Will big brands buy more gaming ad space?

In January, industry expert Eric Seufert predicted that brand spend would reach at least 10% of in-game ad monetization. It’s a prediction that we couldn’t resist looking into. When we look back on 2023, will it really be the year we see brands spending far more of their budget on in-game ads?

Brands are definitely seeing the value, but it seems like there are a few barriers still in the way. For one example they want brand-safe slots and better measurement, so it could take a little longer than just 12 months – especially in the the current economic climate. Brands are generally tightening their advertising budgets, and this will likely be reflected in the gaming industry as well. According to reports, 30% of advertisers cut their 2023 budgets.

This belt-tightening impacts the predicted growth rate of ad spend in gaming, potentially delaying the moment when brands commit more of their budgets to in-game ads. Still, the value and potential that gaming presents are undeniable. It’s just that the path to full realization of this potential might be a bit rockier than we’d hoped.

Brands are spending, albeit slowly

Statista predicts that the advertising expenditure in gaming will rise from $46 billion in 2021 to $130 billion in 2025, a considerable increase over just five years.

Most of this expenditure is channelled into mobile gaming. Statista reported in 2022 that mobile gaming would constitute half of all gaming revenue. Consoles came in second, accounting for 28%.

Source: Statista

Evidently, mobile gaming is the preferred advertising platform for brands. This is understandable, as console and PC games typically require one-off payments. Free-to-play games on other platforms much less frequently rely on advertisements for revenue; they tend to use subscriptions and in-app purchases for funding their development.

Brands spend far less than they should

Big brands tend to have big budgets. But the amount that brands are putting aside for gaming is far less than you’d expect. Gaming accounts for less than 6% of total digital ad spend in the US, according to the IAB.

That’s a very low figure, considering the potential audience. People spend far more time playing games than they do with any other media.

According to Ernst & Young, one of the big four accounting firms, brands spend nearly $60 billion on TV ads and $1.5 billion on gaming. But people only spend 8% of their time on TV content, but 37% of their time gaming. It’s all backwards.

According to EY, brands spend far less on gaming, but it grabs far more of people’s attention.

This data suggests that brands would reap more value by investing their budgets in gaming rather than television ads. However, common misconceptions about gaming deter them. EY further explains that brands hesitate to invest because they often adhere to outdated stereotypes about gamers, viewing them as unemployed young males.

But that’s just not true. Almost half of gamers are women, and the average player is 35. The gaming market is huge and varied. It’s just that brands haven’t realized it yet.

What is true is that the younger generation cares more about gaming than any other entertainment. A Newzoo report found that younger customers spend nearly 15 hours a week engaging with gaming content. Almost half of that time is playing, the rest is reading, creating and watching others play.

Irrespective of their target demographic, brands need to rethink their stance on gaming. It’s an opportunity waiting to be seized.

Brands want to advertise in a safe space

One of the key concerns for companies is whether the game they’re advertising in is suitable for their brand. They don’t want their brand associated with controversial opinions or a bad game. They only want to advertise in high-quality titles, with respectable content.

The shift in the industry from hyper-casual to hybrid-casual helps developers here. Hyper-casual games are typically lower-budget and have a quick turnaround. While they’re fun, they’re not very deep.

On the other hand, hybrid-casual games are – by definition – deeper. They focus more on retaining players with meta-features and are less reliant on spamming ads at the beginning of the game. Their players stick around for longer and are less frustrated. So there’s not the same level of concern for brands to be affiliated with an annoying game, and targeting unhappy players.

It works both ways, too. Because developers are focusing more on deeper gameplay, longer playtime, and a hybrid-monetization approach, they’re much less likely to want to advertise other games. All that does is encourage players to leave their own titles and play other games, instead of their own. Instead, developers want brands to advertise in their games. So brand advertising is a win-win for both.

Brands want to spend more

The brands themselves know this. According to The Drum in 2022, 81% of media buyers plan to increase their spending. And 93% intend to run in-game advertising by 2025.

In fact, we’re seeing this shift already. Brands are already teaming up with game developers. Ralph Lauren is releasing content in Fortnite. McDonalds got together with Overwatch 2. Kraft, Hershey, Frito-Lay, M&Ms – they’ve all launched campaigns that appeared on gaming platforms.

We’re seeing more and more stories of partnerships like these. And it’s likely that we’ll keep seeing big brands working directly with developers to share their IPs.

But brands don’t have the usual channels to advertise and partner up with game developers. We’re a new industry. And a large reason that brands aren’t running campaigns is that there’s a barrier to entry. They don’t know how.

According to that earlier EY report, developers need to do three things to help brands:

1. Make good games. Brands don’t want to be associated with spammy games. So you need to seamlessly blend ads into the core gameplay loop.
2. Help brands measure. Brands are concerned that they can’t get the data they need. So offer ways to integrate measurement SDKs into your games to help them track their ads.
3. Help educate brands. Work with agencies and mediation platforms to teach brands about the value of advertising in games.

It’ll take a while for brands to shift

As you can see, there’s definitely a trend for brands shifting their budgets towards gaming. They’re realizing the benefits, seeing that their preconceptions are wrong, and slowly moving over.

But it’s likely to take them a little while for them to get the results and spread the word. As an industry, we need to show brands that they can measure the data they need, that ads aren’t breaking the gameplay experience, and explain the value of advertising in games. If we do that, we’ll definitely see more brands spending on in-game advertising and partnerships.

Will we hit that 10% figure? Hopefully. It seems ambitious, but possible. And we’ll definitely get far closer. But if we work together to help ease brands into the process and show them how they can measure their results, we can speed up the change.