Facebook gears up for the world’s first ad-supported cloud gaming service

Today Facebook Gaming announced that several free-to-play mobile games will be available via cloud gaming on the Facebook Android app and browser. This appears to incorporate technology from its PlayGiga acquisition into Facebook’s existing ‘Instant Games’ service (launched in 2016). Instant Games have so far focused on the hyper-casual segment (such as Pac-Man and Words With Friends), but with cloud gaming, Facebook hinted at more complex mobile games coming to its redesigned ‘Play’ tab in the future.

Facebook has been ramping up its activity in games - in April 2020, it launched a dedicated Facebook Gaming app, focusing on live video-streaming of games content to compete against Twitch and YouTube, in addition to offering Instant Games that users could play and live stream.

A big emphasis has been placed on managing people’s expectations for Facebook’s cloud gaming initiative, with ex-Oculus Jason Rubin (VP of Play) stating that it is “not going to overpromise and under-deliver”, and “not going to try to wow you with the wonders of our data centers, compression algorithms, resolutions, or frames per second”. These were allusions to Google Stadia’s inability to deliver on its grandiose vision, which it promised back in March 2019.

"Underpromise and overdeliver"

Facebook is taking an extremely cautious approach, as it looks to avoid the missteps of Stadia. The launch titles are underwhelming, which will not excite dedicated gamers, but Facebook is aware of this. It doesn’t intend to compete against console and PC gaming platforms, but instead continue to target casual mobile gamers – 200,000 of whom are already playing cloud-streaming games per week on Facebook. The ultimate goal of this endeavor is to use gaming to increase user engagement with the Facebook platform and power the company’s enormous ads business.

This announcement gets one step closer to my prediction that Facebook will eventually offer the world's first ad-funded cloud gaming service. The Facebook Gaming app is currently in the user-acquisition phase; it is offered completely free, without any ads. Facebook is likely to be utilizing the same strategy as it did with Instagram: Build a critical mass, and then gradually introduce monetization via advertising. Facebook’s great strengths in the ad business means it is well-positioned to lead in the in-game advertising market. Other companies are in similar position, most notably Google with Stadia, but it has so far not strayed away from this form of monetization. 

Facebook, Google, Microsoft and Tencent are well-positioned in the in-game advertising market

Glimpse into the 'cloud playable ads' future

One of the most intriguing (but overlooked) aspect of this announcement was the launch of ‘cloud playable ads’ – a concept which was highlighted earlier this year in Omida’s Market Landscape In game advertising 2020 report. The existing playable ads have already proven effective in not just driving app installs, but also further post-install engagement. This is because the user has already chosen to try, and engage with, the app before a download has taken place. With cloud gaming, Facebook is taking this a step further by “blurring the line between games and ads”. 

Relationship between cloud gaming providers and Apple is increasingly contentious

Facebook vilified Apple’s restrictive rules around cloud gaming apps on the App Store, with Rubin stating, “Apple treats games differently and continues to exert control over a very precious resource”. With a global installed base of nearly one billion iPhones, Facebook, nor other cloud gaming services can afford to miss out on much-coveted iOS users who are, on average, more affluent and spend more on apps and games.

Delivering cloud gaming via a Progressive Web App (PWA) is one interim solution, but due to its limitations (see chart below) Facebook has instead chosen to exert pressure on Apple, hoping it will loosen its rules. In a Twitter exchange with me earlier today, Rubin highlighted that “linking from App 2" Web is blocked by Apple”, making PWA solution undesirable for Facebook, despite it potentially suiting Amazon’s and Microsoft’s cloud gaming services. I believe that Apple’s stance on cloud gaming apps on the App Store is unsustainable, particularly as other content-streaming services are already on App Store (such as Netflix). Apple remains under pressure from game companies, gamers, and the EU antitrust probe on the App Store billing rules – leading me to believe that Apple will loosen its restrictions further in 2021.

Cloud gaming service providers can circumvent Apple App Store’s restrictions and rules by running the service as a Progressive Web App (PWA), but this brings its own set of challenges and limitations