Media Media Planning and Buying Gaming

As ads come to consoles, here are the key lessons to be taken from mobile gaming

By Nick Blake | EMEA vice-president

May 16, 2022 | 7 min read

Nick Blake, the EMEA vice-president at mobile app marketing company Liftoff, has been across the booming smartphone gaming space. As part of The Drum’s Gaming Advertising Deep Dive, he writes that there are positive lessons to be learned ahead of the impending introduction of ads into home consoles.

IN-game

When news broke that Microsoft is exploring how to bring ads into its games, it didn’t take long for us to find out that Sony is planning exactly the same thing for its free-to-play (F2P) first-party games. Understandably, people now have a lot of questions, such as what does this news mean for advertisers? What will these ads look like? And, more importantly for Sony and Microsoft, how do they introduce ads without annoying players?

There are difficult questions, but we can find some of the answers we’re looking for by looking at mobile games – an ecosystem heavily reliant on advertising. Most mobile games are F2P and rely on ads to generate the majority of their revenue, alongside in-app purchases for items such as new characters, outfits, weapons and in-game currencies.

So while you might think in-app purchases generate the most money for game studios, a 2014 report from Swrve found only 2.2% of F2P users ever spend money via in-app purchases. Some publishers started introducing subscription models (which you might recognize as battle passes or season passes in console games) to get around this. Others shifted their focus to in-app advertising, giving rise to a number of creative new ad formats such as offerwalls (incentivized engagements), playable ads and even rewarded ads, where players can earn in-game items and currencies for watching video ads.

Fast-forward to today and mobile games account for over 52% of global game revenue. According to Venturebeat, in-game ad revenue is projected to reach $56bn in 2024. What we’re seeing now with Microsoft and Sony embracing ads for their first-party games is gaming ad history repeating itself – but this time in the console market.

F2P games have been a major part of the mobile market since 2009 when Apple enabled in-app purchases, but it is only fairly recently that F2P console games have truly started to take off (thanks, Fortnite). Alongside that, the growing popularity of Microsoft’s subscription-based gaming service Game Pass means gamers can play over 100 games (including first-party Microsoft titles on the day of their release) for just £10.99 a month.

Microsoft’s Game Pass service now has over 25 million active subscribers. It has been so successful that Sony is planning on announcing a similar plan of its own in the coming months for PlayStation owners. Alongside this, the success of Fortnite has spawned countless F2P imitators. It makes sense that studios would want to grow revenue even further through in-game ads, but they’ll have to be careful.

The reaction from gamers to Microsoft and Sony’s ad plans hasn’t been positive. Gamers can be fiercely territorial when something new enters the market and threatens to change the landscape of what they know and love (see the industry’s backlash to blockchain technology) and many are worried that ads will get in the way of gameplay and disrupt their gaming experience.

Quick side note: this is by no means the first time that ads have appeared in console video games, as anyone who raced past the Red Bull branding in PlayStation’s 90s Wipeout games can attest. While we may see more licensing deals and banner ads off the back of this – especially as they’re a natural fit for sporting sims (think football-style banners in-stadium games) – the focus on F2P means it’s more likely we’ll see in-game engagement ads.

The most effective in-game ad strategy pairs good user experience with an effective reward system. Offering your players high-value rewards can keep them engaged for a longer period of time, incentivizing them to come back and keep playing your game.

There’s an opportunity here for both Microsoft and Sony to use rewarded video ads to boost in-game purchases. If players opt-in to watch adverts and are rewarded with a premium in-game currency in, let’s say, Halo, if that’s its first time using that currency and it’s an enjoyable experience, it may lead to more organic purchases in the future.

But Sony and Microsoft must ensure that their ads do not interrupt the main gameplay experience. They’d be wise to place them strategically depending on the game genre. For platformers and puzzlers, this would be in between stages. For open world shooters or RPGs, this would be in the main hub world.

More importantly, ads are most effective when they’re relevant to the people they’re targeting and both parties must leverage user data effectively to ensure their rollout of ads runs as smoothly as possible. I have no doubt that at some point, the console market will have to contend with new privacy laws that make this process more difficult.

So will this news cause a shift in advertising spend? With the mobile game industry on track to surpass $100bn in revenue this year, it’s unlikely. Ads for mobile are quick and easy to test compared to other platforms, and mobile games are much easier to publish and advertise for. I also don’t believe gamers will tolerate ads in console games, especially on titles they’re already playing.

Until Microsoft and Sony announce more details of their advertising plans and whether or not their walled garden will be accessible to external studios, advertisers should and likely will stick to advertising where the money is: mobile games.

For more on all the different ways brands can advertise in gaming, from virtual billboards to product placements, social lenses and even games of their own, check out The Drum’s Gaming Advertising Deep Dive.

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