Activision Blizzard (NASDAQ:ATVI) has been a rewarding investment for shareholders over the years. While its near-term prospects seem bleak and the stock is down dramatically from 2018's highs, the long-term picture still looks bright.

Management is currently shifting resources around to reinvest in the highest-return areas for the company, including additional content for its existing games. Analysts expect this strategy should improve in-game spending through 2020 and get the company back to growth. The transition will cause revenue and earnings to decline this year, but Activision still has a lot of opportunities for growth in the $140 billion video game industry.

Here are three areas where the company is investing that should pave the way toward higher profits over the next five years.

A road with the years 2019 and 2020 written between the yellow stripes.

IMAGE SOURCE: GETTY IMAGES.

1. Mobile advertising

One reason we can be confident that Activision Blizzard will return to growth is that its games are still drawing more than 300 million monthly active users. More than three-quarters of those MAUs are connected with King Digital Entertainment's mobile games. Candy Crush is the main draw and continues to deliver solid operating results for the company. 

One initiative to keep an eye on is in-game advertising. The King division has started to implement in-game ads to further monetize its mobile titles, and the growth prospects are looking bright. In the first quarter, advertising revenue from Candy Crush more than doubled year over year. 

2. New releases

Activision Blizzard was so active in releasing new games over the last decade that it's difficult to imagine that it will be able to maintain its prior pace over the next five years. In 2012, the company released a new Diablo game. Other than World of Warcraft, which has received a new expansion every few years, that's the only existing franchise that Activision has refreshed. 

It did, however, launch three wholly new franchises in the last five years: Heroes of the StormHearthstone, and Overwatch.  

It's possible the company may release a new Diablo title in the next five years, simply because it's a beloved franchise among Blizzard fans, and it has been seven long years since the last release. 

Additionally, investors should expect the company to make a serious push to bring its console games to the mobile universe. The company made a few major announcements on that front within the last year, with mobile versions planned for Call of Duty and Diablo, and it's just the start of the company's ambitions to grab a larger piece of the $68 billion mobile market. 

Specifically, Activision sees the Chinese mobile game market as a big opportunity, which is why it partnered with Tencent on the upcoming Call of Duty Mobile

Mobile games could be a significant source of growth for the company, but that depends on how well it executes. The mobile market can be a tough nut to crack, particularly for a company that has specialized in console and PC games.

However, Activision Blizzard should have some folks around the office who know a thing or two about building a successful mobile game business, since it spent $5.9 billion to buy King Digital Entertainment, one of the best in the industry, a few years ago. 

3. Esports

Esports remains one of the most attractive growth opportunities for Activision Blizzard. Most revenue from esports is derived from advertising and sponsorships, so attracting major brands to invest is the main challenge.

Overwatch has likely peaked in terms of the size of its player base, but the professional Overwatch League seems to be growing as Blizzard added more sponsors for the second season. 

However, esports is still an unknown quantity for many brands. Activision will need to find ways to convince non-endemic advertisers that it's a reliable gateway to reach an enthusiastic millennial demographic and that it's worth their investment. Given that Activision landed Anheuser-Busch Inbev and Coca-Cola as sponsors for the second season, it seems to be making great progress on that front.

How to think about investing in video game companies

Some investors who bought Activision stock during the last year are probably wondering whether they made a mistake. While it might take time for them to realize a return on investment, keep in mind that the video game industry has grown significantly over the years, and is projected to grow at an annualized 9% rate over the next few to reach $196 billion by 2022, according to market researcher Newzoo.

A $1,000 investment made in Activision stock at the height of the dotcom bubble in 2000 would be worth $50,600 today, including dividends. The company should remain a good investment because it has millions of players across its franchises, and many of them view playing a game like Overwatch as a lifestyle.

Players spend an average of 50 minutes per day on the company's games, which puts into context the opportunity Activision has to monetize these properties with new strategies like in-game advertising and esports.