Analysts believe Google will need more than just advertising to maintain its new gaming service


Google has seduced the world by unveiling Tuesday its new streaming game service, Stadia. But there remained an important question without answer. How much will it cost to play?

The answer is important not only for hard-core players, but also for Google companies.

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

At the moment, it is assumed that Google's next streaming service will charge consumers to play. This would mark a big departure from the free, ad-supported activity that Google has mastered over the years.

Patrick Moorhead, senior analyst at Moor Insights and Strategy, said that a purely ad-based model would be an ideal source of revenue for Stadia, given Google's uneven track record with subscription services, but that these chances are very unlikely.

"In an ideal world for Google, it would be an advertising-based model because the company is not so successful in" pay "services," Moorhead said. But he thought that it was unlikely that Google's advertising expertise could be successfully integrated into the world of video games, at least not in the short term.

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

In an interview with Business Insider, Jack Buser, Stadia's Business Development Manager, declined to provide details on how the service would be offered to consumers. "We are not talking yet about the commercial side of things," he said.

Is it iTunes or Apple Music?

Google's silence on the issue has left investors, competitors and other insiders in the industry wondering how the company would make money in such an ambitious and expensive venture.

Google has built an $ 840 billion commercial empire in the advertising market, while struggling to create a subscription-based winning product. For example, the company tried to launch a competitor by subscription to Netflix and Amazon Prime with YouTube Premium, but last November it bought back a lot of those efforts.

Google Stadia

Some observers believe that advertisements are a fundamental part of Google's DNA, which means that the company lacks commitment and mentality to create a successful paid consumer service. And if Google decides to charge consumers directly for playing games on Stadia, it will have to make important decisions.

"Is it iTunes or Apple Music," asked Michael Pachter, managing director of Wedbush Securities. An iTunes model means that Google would take the traditional route of having each game individually purchased by users, while an Apple Music approach would turn Stadia into a monthly subscription service.

Read more: Google's weird name and logo for its new game service are part of a clever act that goes away

The difference between subscription and pay-per-play could be significant. Google is considering Stadia as a platform on which any user with an Internet connection and a Chrome browser can access and start playing in seconds. For this reason, some think that a "pay-per-download" model could create too much friction, thus preventing the type of game and experimentation that Google wants.

Follow the fortite

Google must also worry about the competition. Microsoft announced that it was working on a game broadcast service called Project Xcloud, which could be put online this year.

Some Wall Street analysts, such as Dan Ives of Wedbush, believe that Stadia will eventually have to adopt a hybrid model combining Google's advertising expertise with a subscription model.

"[Google has] a definite advantage on the advertising front compared to the likes of [Microsoft] who do not have this in their repertoire if they also go that route, "said Ives.[But] we believe in a mixed monetization strategy around steam and ads [will be the business model]. "

Google Stadia

According to Eric Haggstrom, a forecast analyst at eMarketer, ads in games represent a $ 3 billion market. But most of this revenue comes from ads in games for mobile games, which are generally a less refined experience than the high-end games that Stadia plans to offer.

However, Haggstrom believes that having an advertising space in the Stadia games could be a compelling offer for game publishers.

"If you're a new Royal Battle game that just came out and you want to get people to play, the best place to advertise would be among the other similar games," said Haggstrom.

Haggstrom believes that the Google service will probably adopt an approach similar to that of the very popular Fortnite, which does not charge players to download his game, but instead allows shopping in the game of "skins" and other cosmetic items. This type of in-game buying model could make sense, he says, as Stadia boasts an open platform with very few barriers to entry.

Not everyone is in the dark

However, for a large group, Google is a little more open. Google announced that it already shares Stadia's revenue model with video game developers to help them integrate them.

"Some games may take years to create a game developer for your platform, so you need to show them that it's going to be financially viable for them," Buser said.

Given what is at stake, Google can not afford to lose game developers.

If Buser and Stadia's team finally find a way to create meaningful business outside of the Google ads, the consequences of applying this model elsewhere on the technology giant's properties could be enormous.

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