Study: Game developers no longer see ads as 'necessary evil'

Dive Brief:

A study on in-game advertising from deltaDNA found a shift in developer attitudes toward ads, as last year a majority (51%) viewed ads as a "necessary evil" but, now most (49%) view in-game ads as an “important monetization opportunity” and 21% report ads “enhance player progress,” up from 11%, in news made available to Marketing Dive.
The study covers free-to-play (F2P) game developers and found the number of developers describing their ad strategies as effective has doubled, and the number reporting being “cautious” or “unsure” about how to best integrate ads has decreased.
Other findings from the report include: a majority of F2P developers use multiple ad formats to maximize revenue, and 20% of core games and 7% of casual games don’t use ads; rewarded video ads are the most popular ad format used in 58% of F2P games, up from 44%, and outpacing video ads (38%) and banner ads (34%); the number of games managing six or more ad networks rose to 17% of games this year compared to 8% in 2016 and the use of ad mediation tools has increased.

Dive Insight:

The takeaway for marketers is that in-game advertising is a viable advertising channel to reach a wide-ranging audience, and according to the deltaDNA report advertising opportunities on free games are currently underutilized by game developers. Developers are “leaving a lot of cash on the table” by not boosting in-game advertising, supported by the finding that ad revenues are still only around a third of total game revenues, said Mark Robinson, CEO, deltaDNA, in a statement.

Despite the growing opportunity, developers still see some challenges with making a bigger commitment to ads. Developers are concerned about increasing ad frequency citing player churn (26%) as the top concern, followed by lower levels of player enjoyment (21%) and less player engagement (19%), other concerns include higher ad frequencies leading to lower eCPMs (12%) and a drop in ad fill rate (7%); and 40% of all developers only serve one or less ads per session and in-game advertising accounts for 31% of total game revenues.

The study highlights how developers embracing ads are adopting a “player first” strategy with advertising by making it a natural part of the game mechanics, Robinson said.

The gaming industry as a whole is big business, with industry intelligence firm Newzoo predicting 2017 revenues at around $109 billion, according to Venture Beat. Gaming demographics might surprise some marketers. While the stereotypical gamer tends to be a young male, stats compiled from a variety of sources find the average gamer is 35 years-old; 59% are male and 41% female, and the number of women gamers over 18 is greater than the number of male gamers under 18. Additionally, esports is a growing entertainment option.