Here’s How Casual Mobile Gaming is Changing AdTech

Last year, Nintendo’s Pokémon Go app store performance was extremely impressive. In Japan, the game reached 10 million downloads on its first day. In the United States, Pokémon Go reached 10 million downloads faster than any app ever and broke through Candy Crush’s high water mark of 20 million DAU (daily active users). This popularity quickly brought in revenue exceeding $100 million from in-game purchases. This is rare to see in the current climate where mobile device owners are suffering app fatigue. It should not be surprising that Facebook and Google attract over 80% of digital advertising spend. And yet, casual gaming still persists.

Of the top paid and top grossing apps not owned by Google and Facebook, most are games.

Here’s why casual games continue to pull ahead and meanwhile change the rules of AdTech:

1. Brands seeking performance and ROI will eventually find games: If brands begin to seek audiences across mobile platforms where they can prove performance (and therefore ROI), mobile apps will benefit from the increased ad spend. Dan Munteanu, the Head of User Acquisition at games company Storm8, revealed in a 2016 interview that “…mobile is attracting a huge influx of savvy advertisers that want to measure and prove with certainty that their dollars will have a measurable return…in the next few years we will continue to see increased brand marketing presence on mobile.”

2. Premium inventory could become a thing of the past for mobile first audiences: The number of Internet users who are either mobile first or mobile only will grow from 40 million in 2017 to 47 million by 2019, according to eMarketer. “As smartphones and data plans become more affordable than ever, they are positioned to become the default device for Internet access,” said eMarketer’s Corey McNair. The implication for brands? If a brand seeks to reach a segment of New York Times readers on mobile devices, the brand should wait for that segment to open non-premium apps and then show the ad. This will improve efficiency and marketing ROI dramatically while delivering on reach and performance. The result will be a world in which brands pay for audience rather than inventory. And the high fees once charged by premium apps will be shared by all other app makers. For more information on gaming, including Targeted Advertising, download our report here.

3. In the mobile world, location data is incredibly important: An AR game like Pokémon Go captures this signal by encouraging users to explore the world and creates a very valuable data set of user location information. It is not hard to imagine how valuable it is to understand where an audience is, where they live, and what they do. Brands and agencies want such insights. Urban Outfitters sought to leverage geolocation data over the 2016 Christmas season. They successfully “boosted customer conversions by 75 percent and increased related revenue by 146 percent” according to Geomarketing.com.

4. Ad-blocking technologies are not inevitable: Ad-blocking undermines the freemium model, but most users do not implement ad-blocking technologies unless they have a bad experience. It is imperative, therefore, to deliver ads that are relevant to the user and to prevent the ad experience from being burdensome. Mobile game makers can ensure this by implementing ad tech that applies user insights.

5. Users are more likely to block ads in developing economies: The higher price of data plans outside the United States creates incentives for users to implement ad-blocking technologies. But ad-blocking will not entirely stop mobile ads in emerging markets — if the ads can prove their relevance and usefulness which justifies the cost. Ad blocking in emerging economies will accelerate the end of low quality ads, poorly targeted ads, and ad platforms that do not prioritize delivering on-target messaging.

For the rest of the year, I think we can expect that brands will endorse the freemium model and create ad-fueled experiences for their audiences with plenty of opportunities for in-app purchases. Given the immense popularity of augmented reality features, it seems very likely that branded AR experiences will be regularly released within games throughout 2017. As a result, we are anticipating new data sets filled with geo-location information. App development like this is expensive so it will have to be supported by additional revenues which might include relevant and targeted ads served by sophisticated ad tech.

Importantly, in a mobile first world, it becomes increasingly less important for brands to target premium inventory. Rather, it is MUCH more important for bands to understand their audience and reach the right people regardless of they app or inventory they are using. For more information on gaming, including Targeted Advertising, download our report here.

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