Digital Building Blocks

Gaming at an Early Age

As a firm, we spend a great deal of time thinking about where the next billion gamers will come from. We have taken a close look at the opportunities in specific geographies such as India, Latin America, and Africa; where gaming intersects other industries such as education and health and wellness; and ways to better serve certain age groups such as gamers aged 65+.

This week, we will be looking at a specific age group we believe has historically been mis-served within the gaming industry: children in early childhood (ages 2-5). 

Can Gaming Play a Role in Early Childhood Education (ECE)?

According to Harvard University’s Center on the Developing Child, while brains are built over time, the foundations of brain architecture are constructed early in life. A great deal of brain architecture is shaped during the first 3 years with experiences and genetic factors shaping the quality of brain architecture and establishing the foundation for the child’s learning, behavior, and health in the future. Plasticity (the ability for the brain to change and adapt) is greatest in the first years of life and decreases with age.

Instead of focusing on standards for reading, writing, and math, education and learning for children aged 5 and younger is primarily focused on developmental milestones across 4 categories: social and emotional, language and communication, cognitive, and motor skills.

This teaching can be done either in a formal program or at home. Today, ~75% of all children in the US attend some form of preschool or early education program. However, parents still see themselves as the primary educators of their children, with 85% of US parents reporting that they regularly engage in educational activities with their preschool-aged children.

Similar to older age groups, technology can be used to supplement (not replace) education through increased learning opportunities (National Association of State Boards of Education). We believe that gaming and digital play can provide interactive opportunities and feedback which enhances the quality of learning. 

Quantifying the Opportunity

There are an estimated 657 million children under the age of 5 worldwide (about 8.2% of the population). The global preschool toys market size was valued at ~$11b and is expected to grow at an average growth rate of 7% between 2023 to 2030 (Research Corridor). 

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One of the primary drivers of this projected growth is the increasing demand for educational toys. Parents and caregivers are becoming increasingly aware of the importance of play-based learning on early childhood development, leading them to seek out toys that are both fun and educational. The average annual toy spend per child in the US was $366 in 2021, the highest in the world, followed by Europe at $222. 

Education is the 2nd highest category (after housing) of spend for children under 5 with 20-25% of spend per child going toward education. The cost of preschool varies depending on location and type of program, but on average, costs between $4-12k per year. Supplementing in-person education programs with digital products can be a cost effective way to offset the high cost of preschool programs or to give parents more peace of mind around their child’s development while at home.

The Current State of Digital ECE Products

We believe that a majority of digital products catered toward the 2-5 age group not only fall short of providing value-add engagement but introduce potential harmful effects:

• Overstimulation and addiction: Bright colors and fast movements send overstimulating messages to a child’s nervous system. This enables the body’s flight or fight response, creating a hyperarousal state. Prolonged activation of the stress response systems can disrupt the development of brain architecture and other organ systems, and increase the risk for stress-related disease and cognitive impairment, well into adulthood (Harvard University’s Center on the Developing Child).

• Promotion of the wrong type of education: It is critically important that experiences provided in early childhood are appropriate for a child’s stage of development. Formative stages of development begin and end at different ages for different parts of the brain and build on one another. For example, vision, hearing and touch end in the first years of life while the areas of the brain that process more complex things (e.g. communication, interpreting facial expressions, reasoning and decision making) end later. Misalignment with the proper milestones or an imbalance of entertainment and education can result in confusion and frustration.

• Lack of trust: Broadly accepted standards for technology use for young children typically guide parents toward limiting usage by time (one hour or less for kids aged 2-5) and to “quality content”. However, outside of some contextual guidelines, it is up to parents to determine what is considered “good” versus “bad” screen time which can foster a lack of trust in digital products entirely. Additionally, multiple platforms (e.g., YouTube, Netflix) offer children’s content that is mixed with adult content, exposing the child to unnecessary risk.

While we believe that most digital products for the 2-5 age group experience these pitfalls, this category still has successes and further potential for growth. For example, Pok Pok (a Konvoy portfolio company) is successfully reimagining digital play by creating a gentle and developmentally safe playroom (nominated for the App Store Awards for 2023!).

Key Challenges for the Category

In addition to overcoming the negative stigma and impacts of poor product design mentioned in the prior section, products addressing early childhood face a unique set of challenges:

• The payer is not the user: The disconnect between the payer (parent) and user (child) that we typically see in kids products is further exacerbated given that the end user has limited communication abilities - enjoyment may not be directly correlated with continued usage and payment. 

Additionally, for this age group, there is also no broadly accepted standard in terms of business model and price. While an adult may feel comfortable spending $15 / month on subscription entertainment products like Netflix or Hulu, models other than a one-time purchase are much more nascent in digital products for this age group.

• It is difficult to measure positive impact on learning: As we highlighted earlier in this piece, learning does not have the same rigid guidelines as those seen in formal education for older age groups. While there are still observable checkpoints in each developmental milestone, it is difficult for a parent to discern the true impact of digital play specifically.

• Accessibility: 1 in 3 kids under 5 fail to meet their development potential as a result of poverty and inadequate nutrition. While digital tablets have become more common in households with children - about 80% of households with children own a tablet - there is a significant gap between high and low income households. Given that chil­dren from low-income fam­i­lies are less like­ly to access preschool, if digital gaming products are introduced as an education supplement, the developmental gap by income will be exacerbated until there is tablet parity.

• “Single Player” design lacks serve and return: One of the most essential experiences in shaping the architecture of the developing brain is “serve and return” interaction. Young kids naturally reach out for interaction through vocalization, facial expressions, and gestures, and adults respond similarly. This back-and-forth process is fundamental to the wiring of the brain, especially in the earliest years and single player products do not allow for this.

Takeaway: Gaming can be additive to achieving developmental milestones in children aged 2-5. While digital play products must overcome challenges related to trust, quality screen time, and alignment to appropriate milestones, it is not impossible, as evidenced by successful products like Pok Pok (a Konvoy portfolio company). We estimate that this growing $11b+ opportunity is still a blue ocean for digital innovation. We believe in and are excited at the prospect of investing further into the future of developmental play for young kids.