Gaming hits $200 billion: why advertisers remain cautious despite huge potential.
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Gaming Hits Nearly $200 Billion, but Advertisers Remain Cautious
The gaming industry, now a nearly $200 billion juggernaut, dwarfs both the movie and music industries. Despite this massive revenue, advertisers remain hesitant to fully embrace in-game advertising. The global gaming market, generating around $183.9 billion (£144 billion) annually, presents a significant yet underutilized opportunity for advertisers, according to WARC Media’s latest Global Ads Trend report. The industry’s ability to engage multiple age groups and offer full-funnel marketing potential makes it an attractive prospect.
Slow Growth in In-Game Advertising
US advertisers are gradually increasing their investment in in-game advertising, but progress is slow. In-game ad spending in 2024 is forecasted to reach $6.7 billion (£5.27 billion), reflecting a modest 10% year-over-year increase. The WARC Marketer’s Toolkit survey for 2024 revealed that enthusiasm for in-game ads surged during the pandemic, with 72% of advertisers planning to increase spending. However, this figure has since dropped to 52%.
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Missed Opportunities
This hesitation comes despite the average revenue for in-app gaming ads rising by 26.7% year-on-year. Advertisers not investing in in-game ads are missing out on an audience of 3.4 billion gamers worldwide, spanning various age groups, including 72% of 35-54-year-olds and 46% of those over 55 who play games at least once a week. In-game advertising is also considered a brand-safe channel, with 90% of advertisers surveyed by the IAB agreeing due to improved tools like fraud detection, context, age ratings, ad interactivity, and engagement metrics.
The Complex Ecosystem of Gaming
Alex Brownsell, Head of WARC Media, highlights the complexity of the gaming ecosystem as a major reason for advertiser hesitation. “Gaming is huge, both in audience and cultural impact, and its highly complex ecosystem spans devices and platforms, defying conventional definitions of a channel,” he said. “Gaming has long been heralded as a vital emerging opportunity for brands, particularly those wanting to reach younger audiences. However, in-game advertising spend remains low. This may soon change, with game publishers focused on improving ad monetization. But evidence is needed to make the case for gaming as an advertising medium.”
According to WARC Media, the gaming industry’s complexity spans different devices, genres, formats, and market preferences. Traditional in-game advertising includes mobile and reward-based formats, but there are newer formats such as creator content on platforms like Twitch, e-sport sponsorships, and dynamic in-game advertising integrated into the game’s environment.
Long-Term Investment and Partnership
To effectively see growth from investing in the gaming industry, Jo Pereira, SVP Strategy at EssenceMediaComX’s Media Futures Group, emphasizes the importance of long-term partnerships. “Gaming is more of a longer partnership opportunity than a straight media buy,” Pereira said. “It would be better to invest in the audience consistently rather than dipping their toe in.”
Pereira added, “Gaming is a whole entertainment ecosystem, not a channel, and is stealing share from entertainment platforms. However, clients haven’t grown up with gaming and feel less confident about the opportunities.”
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Diverse Advertising Channels Within Gaming
Maure Nogaré, Dentsu’s corporate planning manager, highlights the diverse channels and touchpoints within the gaming ecosystem. Brands can select from seven or eight different channels within the gaming ecosystem, depending on their key performance indicators (KPIs) and marketing goals. This diversity allows for tailored advertising strategies that can effectively target different segments of the gaming audience.
Successful Examples of Investment in Gaming
Recent investments by major companies like Netflix and The New York Times demonstrate the potential of the gaming industry. Netflix, which spent $1 billion on its gaming business that launched three years ago, has seen a 200% increase in downloads since 2022. Similarly, The New York Times has been able to retain users across other digital platforms like LinkedIn by investing in gaming content.
Brand-Safe Advertising Environment
One of the significant advantages of in-game advertising is its brand safety. The Interactive Advertising Bureau (IAB) found that 90% of advertisers consider in-game advertising to be brand-safe, thanks to improved tools for fraud detection, context, age ratings, ad interactivity, and engagement metrics. These improvements provide a secure environment for brands to reach their target audiences without the risks associated with other digital advertising channels.
Addressing Advertiser Concerns
Despite the potential and advantages, advertisers remain cautious. The primary concerns revolve around the complexity of the gaming ecosystem and the lack of clear evidence demonstrating the effectiveness of in-game advertising. Advertisers are used to more straightforward channels with established metrics and benchmarks, making the diverse and fragmented nature of gaming a challenging landscape to navigate.
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Need for More Evidence
Alex Brownsell from WARC Media notes that more evidence is needed to convince advertisers to invest heavily in gaming. While game publishers are focusing on improving ad monetization, advertisers need concrete data and case studies to make informed decisions about their advertising budgets.
Long-Term Commitment
Jo Pereira’s point about the need for long-term partnerships rather than one-off media buys underscores the importance of commitment. Advertisers need to see gaming as an integral part of their marketing strategy, requiring consistent investment and engagement with the gaming audience.
Education and Familiarity
Another factor contributing to advertiser hesitation is a lack of familiarity with the gaming culture and ecosystem. Many decision-makers in advertising agencies and brands did not grow up with gaming and feel less confident about its opportunities. Education and awareness about the gaming industry’s potential can help bridge this gap and encourage more investment.
The Future of In-Game Advertising
As the gaming industry continues to grow, the potential for in-game advertising will become increasingly apparent. The industry’s ability to engage diverse and large audiences makes it a valuable platform for brands looking to reach new customers and build stronger connections with existing ones.
Improved Monetization Strategies
Game publishers are continuously working on improving their ad monetization strategies. As these strategies become more effective and transparent, advertisers will have more confidence in the return on investment (ROI) from in-game advertising.
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Integration with Emerging Technologies
The integration of emerging technologies such as augmented reality (AR) and virtual reality (VR) will also play a significant role in the future of in-game advertising. These technologies offer immersive and interactive experiences that can enhance brand engagement and create memorable advertising moments.
Data-Driven Insights
The use of data and analytics will become increasingly important in optimizing in-game advertising campaigns. By leveraging data-driven insights, advertisers can better understand player behavior, preferences, and engagement patterns, allowing for more targeted and effective advertising strategies.
Conclusion
The gaming industry presents a massive and largely untapped opportunity for advertisers. With nearly $200 billion in annual revenue and a global audience of 3.4 billion people, gaming offers a unique platform for brands to reach diverse and engaged audiences. However, the complexity of the gaming ecosystem and the need for long-term commitment and education pose challenges that advertisers must overcome.
As game publishers improve ad monetization strategies and emerging technologies offer new possibilities for immersive advertising, the potential for in-game advertising will continue to grow. By investing in the gaming industry and embracing its unique opportunities, advertisers can unlock new avenues for growth and engagement in the ever-evolving digital landscape.
FAQs
What is the current revenue of the global gaming industry?
The global gaming industry generates nearly $200 billion in annual revenue, surpassing both the movie and music industries.
Why are advertisers hesitant to invest in in-game advertising?
Advertisers are cautious about investing in in-game advertising due to the complexity of the gaming ecosystem, the lack of clear evidence demonstrating its effectiveness, and a lack of familiarity with gaming culture.
What are some advantages of in-game advertising?
In-game advertising offers a brand-safe environment, the ability to reach diverse age groups, and opportunities for immersive and interactive advertising experiences.
How much is in-game advertising spending expected to grow in 2024?
In-game advertising spending in the US is forecasted to reach $6.7 billion in 2024, reflecting a modest 10% year-over-year increase.
What role do emerging technologies play in the future of in-game advertising?
Emerging technologies such as augmented reality (AR) and virtual reality (VR) offer new possibilities for immersive and interactive in-game advertising, enhancing brand engagement and creating memorable advertising moments.
How can advertisers effectively invest in the gaming industry?
Advertisers can effectively invest in the gaming industry by committing to long-term partnerships, leveraging data-driven insights, and educating themselves about the gaming ecosystem and its potential.
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What are some successful examples of investment in the gaming industry?
Recent investments by companies like Netflix and The New York Times demonstrate the potential of the gaming industry. Netflix has seen a 200% increase in downloads since launching its gaming business, and The New York Times has retained users across digital platforms by investing in gaming content.
How can advertisers overcome the challenges of in-game advertising?
Advertisers can overcome the challenges of in-game advertising by seeking concrete data and case studies, committing to consistent investment, and educating themselves about the gaming industry and its opportunities.