverts naturally into games – and a string of high-profile deals with the likes of Codemasters and Avocet Systems.

However, recent months have seen the business complement its established offering with an increasing focus on the growing video game streaming market. Notably, its efforts to build a first-mover advantage in this fledgeling sector have included several high-profile appointments boasting senior experience at companies like Spotify, Sega, and Disney. With Google and Microsoft already staking their claim in the streaming space, Bidstack’s CEO James Draper tells us why the sector could be a real game-changer for the company’s product.

Unique product

Bidstack has developed unique technology that can place adverts into organic spaces within video games across numerous popular gaming platforms. This could be anything from a poster on a virtual billboard on a building or vehicle in an open world game, to a video banner or flag by the edge of the pitch in a football simulator. Unlike traditional video game adverts, Bidstack’s so-called ‘native’ approach ensures that adverts are inserted in a way that resembles real-life advertising. The model means the overall gaming experience does not break immersion  and, in some cases, can even be enhanced.

The company is based around two types of customers – game developers (supply) and advertisers (demand). On the supply side, the business secures access to organic advertising space within a video game from the title’s publisher or developer. Any revenues arising from this space are then split on an agreed basis. From the developer’s perspective, Bidstack allows them to monetise their virtual advertising space dynamically and in real time, providing recurring revenues. Traditionally, such space was sold before launch, meaning it was locked in and revenues were limited.

Meanwhile, on the demand side, advertisers pay Bidstack to insert adverts onto the in-game space it has secured. Prices are typically determined by scale and pace, which – in turn – is calculated by how many players see the advert, the number of times they would see the  advert and how long they see the advert for. Aside from huge market exposure – Bidstack’s implementation in the Football Manager simulation franchise ensured around 25m impressions a day for advertisers in December – this approach offers numerous advantages to advertisers. Indeed, it enables them to alter their campaigns in real time, tailor adverts to specific players, monitor the success of their advert using analytics, and, importantly, avoid ad blockers.

As well as selling its directly to advertisers, Bidstack has adapted its technology to enable its inventory to feature on so-called ‘Demand Side Platforms’ (DSP). Owners of advertising space upload their opportunities to these platforms, while brand owners and advertising agencies allocate a certain amount of expenditure to spread among the opportunities best suited to their campaign. For more on Bidstack’s product offering, please see our recent profile on the business.

New horizons

Bidstack has been very busy since entering the market, with investors enjoying a steady stream of newsflow. Last year, the outfit signed a deal with AIM-listed, award-winning video game developer Codemasters to provide exclusive native in-game advertising to two of the firm’s titles for three years.  It has also integrated a demand-side platform called Avocet Systems, marking the first time its in-game inventory has been able to buy programmatically via a DSP. Notably, it has also revealed that it is in discussions with the Interactive Advertising Bureau (IAB) – a trade group for the digital advertising industry – around creating a recognised advertising category for native in-game advertising.

However, over the last month, the business has shifted its focus somewhat onto the growing video game streaming market. Notably, it has established an advisory committee that aims to harness the talents of a select group of high-profile executives across both the video gaming and digital advertising industries.

Initially, Bidstack  appointed Pete Beeney and Joel Livesey, senior figures from Spotify and The Trade Desk respectively, to support it in monetising the video game industry’s moving towards a streamed subscription model. The company has since bolstered this expert guidance with the addition of Disney, Activision Blizzard, and AdColony veteran Will Kassoy to its advisory board. It has also appointed former SEGA Europe CEO Mike Hayes as a non-executive director.

So, what is video game streaming?

In a similar manner to Spotify and Netflix, video game streaming services allow players to stream games to any screen from the so-called ‘cloud’. In layman’s terms, the game is stored, executed, and rendered on a remote server (often controlled by the game company) and streamed directly to a consumer’s computer over the internet. During the game, the player’s inputs are then transmitted to the server before the server issues an in-game response.

There are numerous potential advantages to the software. The most notable of these is that it enables users to play games on multiple devices whenever they have a decent internet connection without actually needing to download or install the game. Importantly, because the content is not stored on their device, they can play top-of-the-range games that require state-of-the-art hardware without actually owning that hardware.

Although video game streaming is yet to hit the mainstream fully, numerous companies have released or announced their version of the service. Most notably, this includes names like Sony, Microsoft, and Google. Sony was a particularly early adopter, launching its cloud gaming subscription service PlayStation Now back in 2015. This allows users to access a selection of PlayStation 2, 3, and 4 that can be streamed to their PlayStation 4 or PC. Microsoft subsequently launched a similar service called Xbox Game Pass in 2017.

Following these early attempts, the last few months have seen the possibilities offered by video game streaming services open up significantly. Indeed, Microsoft has revealed an updated cloud gaming product called ‘Project xCloud’, which is designed to stream high-quality, console, and PC-grade experiences to any screen. The firm will begin by streaming its existing library of Xbox games. Meanwhile, Google has also announced a cloud gaming service called Stadia that is capable of streaming video games in 4K resolution at 60fps on any connected device through the company’s Chrome web browser.

Speaking to ValueTheMarkets, Draper said the rise of cloud gaming services has the potential to increase the size of the ‘high fidelity’ gaming space – aka the serious gaming space – considerably: ‘In short, this move towards streaming is revolutionary because high-fidelity gaming now has the potential to have the same reach as casual gaming. It will be accessible to anyone with a decent internet connection – they no longer need to spend a large sum on the newest console of top-of-the-range PC.

From an advertising perspective, he says this will play into Bidstack’s strengths well: ‘We have found ourselves in a pretty sexy market with the potential for unprecedented reach,’ he says. The standardised old gaming market model sees a game sells for £40-50, and that will be the only revenue generated from the user. The subscription model provides our adverts with a much wider reach due to the number of people playing across devices and the ability to run numerous, tailored campaigns to users that can be changed regularly. In some cases where a game is particularly successful, we think this could generate around 300 times as many impressions as the traditional model, making much more advertising revenue.’

Alongside the opportunity for an increased number of players, Draper adds that the streaming services could open up an entirely new secondary advertising market. In particular, this applies to Stadia, which integrates with YouTube to cater to the large demand for watching others play video games that is currently dominated by a service called Twitch:

‘Stadia lets people watch others play a game on Youtube and even enter it and play it their way. This creates a ‘secondary audience’, that means a viewer can engage with the person they are following for the first time. Importantly, it also means that different adverts can be placed for the secondary audience and the primary audience. In other words, the person playing the game will see one set of adverts while the person watching (and potentially also playing) will see another,’ he says. ‘The potential here is clear- by monetising the secondary audience, meaning ads are not restricted to one viewer, there are opened up by factors of 10 and 100 depending on how many people watch the stream. The computational power is massive. If Google can get the penetration they want with Stadia, which is likely given their size, then they could have the market for watching video game live streams sewn up.’

Valuethemarkets.com and Dynamic Investor Relations Ltd are not responsible for the content or accuracy of this article.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

  • Daniel Flynn currently holds a position or positions in the stock(s) and/or financial instrument(s) mentioned in the piece.
  • Daniel Flynn has not been paid to produce this piece by the company or companies mentioned above.
  • Dynamic Investor Relations Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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