Market Insight

Facebook acquires PlayGiga to ready itself for cloud gaming in the 5G era

December 20, 2019


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Facebook has acquired Spanish cloud gaming solution provider PlayGiga for €70 million. PlayGiga offers a white label, end-to-end cloud gaming solution to telcos and media companies.

Facebook’s acquisition of Spanish cloud gaming company PlayGiga gives the company a short cut to building its own cloud gaming services allowing it relatively rapid speed to market. It’s now possible that Facebook could launch a cloud gaming service, or some form of cloud streamed games, in 2020 to compete with other services from Google, Microsoft and Sony.

I don’t believe Facebook has acquired PlayGiga for its existing white label relationships which conceivably could be negatively impacted by the deal, but primarily for its streaming technology (although increasingly commoditised), its cloud gaming infrastructure expertise developed in conjunction with Intel, its telco relationships and its portfolio of games which it has negotiated with a collection of publishers. PlayGiga is one of a few independent, start-up cloud gaming companies that have focused on both technology and content, and this makes it a strong fit for Facebook. The ‘time to market’ value is reflected in the €70 million acquisition price.  

Why?

Why has Facebook made the move? Facebook’s entry into the cloud gaming market is quite predictable as it aligns with and leverages some of the company’s key attributes, namely its huge data center capability, its consumer platforms with enormous reach, its games distribution channels, its advertising network and its games streaming capability. With Google, Microsoft, and Tencent already playing in this space, and signs that Amazon is likely to be active sooner rather than later, it was a matter of time before Facebook made its move. The challenge for Google, Amazon and Facebook is lack of first-party games content and limited relationships with publishers of high-end games content. This acquisition partially solves this issue for Facebook and as such positions it strongly for a quick move into the market as required.

Facebook cloud gaming

What a cloud gaming service from Facebook looks like and how it integrates into the existing business remains to be seen. The obvious approach would be to integrate the technology into its Facebook Gaming tab which exists in the main Facebook app on mobile and desktop. Facebook gaming is home to its game streaming content and also its Instant Games initiative. Instant games have been migrated out of the Facebook Messenger app during the last few months. The type of content being streamed in Facebook Gaming is not strongly aligned to current instant games, so the ability to instant play higher-end content makes sense in the context of this product strategy.

If this approach is taken, this product strategy will be similar to Google’s ambition with Stadia integration into YouTube live streaming. Offering consumers instant access to content they are viewing is an interesting new commercial model untested in the market. It would also fit nicely with Facebook’s advertising business. The increasingly mobile-first nature of Facebook consumption, and the network and data demands of cloud gaming, means that its strategy should be aligned to the roll-out of 5G services. In this context the telco relationships that PlayGiga have nurtured also have some value to Facebook.    

 

Geography
World
Organization
Facebook
Research by Market
Media & Advertising
Category
Games
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