Once upon a time, in-game ads were highly disruptive and intrusive, creating a poor user experience. Today in-game advertising has transformed into a pivotal marketing channel, offering dynamic and immersive experiences that engage audiences within the gaming ecosystem. Video gaming is no longer a hobby exclusively enjoyed by the young. With at least one-third of the world’s population gaming, there’s a great opportunity for brands to engage audiences and have an impact. Although the in-game ad market is still largely mobile today, the growth and opportunities coming through PC games, console games and online video games offering high-quality graphics. This presents a real opportunity for brand engagement. Research shows an estimated 93% of media buyers intend to incorporate in-game advertising by 2025. Today’s in-game advertisers are able to respect the user experience with ads that naturally fit into the in-game ecosystem. These shifts provide incredible ad opportunities in brand-safe and brand-suitable ad environments.
Global gaming market
With almost 3+ billion gamers worldwide, the current size of the global gaming market is $245 billion, where mobile gaming accounts for 51%. The gaming industry has experienced tremendous growth in recent years and is expected to grow over $500 billion in 2030. The COVID-19 pandemic significantly accelerated the global gaming market, with a remarkable growth of 38% in 2020. Besides the pandemic, the tremendous growth can be attributed to several other factors, including the rise of mobile gaming, the popularity of online multiplayer games and the increasing use of VR and AR technologies. The industry is also facing some challenges due to the increasing time and cost of developing new games, in combination with a shorter product lifecycle.
Asia-Pacific region dominates
Asia Pacific is het largest, and fastest growing region for gaming. The region accounts for more than 52% of gamers worldwide and Statista predicts the number of smartphone users (in particular, internet users) is projected to hit 3,340 million by 2025. China’s mobile gaming industry is red hot, with over 654 million mobile gamers it is the world’s largest mobile gaming market. A combination of rising smartphone penetration, an increasing number of gamers and innovative gameplay mechanics fuel demand for mobile & video games in China. Tencent is the driving force of the Chinese gaming market, but crackdowns on limiting playtime by the Chinese government in recent years put pressure on the gaming industry in the region. Despite that China, Japan and South Korea are part of the top 10 global game spending and are home to some of the biggest mobile games, such as Honor of Kings and Genshin Impact. The region is a hotbed for mobile gaming and the increasing gamer population are poised to drive significant growth in the APAC region.
Market: United States is largest gaming market
Unites States is the largest gaming market worldwide with over 185 million gamers and a revenue of $55 billion, driven by the high demand for console and PC gaming. The region is home to several major players in the gaming industry, including Microsoft, Sony and Electronic Arts. The North American market is also characterized by a high level of consumer spending on gaming, with gamers willing to pay for high-quality content and technology.
Gaming market leaders
Some key players in the gaming market based on 2023 revenue are Sony, Microsoft, Tencent and Nintendo. The success of Sony is driven by the PlayStation 5 along with original games like God of War, the PlayStation Vita and Spider-Man developed by Sony-owned studios Santa Monica Studio and Insomniac Games, respectively. Microsoft’s success is driven through Xbox Game Studios. The next-gen Xbox Series X/S console plays a significant role, but Microsoft also develops games in-house and owns studios, including the renowned Swedish studio Mojang, creator of Minecraft. Microsoft’s pending acquisition of Activision Blizzard, known from Call of Duty and CandyCrush amongst others, marks a significant move in the industry. Tencent Games primarily focusing on online and mobile games like PUBG: Mobile and Honor of Kings. With ownership of Riot Games, creators of League of Legends, and stakes in Epic Games, Activision Blizzard, Krafton Game Union, and Ubisoft. Tencent has become a major player in both mobile and big-screen gaming. Nintendo remains the largest pure video game developer, the success is driven by the Nintendo Switch console and the popular Pokemon franchise.
In-game advertising (IGA)
In-game advertising or IGA refers to the placement of advertisements within video games to promote brands, products or services. Examples include pop-up messages, on-screen advertisements, cut-scenes, billboards and background displays. Static (non-changeable) ads, dynamic (changeable ads), and advergaming (a game built as an advertisement) are all types of in-game advertising. In-game advertising has a rich history, evolving alongside the gaming industry’s growth. Key milestones include:
- In the 1990s, Atari and others experimented with early forms of in-game advertising, such as billboards and product placements. Advergames gained traction.
- In the 2000s, static in-game advertising became prominent with the rise of 3D graphics. Billboards and posters were integrated into various game genres.
- From 2000-2010, dynamic in-game advertising gained momentum, allowing real-time delivery and updating of ads. Video ads, interactive content, and sponsorships became common.
- Since 2010, mobile in-game advertising emerged with the rise of smartphones and mobile gaming. New formats like rewarded ads and playable ads gained popularity.
- Influencer marketing became prevalent, with gaming influencers integrating branded content into gameplay videos and streams.
- Native advertising seamlessly integrated ads into the game world or storyline for enhanced immersion and authenticity.
- Virtual Reality (VR) and Augmented Reality (AR) opened up new possibilities for in-game advertising, with product placements and branded virtual environments being explored.
These milestones reflect the continuous adaptation of advertising strategies to the progress of the gaming industry.
In-game advertising market
The global in-game advertising market is projected to reach $33 billion in 2023 and $46 billion by 2027. Some of the major factors driving the growth and future potential of in-game advertising are strategic partnerships, advancements in programmatic advertising, increasing global internet penetration and the popularity of mobile gaming, as well as increased consumer time spent on internet gaming. eMarketer research shows mobile games currently attract 3.9% of mobile ad revenues compared with 10.6% of time spent. It has become a popular form of advertising due to the widespread popularity of video games and their ability to reach a highly engaged and targeted audience. This evolving landscape presents brands with the chance to deliver targeted and captivating ads, creating meaningful connections and maximizing their reach in the dynamic world of gaming. If done right, research shows that 73% of 18- to 34-year-old gamers in the U.S. would welcome more advertising.
Categories, strategies and effectiveness
Based on IAB UK definitions, in-game ads can be categorized as follows:
- Blended in-game ads seamlessly integrate sponsored content into gameplay, enhancing the experience without disruption.
- Around-the-game ads promote products/services during gameplay without interrupting the gaming experience.
- Away-from-the-game ads encompass streaming, e-sports, influencers and content marketing.
In addition to these categories, other common in-game advertising types include static ads, dynamic ads that can be updated in real-time, advergames designed as branded entertainment and various formats such as in-game sponsorships, native advertising, incentivized ads, and sponsored in-game events. Advertisers should consider factors like game genre, target audience, brand objectives and desired integration level to create engaging experiences with effective in-game advertising strategies.
In-game audiences
Although gaming personas overall are still largely male-dominated, GWI research shows mobile-only gamers actually have a higher ratio of females to males (55% to 45%, respectively). According to a Deloitte media survey conducted earlier this year, gamers are spread across generations. Gen Z and Millennials spend, on average, 11 hours per week playing video games. In all five countries surveyed—the United States, the United Kingdom, Germany, Brazil, and Japan—Gen Z respondents cited playing video games as their favorite entertainment activity. However, Gen Z and Millennials are not the only demographics playing video games. In the U.S., 89% of the Gen X survey participants and more than 50% of the Boomers it surveyed play video games. As audience numbers surge, brands are still trying to figure out where they fit within the marketplace and how best to allocate a portion of their ad budgets to in-game advertising.
Benefits of in-game advertising
In-game advertising offers several benefits for advertisers looking to reach and engage with their target audience within the gaming environment. Some key benefits of in-game advertising include:
- Targeted Reach: In-game advertising allows advertisers to target specific demographics or player profiles, ensuring their message reaches the desired audience. According to a study by Nielsen, in-game advertising can reach elusive audiences, with 62% of gamers falling into the 18-34 age group, a highly coveted demographic for many advertisers;
- Engagement: Players are often highly engaged while playing games, providing an opportunity for advertisers to capture their attention and create memorable experiences. A study conducted by Ipsos found that in-game ads generated 48% higher brand recall compared to traditional video ads, demonstrating the effectiveness of ads within the gaming context;
- Brand Integration: Well-executed in-game advertising can seamlessly integrate brands into the game world, enhancing realism and immersion. A survey by GWI revealed that 62% of gamers are receptive to brands that appear in their favorite games, indicating the potential for effective brand integration within the gaming landscape.
Game advertisers should make sure the ads are relevant and authentic to the game’s setting, theme and target audience. The advertisements should be seamlessly integrated to avoid disrupting the gaming experience. Measurement and analytics help assess campaign effectiveness, enabling advertisers to optimize their strategies. Compliance with regulations, such as disclosure obligations and industry restrictions, is crucial. These considerations ensure successful and compliant in-game advertising campaigns.
Major in-game advertising players
There are several major players in the gaming industry that offer in-game advertising opportunities to advertisers. Some of these companies include:
- Through its Xbox platform Microsoft offers in-game advertising opportunities to advertisers. With a large user base and popular game titles, they provide a platform for brands to reach gamers through various advertising formats;
- Prominent game publisher Electronic Arts (EA) is known for popular titles like FIFA, Madden NFL, and The Sims. They have an in-house advertising platform called “Player Network” that enables brands to reach audiences through in-game ads;
- Leading game developer and publisher Activision Blizzard, is behind franchises such as Call of Duty, World of Warcraft and Overwatch. They offer in-game advertising options to advertisers looking to reach their massive (mobile) player base. Microsoft is acquiring this company;
- Highly popular game Fortnite is developed by Epic Games. They provide opportunities for in-game advertising within the Fortnite environment through their “Epic Games Store” and partnerships with brands;
- Major game publisher Ubisoft is known for titles like Assassin’s Creed, Far Cry, and Watch Dogs. They offer in-game advertising solutions to advertisers, allowing them to target specific audiences within their games.
It’s important to note that the availability of in-game advertising may vary depending on the specific game, platform and publisher. Advertisers interested in in-game advertising should explore partnerships and opportunities with these major players in the gaming industry to reach their target audience effectively.
Emerging in-game advertising trends
One of the key trends in in-game advertising is the use of targeted ads. By leveraging user data and machine learning algorithms, advertisers can target ads to specific audiences, making them more relevant and effective. This trend is likely to continue as advertisers seek to optimize their ad spend and improve their ROI. Many games now feature in-app purchases, which provide an additional opportunity for advertisers to promote their products or services. For example, a game might offer players the chance to earn extra points or in-game currency by watching a short ad. Other trends are:
- The integration of Neuro-Linguistic Programming (NLP) with in-game advertising, which allows for targeted ad placement based on the gamer’s mindset, behavior and language processing, is expected to drive the growth of the global in-game advertising market by enhancing engagement and brand interaction;
- Collaborating with gaming influencers or content creators to feature products within their gameplay or live streams can be an effective form of in-game advertising;
- As VR and AR technologies continue to advance, they offer new opportunities for immersive and interactive in-game advertising experiences;
- Integrating ads in a way that complements in-game purchases or micro transactions can provide a mutually beneficial model for both developers and advertisers.
In-game advertising has become a vital marketing channel, providing brands with the opportunity to engage with a highly receptive gaming audience. Understanding the gaming landscape, respecting the user experience, and implementing best practices are crucial for successful in-game advertising campaigns. As the gaming industry continues to grow and evolve, in-game advertising is poised to play an even more significant role in the future, driving meaningful connections and maximizing brand reach in the dynamic world of gaming.