In-Game Advertising Still Not Drawing Ad Budgets

The banner ad is dead, say digital marketing pundits, so what’s a better way for brands to reach consumers? Integrating ads into online games and allowing users who view the ad to win points or other rewards in the game, is an increasingly attractive way for consumers to engage with advertising.

Yet advertising budgets are far from reflecting this market’s potential, according to a panel of gaming and ad industry executives who gathered at New York watering hole SideBar to discuss in-game advertising.

Sam Glassenberg, CEO of Funtactix, which develops social games for major motion pictures like The Hunger Games, said the in-game ad market presents both huge opportunities and new risks for brands and agencies. He cited statistics from NPD and said that there are almost 200 million online gamers out there who play games for an average of 13 hours a week. Yet, the majority of ad spend still goes to TV or banner ads and only a fraction to games, he noted. “How are we going to close that gap?” he asked.

The discussion was organized by SponsorPay, a Berlin-based engagement advertising company whose application rewards users that watch an ad with virtual currency and other goodies. SponsorPay is one of a handful of companies out there including SocialVibe, Flurry and WildTangent seeking to help games developers monetize their product and brand advertisers engage consumers with such ads.

Games entrepreneur Wilson Kriegel, formerly with Zynga, addressed this potential by discussing his involvement with mega-hit Draw Something, an online drawing game developed at his former company OMGPop, which Zynga acquired in March.

The game allows people to draw things and share them with their friends. Since its launch early in 2012, it has seen over 90 million installs, 10 billion drawings created and was a top trending topic on Twitter. 

Companies including McDonald’s, Disney and Sprint have incorporated their ads into the game. Kriegel said that ad features including in-game banners, game features and in-game call to actions seen a clickthrough rate of 1 percent to 10 percent-unheard of in an industry where average CTRs are 0.7 percent.

Not all games can boast such high user numbers. But Adam Broitman, chief creative strategist at digital advertising firm Something Massive, said advertisers nonetheless need to look more closely at how attractive the gaming demographic for casual online games is. Rather than the hardcore gamer of old-typically a teenage boy-online and mobile games are attracting affluent adults and more than half of those are females. “The audience is everybody,” he said.

Yet there is a disconnect with current ad spending on in-game ads, executives noted. Webster Lewin, vice president and executive creative director at PhoneValley (a subsidiary of Publicis), believes it is partly a question of momentum and ad spending habits. The industry has simply become accustomed to TV and radio advertising-and annoying banner ads. “When they start seeing more ads that are organically integrated into games, the media dollars will follow,” he predicted.

Reality check again came from Kriegel, who pointed out that the gaming industry is much more fragmented than television, with thousands of different games spread across numerous platforms. That makes it hard for advertisers to easily reach audiences with their ad dollars. “This is not how agencies are structured. Microbudgets are hard to scale,” he said.

Other issues remain around how these new games should be developed. Should game developers create games with advertisers in mind? And should companies also follow in Red Bull’s footsteps and create their own games or instead cleverly integrate their content into existing games?

Wade Tinney, CEO of social games company Large Animal Games, said timing and coordination is important in the process. “Agencies are good at some things. But they have not understood the games market. They spend too much time talking about it and bring the gamers in way too late. That’s not a good fit,” he said.

Broitman at Something Massive also advocated developing native ads where “the advertiser doesn’t feel like it gets in the way” of the game. Ads on Facebook, he noted, simply feel like a bolt-on to a core product that is awkward.

But gamers also need to focus on what they do best-creating a great game-rather than worrying too much about advertisers’ business goals, some panel members agreed. Not an easy puzzle to solve, so who should help them successfully incorporate ads into their games?

“Whoever wants the money most,” said Broitman.

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