Gaming soared during the pandemic - but in-game advertising never did

At this point, it's worth asking why? And will it ever?

The word of the pandemic was ‘acceleration.’

In terms of media and advertising, lots of consumer behaviors accelerated over the past few years, including three prominent ones that had big implications on our industry: streaming, eCommerce and gaming.

In two of the three cases, advertising surged in concert with these behavioral shifts. CTV continues to boom, and retail media has spread faster than -well - a fungal outbreak.

But gaming – well, what happened to gaming?

To be sure, there has been an enormous amount of real evidence since Covid-19 hit our shores regarding how much more people were playing Fortnite, streaming Twitch, spending their savings to get PlayStation 5s. And there has been the corresponding hype surrounding in-game advertising during that period – startups getting funding, big players like Microsoft and Sony making moves, the IAB hosting its first PlayFronts.

Yet when it comes to spending – well, it’s hard to see any correlation.

“It’s still a work in progress,” said Jonathan Stringfield, VP, Global Business Research & Marketing at Activision Blizzard, on this week’s episode of Next in Marketing.

Stringfield, author of the new book “Get in the Game,”said that the gaming spikes tracked during quarantine and the ensuing years have gone a long way toward shattering misconceptions among CMOs about gamers that has yet to translate to meaningful budget shifts.

“That was the single biggest blocker,” he said. “Now at least we’re starting to get to these more productive conversations.”

Those conversations have yet to proceed toward much action. Take a look at the recent end of year forecasts released by the likes of dentsu, Magna, GroupM – the word ‘gaming’ is scarcely even mentioned. It’s hard to grow when you’re not even a line item.

“There is more money under my couch than in gaming,” said one analyst.

Part of the challenge is, where is the money going to come from? As this executive noted, CTV’s spending growth isn’t new money – its TV money moving from old TV to new TV. Similarly, retail media is siphoning off dollars from trade marketing budgets – and in the case of its biggest player Amazon – from other digital brands like Meta.

For gaming, the questions is – since most brands are unlikely to conjurer up up large new pools of spending  where do the budgets come from?

As Stringfield explained it, for better or worse, gaming offers lots of different “surface areas” via which to potentially advertise, a condition that brings with it opportunity, and the opportunity to be overwhelmed.

“In the marketing world, our overall institutional knowledge of something like gaming is near zero,” he said. So when brands want to get started, they realize quickly, “‘oh darn, there isn’t a single marketplace for gaming.’”

That fragmentation is a big ongoing challenge, one that Stringfield puts on the CMOs and the gaming studios themselves. As for how this market finally gets moving, there are definitely factions betting that gaming can be sold and treated like CTV. (“We are constantly trying to replace linear TV,” Stringfield said.

And there are a wave of startups are trying to make gaming just another thing brands can buy programmatically. Think Anzu or Bidstack or even the Trade Desk. Stringfield sees those as serving the long tail of gaming, but not the big titles and platforms.

One caveat here – advertising in mobile gaming is undoubtedly huge (some suggest its in the billions), and many would cite that as evidence that in-game advertising is thriving. I’d argue that mobile games operate as a completely distinct advertising marketplace, one dominated by games marketing other games and apps.

Yes, there is plenty of mainstream advertising here, but to me its much more akin. To just another place to run display and video ads online – not a strategic use of gaming to reach gamers, one that seeks to capitalize on the massive shift toward immersive, heavily produced, and highly social experiences.

In ad circles, we keep hearing that it’s just a matter of time until the gaming business model changes fundamentally,  and that developers are going to embrace advertising as core revenue stream rather than relying on massive hits or the small group of gamers who make digital purchases. Yet at some point you have to wonder, what if these people just don’t want your ad money. While CMOs need to get their act together, it takes two players to tango.

“One of the things we fail to accept,” said the aforementioned analyst,” is that time spent and money don’t always correlate.”

Maybe the big guys in gaming get serious about ads this year. Maybe if Microsoft closes the Activision deal, it puts far more muscle behind in—game ads. Maybe this all just takes time.

Some of us have been waiting for a while.