Programmatic advertising: it’s in the game

As the video game industry continues to expand, publishers are seeking new ways to monetise advertising opportunities. This article discusses the shift towards in-game programmatic advertising and how games publishers and advertisers can capitalise on these emerging technologies whilst managing the risks that it can present.

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History of in-game advertising

In-game advertising is not a new or unique concept. Prior to the advent of streaming, when video games were contained on hard copy discs pre-loaded with game content, publishers offered advertisers space on in-game properties as a means of increasing the profit generated by the release. These were static opportunities, contracted for during the game development phase and appearing to all players of  the game regardless of who they were. For example, Adidas and Panasonic advertisements were displayed pitch side on the very first FIFA title, FIFA International Soccer, when it was released in 1993. Additional forms of advertising have also developed and have been seen in subsequent titles, such as the product placement by Subway which was seen in Unchartered 3 in 2011.

 

 

 

 

 

As video games have shifted from static, offline, physical copies to “always on” connected experiences (even when playing single player experiences), in-game advertising has undergone a parallel and significant change with older, static advertisements replaced with more dynamic and, importantly, more tailored content.

One key technology emerging in the video game industry is programmatic in-game advertising. Programmatic advertising entails the use of an end user’s data to serve tailored advertising to them, based on identifiers such as interests, demographic, location or history of player. Now the predominant method of buying and selling advertising across mobile and web platforms, the ability for advertisers to service ads on in-game properties programmatically offers them the chance to reach a wider audience in a more effective and efficient way and also provides games publishers with an opportunity to monetise in-game properties more effectively.

 

 

 

 

 

 

Industry change

Given there are now over 3 billion gamers worldwide, and this figure is predicted to increase further , it is no surprise that in-game advertising space is generating increasing interest. This figure is expected to grow further and given the value that advertisers can extract from an audience so large, it is unsurprising that the value of the in-game advertising market is expected to grow by over $5 billion between 2023 and 2027.

The volume of commercial transactions occurring in the in-game advertising world is testament to the importance industry players are attaching to this space.  Sony and Microsoft are both considering offering in-game advertising on their consoles, a move which would offer a standardised framework on the underlying platforms that publishers could use to monetise content without having to build such capabilities into titles themselves, encouraging wider adoption. Also, last year, major in-game advertising platforms such as Bidstack  and Gadsme undertook seed funding rounds to expand their operations, and a number of key partnerships were announced including:

  • NBCUniversal partnering with Anzu.io to run advertisements for its client roster across Anzu’s mobile, PC and console game inventory;
  • Gadsme partnering with Integral Ad Science to improve viewability and invalid traffic measurement across its advertising inventory; and
  • Bidstack announcing that it had entered into a deal with an APAC company to create a white label in-game advertising platform.

Significant announcements have already been made in 2023 as well:

  • Bidstack announced its partnership with SimWin Sports in January, which will see Bidstack’s advertising technologies being deployed across SimWin’s virtual sports metaverse.
  • In February, Adverty and Scuti announced a revolutionary partnership to develop technology which allows players to purchase the brands displayed to them during gameplay directly from their game lobby and earn rewards following these purchases which can be spent on in-game purchases.

These examples show that in-game advertising is developing rapidly and an increasing number of game publishers are looking to deploy  more technologically advanced solutions. The technologically transformative nature of many of these deals will serve to unleash the potential of programmatic in-game advertising which may, in turn, make the area a more lucrative and attractive medium to players within the AdTech ecosystem.

Opportunities

Serving advertisements through in-game native advertising formats offers benefits to both publishers and advertisers.

Games publishers

  • Monetisation: in-game programmatic advertising allows publishers to monetise their in-game advertising inventory. Programmatic advertising targeting specific users is likely to be a more effective advertising tool than static advertising, which will result in an ability for publishers to command higher fees as advertisers will be more confident that their campaigns are being seen by their target audience. Being able to dynamically change advertising partners over time also allows for repeated monetisation, creating a continuing revenue stream.
  • Flexibility: monetising the in-game inventory via programmatic in-game advertising allows games publishers to have more flexibility in how they offer their games. For example, publishers may be able to offer their games in F2P formats or offer their games at lower cost, and instead use their advertising inventory to generate revenue.
  • Experience: in-game advertising may give games a more ‘real-world’ feel and improve the gamer’s overall experience. Native advertising inventory can be displayed in a highly realistic manner and if it is presented in a way which is non-disruptive to gameplay, it may enrich the player’s overall experience of the game.

Advertisers

  • Data: in-game programmatic advertising will rely on information about an individual player to target specific ads towards them, rather than all players seeing the same advertisements. This, in theory, means that advertisements will reach specific target audiences, which is significantly more effective than static advertisements being displayed to a large number of users who may have no intention of engaging with the advertised product.
  • Engagement: the Averty/Scuti partnership shows that in-game programmatic advertising is becoming more developed and users will be able to engage directly with the in-game advertisement without leaving the in-game environment. This is a major step forwards from the static advertisements which would require players to disengage from gameplay and move to a different device to purchase the product.
  • Social media: the rise of platforms such as Twitch demonstrate that there is a growing market for people consuming video game content by watching others play rather than playing themselves. Where in-game programmatic advertising campaigns are used, brands may enjoy further exposure outside of the in-game environment through promotion on social media platforms. This allows the brand to be promoted to an even larger audience.

Things to consider

  • Data: in-game programmatic advertising relies upon the use of data to serve the advertisement to the correct target audience. Web-based programmatic advertising can use data from a range of sources, such as cookies, but in the in-game environment the volume of data on the player is more limited, particularly on console based formats as compared to mobile formats which can pull data from other apps. Games publishers will need to consider how to enhance player data, through means such as detailed registration processes, and the importance of avoiding friction in the sign up process resulting in player drop-off.
  • Privacy: games publishers and advertisers will need to be comfortable that the data they are using to serve in-game programmatic advertising is used in compliance with privacy laws, for example by ensuring that players agree to comprehensive privacy policies which allow the player’s data to be used.
  • Targeting children: advertisements targeted at children under 16 years of age should not actively encourage children to buy the advertised product. As PEGI ratings are unlikely to be a sufficient defence, age assurance processes should be used. As approximately 80% of worldwide gamers are over 18, how to tap into the massive adult gamer market whilst avoiding the risks of targeting age-inappropriate advertisements at children is a key issue to be considered. Age assurance is the obvious solution, but refining targeting through data collected from in-game microtransactions may be another tool which could be used.
  • Awareness: for in-game programmatic advertising campaigns to succeed, users will need to engage with the advertisements. As such, games would need to be developed in a way which makes encourages players to engage with the in-game environment and makes it clear that such engagement is possible whilst the player remains in the in-game environment.
  • Viewability: as demonstrated by the partnership between Anzu and Oracle Moat, through which Anzu will develop third-party viewability verification and in-view metrics, viewability is a key issue to address within the in-game advertising space. These tools will make the in-game advertising inventory more marketable to advertisers as they will be able to maintain a greater overview of campaign success. As viewability will be imperfect in the in-game space, particularly in the short-term, fee calculations and dispute resolution processes need to be negotiated in depth and detailed in advertising contracts.
  • Adjacent content: tracking adjacent content in the in-game space will be more difficult. A situation may arise whereby advertisers have to accept the risk that their advertisements are not placed next to competitors and this could potentially reduce the value of the in-game inventory. There is also the issue that some brands, such as shirt sponsors in football games or vehicle sponsors in Formula One games, will be promoted in-game without needing to purchase ad inventory space. This might discourage or even prohibit certain advertisers from advertising within that game. Finally, brand safety may be a problem as the way in which a user interacts with an in-game advert will be difficult to control. For example, if advertisements appear in violent in-game scenarios and such scenes are promoted on social media channels, there is a potential for damage to be done to that brand. Both games publishers and advertisers will need to consider how to contend with this.
  • Disenfranchisement: games publishers will be concerned with players becoming disenfranchised by intrusive in-game advertising which detracts from the gameplay experience. Using in-game programmatic advertising via native channels may offer a way of reducing the risk of this as the advertising will be tailored and more blended into the gameplay.

 Whilst in-game programmatic advertising is an exciting avenue shaping the video game industry, this is just one of the many brand activation opportunities which exist in the in-game space.

As the concept of the Metaverse develops, the methods advertisers use to promote their products are set to diversify even further and in-game programmatic advertising is likely to be a sneak peek into the opportunities that await advertisers.

 

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