Early-stage Adtech Play: 4D Sight
Company coverage piece on an adtech startup looking to boost monetization within live-streaming and esports...
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Viewership across both games live-streaming and esports grew exponentially in the pandemic, driven by consumers seeking social communities and by the interruption of traditional sports. As forecasts call for viewership growth to continue, I’d like to explore new, innovative ways to monetize the uptick in eyeballs. In this piece, I’ll cover adtech infrastructure startup, 4D Sight, and how the company’s product looks to achieve that goal. I came across the company when researching UC Berkeley’s SkyDeck accelerator participants and found their technology to be super impressive. I will note that my subsequent thoughts and opinions are solely based on publicly available information.
Let’s start by dissecting 4D Sight and then transition to how its product presents additional monetization streams within gaming. 4D Sight is a deep video monetization platform that utilizes computer vision to create a new class of ad inventory across various mediums. Within gaming, the company’s software identifies “blank canvas” areas within a stream’s game play and dynamically overlays ads onto them. Moreover, the contextually-relevant ads are skinned to match game-specific cosmetics, preventing the risk of pulling audiences out of immersion. “Interruptive ads hurt the content, audience, and brand equity because they are forced and irritating,” says Erhan Ciris, 4D Sight CEO and founder. Ciris believes that this core aspect can drive long-term loyalty with digital communities. It’s also important to note that these ad placements are only visible to the audience and are not seen by the player/streamer.
What’s even more impressive is the time and resources saved on the technical side. 4D Sight’s solution is innovative because it sits between the developer layer and the streaming layer. In other words, there is no developer or game engine integration work required to natively embed an ad. Once the ad spaces are identified and created, 4D Sight’s algorithms integrate ads in real-time with no human input. This aspect allows for customizable, targeted activation campaigns for both live-streaming and video-on-demand (VoD), greatly increasing monetization opportunities. For context, I’ve created a diagram of the workflow below:
While I spent a fair amount of time consulting my network for information on the early-stage startup’s operational strategy, I wasn’t able to dig up much. The aspect that I am most curious about is the business model. Without any concrete insights, let’s take our best guess on how this technology can be used commercially. In a perfect world, streamers or tournament organizers (TOs) could use this software to provide contextually-relevant, immersive inventory to advertising partners. However, I’d assume that, after a certain level of monetization, publishers would quickly shut it down, citing that streamers or TOs need to be granted rights to monetize the game IP. 4D Sight’s ad inventory is different than pre-roll or interstitial ad inventory on streaming platforms, such as Twitch or YouTube Gaming, because the ads are layered and skinned within the actual game experience (i.e., they’re leveraging the game IP much more). As a result, I am curious if 4D Sight could structure an “official in-game activation platform” deal with major publishers.
A similar example of this structure can be seen in the sports betting space. Sports data companies sign deals with professional sports leagues, such as the NFL, for the rights to distribute “official league data”, which sportsbook clients then pay for. By granting a sports data company rights to distribute “official league data”, a league like the NFL ensures that they aren’t excluded from the monetization of their IP - especially in a hyper-growth sports betting environment like we’re seeing in the US. Depending on the market opportunity, these deals can be quite lucrative. The NFL’s recent rights deal with Genius Sports is worth some $120M annually over six years.
Ok that was a lot, but necessary to contextualize my 4D Sight revenue model proposal. I think that 4D Sight should explore a rights deal to become the “official in-game activation platform” for major publishers and their respective titles. With publisher approval, the company could function as an ad network, granting brands a way to access differentiated streamer or TO inventory while still allowing the publishers to participate in the upside via a revenue share or distributor agreement.
Now that we’ve developed a high-level understanding of 4D Sight’s product and explored my thoughts on a prospective business model, let’s clarify relevant use cases within games live-streaming and esports.
Games live-streaming
According to Newzoo, the global games live-streaming audience will hit 729M in 2021 (+10% YoY) and grow to 920M by 2024, representing a CAGR of +9.2%. As stated in the introduction, nation-wide lockdowns increased the time spent at home over the past year, accelerating streaming engagement significantly as consumers sought out new ways to recreate shared experiences.
This movement greatly benefitted streamers as more eyeballs equals more opportunities to make money. For context, streamers on Twitch predominantly make money through channel subscriptions that grant viewers additional perks, subscriber donations and advertising revenue facilitated by the streaming platform. In terms of advertising revenue, monetization functions off a CPM model in which both pre-roll and interstitial ads play whenever a viewer tunes in to a livestream or watches a prerecorded gaming stream or clip. However, proprietary research shows that 50-70% of viewers fail to see ads because of ad blockers. Advertising revenue is an important revenue stream for creators, yet more than half of the eyeballs are failing to be monetized.
Thus, here is our first use case for 4D Sight’s technology. Let’s pretend that a major publisher is launching a new game and working with popular streamers to drive exposure. Given the streamers’ influence and the expected large number of concurrent viewers (CCVs) for the event, endemic or non-endemic brands could partner with the streamers and use 4D Sight’s platform to facilitate an activation campaign. Once the ad creative is determined, the streamers reroute their content through the 4D Sight servers, which then redirect the streams, with the embedded ads and tracking data, to Twitch in real time. Because the ads are embedded in the core gameplay, they are impervious to ad blockers and won’t annoy audiences like interstitials do. It’s a win-win-win for the streamer, who is benefiting from increased reach and monetization, the publisher, who is receiving exposure for its game and a marginal share of revenue for use of its IP, and 4D sight, who shares in the revenue for facilitating the process.
Based on popularity, streamers retain anywhere from 50% to 80% of ad revenue on Twitch. There’s certainly room to structure a split amongst 4D Sight, the publisher and the streamer in which the streamer retains a similar percentage to what they earn on Twitch. However, in the case, it would be on a larger nominal amount given the elimination of ad blockers.
Esports
Referencing Newzoo’s projections again, the global esports audience is expected to reach 474M this year (+8.7% YoY) and 577M by 2024, representing a CAGR of +7.7%. Esports is also getting more visibility on live-streaming platforms in the East and West alike, increasing discoverability1. The use case for 4D Sight’s platform within esports is straight forward. 4D Sight is offering a way for tournament organizers or franchised leagues to monetize their events in a targeted, dynamic way. Similar to the scenario described in the games live-streaming section, endemic or non-endemic brands can embed their ad creative in a way that creates immersive impressions across live streams, broadcasts or linear tv. Again, because the ads are overlaid, they are not visible to the players, do not require any game engine integration and are eminently customizable for different audiences - synchronously or asynchronously. For example, say Mercedes-Benz wanted to run a campaign during the LCS Championship semi-finals. The embedded ad that audiences view in South Korea can be different than what audiences view in the US. Additionally, the ad that VoD audiences view after the event is also customizable, bringing me to my next point.
VoD
While most of the focus has been on live gaming and esports competitions, VoD still makes up a majority (83%) of viewership in the gaming industry2. Using mainstream events as an example, the combined YouTube views across both the Travis Scott and the Marshmello Fortnite concerts currently exceed 200M. Working with a platform like 4D Sight allows metaverse curators or esports league organizers to keep their fan engagement and monetization efforts evergreen.
Let’s transition to cover risk factors for the early stage company. For one, navigating through publisher approval and rights attainment seems like a tall task. While my proposed “official in-game activation platform” sounds good in theory, I’d be curious if such a model is feasible in practice. And even if the publisher rights are attained, I’d question how streaming platforms would react if advertisers started to work through 4D Sight’s immersive inventory instead of traditional pre-roll or interstitial inventory on Twitch or YouTube Gaming. In other words, streaming platforms wouldn’t be happy if activation campaigns were being streamed on their platform without them receiving a cut. If the company isn’t able to figure out a scalable model, I wouldn’t be surprised if a large publisher, perhaps one associated with a franchised esports league such as Riot or Activision, looked to strategically acqui-hire the team at 4D Sight.
The ceiling is high for this young company as live-streaming and esports viewership grows and as gaming cements itself as the epicenter for shared experiences, culture and events. I also consider 4D Sight’s technology to be horizontal in nature, having applicable use cases within the streaming of traditional sports, concerts, politics, vocational events and more. I am personally excited to see how things shake out for the team and their novel technology.
https://resources.newzoo.com/hubfs/Reports/2021_Free_Global_Esports_and_Streaming_Market_Report_EN.pdf
https://www.mediapost.com/publications/article/346473/the-latest-pull-in-the-video-game-streaming-tug-of.html