Video games have progressed from their origins as experimental technology, through a period where they were widely understood to be children’s toys, into a major arm of the personal electronics industry, and, with the widespread embrace of smartphones, have achieved total ubiquity across American and global life.i
While direct sales remain a primary monetization system for high-end gaming products, mobile gaming has opened the doors for techniques, innovated in casinos, that extract atomized value from players by offering them incremental rewards for desired behaviors.ii This can mean direct expenditure for in-game products, but it can also mean voluntarily playing an in-app advertisement in order to obtain an in-game reward.
To date, game developers are themselves one of the larger sources of in-game advertising revenue, hoping to expand their own user bases by advertising to those already demonstrated to be vulnerable to these tactics. However, the growing ubiquity of mobile gaming suggests that there is room here for more targeted advertisements across a variety of non-gaming industries, and that in-game ad placement is something that should be a consideration in plotting any contemporary advertising campaign.
Advertiser Spend in Gaming Climbs
Growth in the gaming market has been affected by global events, and it’s not clear that consumer purchases of prestige gaming products (where consoles and games with a thick library of digital content can both cost several hundred dollars) have yet fully recovered from their 2022 slumpiii; however, in the same period, advertiser spend in gaming has continued to climb.iv
Mobile games have, for many years, been known as the domain of shovelware and least-effort products (clones, asset swaps, etc.). This was a predictable consequence of the explosive growth in the adoption of smartphones themselves – the massive tide of potential customers made growth low-cost and a blue-ocean challenge where getting to market quickly was the most important consideration. Included marketing products, similarly, tended toward least-effort fast-turn products with the most obvious possible integrations (e.g. forcing a 30 second video advertisement in as an interruption to the play experience). However, as smartphone markets saturate and mature, it is inevitable that user acquisition costs will climb – the ocean will turn red. In that more competitive environment, there will be growing appetite for increasingly sophisticated and compelling advertising content – both for its revenue potential but also to ensure that even the advertising content maintains the same experiential quality as the game it is seated within.v
But So Does the Need for High-Quality Advertising
In that vein, there is potential that in-game advertising’s strength as a revenue source could re-vitalize efforts to introduce larger-scale advertising integration to prestige products, beyond the more predictable mobile and licensed product opportunities. As the market for mobile games grows more competitive, its hunger for higher-quality advertising content will continue to expand – to chase concomitant marketing budgets, of course, but also to meet the experiential quality standards of the product itself.vi Marketplaces for the placement of short video advertisements in games, or placement on pre-designed in-game billboard or advertising spaces, already exist. However, a marketplace capable of matching player demographics to advertiser targets while simultaneously matching game makers with advertising that integrates with (rather than undermines) the quality of their play experience could potentially offer a service not currently available to either party.
While it may still be a novel channel for those accustomed to traditional advertising, it’s extremely likely that the bulk of the population of potential clients and customers available to any business on the planet is currently engaged in some form of gaming. Advertisers and marketers who are interested in connecting with difficult-to-reach audiences or simply looking to explore their options would be well-advised to interrogate their own marketing spend and investigate how accessible their target audiences are through in-game advertising. Researching the intersection between modern gaming and any target audience could reveal an untapped channel with huge potential in an increasingly-digital world.
Written by Kirk Voegtlin, Senior Manager at Big Village Insights.
i [Insider Intelligence, US Video Gaming Industry in 2023: Gaming Devices & Video Game Content Viewership Trends] [statistic_id195768_global-gaming-penetration-2022-by-country]
ii [Insider Intelligence, US Video Gaming Industry in 2023: Gaming Devices & Video Game Content Viewership Trends]
iii [US Video Game Industry_ Trends & Forecast 2023]
iv [Insider Intelligence, US Video Gaming Industry in 2023: Gaming Devices & Video Game Content Viewership Trends]
v [In-Game Advertising’s Challenge: Preserve The Gaming Experience, Power Ad Quality (forbes.com)]
vi [Microsoft Is Building an Advertising Program for Xbox (businessinsider.com)]