Video Game Budgets Are Increasing, But Ad Tech Still Needs To Catch Up

The vast majority of advertisers who buy ads in video games (91%) no longer regard gaming as an experimental medium.

That’s the good news, according to IAB and Advertiser Perceptions’ joint research, which was released this week at the third annual PlayFronts.

The IAB’s study surveyed 300 advertising decision-makers who now purchase video game advertisements and spend at least $5 million across their whole media mix. The findings show that many advertisers believe video game commercials are a mature and effective platform, particularly for addressing millennials and Generation Z.

Thirty-five percent of respondents have a specific gaming budget, while one-third spend on games from their overall media spending.

However, ad spending in games continues to lag behind audience engagement, according to Zoe Soon, Vice President of the IAB’s Experience Center.

To put this in context, around 3.38 billion individuals worldwide identify as gamers, while 3.37 billion claim to consume digital video – “yet the difference in ad spend is nowhere near proportional,” she noted.

According to eMarketer, CTV expenditure totaled $24.6 billion last year, more than tripling in-game commercial spending. US advertisers spent only $7.5 billion on gaming marketing last year, a decrease from $8.6 billion in 2022.

It’s conceivable this was an outlier, or it was caused by last year’s turbulence in the video game business. EMarketer predicts that US ad spending will rise to $8.5 billion this year and $11.5 billion by 2027.

Despite last year’s drop in spending, the IAB/Advertiser Perceptions research is encouraging for future spending trends. Forty percent of advertisers that already spend on games say they intend to boost their budgets this year.

To increase gaming’s proportion of budgets, the IAB developed best practices to make it easier for marketers to invest in games.

This week at PlayFronts, the IAB released new creative rules for video game commercials, including aspect ratio specifications, video ad length, and tips for making on-screen text readable. These standards outline best practices for balancing efficient in-game advertisements with user experience on the web, mobile, PC, and console.

However, compared to prior PlayFronts events, there was little creative or ad tech innovation.

Several guests told AdExchanger that this year’s solutions were underwhelming, since they felt like more of the same.

One agency executive informed AdExchanger that mobile advertisements dominated the debate. And it didn’t feel like a new viewpoint, given that video game advertising has always focused on smartphones.

Nonetheless, mobile merits attention. Of the marketers polled by the IAB, 76% stated they’d advertised in mobile games, while 67% tried PC/desktop and only 47% used consoles.

But what about formats that are more appropriate for PC and console environments, such as branded in-game objects, superimposed onscreen popups, and intrinsic in-game ads?But what about formats that are more appropriate for PC and console environments, such as branded in-game objects, superimposed onscreen popups, and intrinsic in-game ads?

Intrinsic in-game ads received a lot of attention on stage, and the concept has progressed significantly since a few years ago, when most marketers had no idea what it was, according to Jonathon Troughton, CEO of in-game ad platform Frameplay.

Despite the demand for more premium in-game inventory, including on consoles, PlayFronts presenters underlined that most gamers can only handle so much in-game ad saturation – another sign of maturity, he noted.

According to Troughton, brands are increasingly understanding the need of respecting the player experience, while game companies recognize that “there has to be some give” before ad dollars can begin to flow.

He believes that the IAB’s recently released creative standards for in-game activations will help unlock additional spend by removing advertising pain points.

And what about the two most popular gaming domains, Roblox and Epic’s Fortnite?

Branded metaverse-like sub-worlds on these platforms received less attention onstage than in previous years. Instead, presenters discussed ad placements, such as sponsored overlays that appear when players defeat opponents or complete in-game goals.Comic: Is the next verse the same as the first?

Roblox, for example, debuted its in-game ad platform last year and demonstrated its new self-service dashboard, which allows buyers to target consumers based on age, gender, device, geography, and genre. However, one unimpressed participant told AdExchanger that such dashboards had long been considered standard for buying platforms.

Attendees also sought additional information about cloud gaming. Another agency executive told AdExchanger that cloud gaming is a top goal for major manufacturers such as Microsoft and Sony, and that marketers should focus on it too.

To be fair, PlayFronts concluded with a cloud-focused presentation from computing company NVIDIA, which rents out access to high-powered gaming gear via a cloud service, with customers paying for rental tickets. NVIDIA presented a free, ad-supported version in which users can view a video commercial and gain temporary cloud access to its gaming systems.

That is nothing new for anyone who has ever viewed an advertisement to acquire access to airport Wi-Fi. However, it does represent possible new ad inventory for the gaming industry.

Building confidence in gaming

Aside from minor differences in creative and technological innovation, the primary takeaway from this year’s PlayFronts is that marketers are more confident in brand safety and measurement for video game advertising.

Nine out of ten advertisers who are actively investing in video games feel they are brand safe, and 85% are confident in their ability to track ROI from game ads.Nine out of ten advertisers who are actively investing in video games feel they are brand safe, and 85% are confident in their ability to track ROI from game ads.

Jack Koch, SVP of research and insights at IAB, believes that confidence is critical for an emerging channel. Advertisers are often comfortable with not knowing exactly what occurs after a consumer watches a TV commercial, but when it comes to developing media, they want to demonstrate that exposure generates conversion.

Advertisers regard gaming as a significant awareness generator, ranking it second only to social media in terms of driving attention and purchases. The latter is especially shocking given how many in-game ad forms aren’t clickable.

Buyers have also grown more familiar with automated programmatic ads.

According to the IAB, 32% of marketers use programmatic guaranteed, 20% use PMPs, 17% purchase via open auctions, and 37% operate “always-on” gaming campaigns.

In short, video game advertising deserves a place in the media plan. And “once [marketers] try it,” Koch said, “they use it consistently.”

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