The State of Gaming: What Brands Need to Know in 2023 & Beyond
On Microsoft’s ascendance in gaming & emerging in-game ad formats
There’s no denying what a cultural force that gaming has become. Per Newzoo’s latest estimates, there are 3.38 billion gamers globally as of 2023, accounting for 41% of the world’s total population. In U.S. alone, over 215 million gamers, ranging from hardcore console gamers to casual mobile gamers, make gaming a crucial media sectors for all brands to understand and explore.
The sheer size of the audience may have marketers questioning the efficacy of a one-size-fits-all media strategy, leaving a many asking “where do I start” when it comes to assessing solutions in this space. The answer is, of course, to start small. There are plenty of turnkey ad solutions available, especially in mobile gaming. that provide accessible entry points for brands to start reaching the gaming audience. Brands hesitant to dip the proverbial toe in this emergent media sector can test more conventional ad formats akin to their existing digital activity across previously unexplored environments.
While programmatically available inventory in mobile gaming has demonstrated its reliability in achieving reach, but formats favoring a value-exchange with users have become increasingly prominent in the last few years. A tried-and-true method of positively contributing to player experience is rewarded video. A mere fifteen or thirty seconds of brand engagement can earn a user a much-coveted extra life or game-changing powerup without having to fork over additional funds or wait an extended period.
That said, ad experiences in the mobile games have a garnered a bit of notoriety due to their perceived non-premium nature. Still, it’s hard to argue with the effectiveness of a fifteen-second spot or display banner that reaches hundreds of millions of Candy Crushers, despite of how creatively uninspired they might be.
Fortunately, in 2023, brands can aim higher than those turnkey mobile game solutions and escape the non-premium perception of direct-response ads to explore the full spectrum of brand opportunities that gaming has to offer.
Beyond the Conventional Ad Formats
Going beyond standard creative across mobile game environments, some gaming companies are building interactivity into those ad experiences. Activision/Blizzard has helped companies like Pringles, Blue Bunny, and Turbo Tax develop exciting micro-games that bring the brand to life in a format familiar to players of that title.
With the rise of mixed reality technology, two-dimension visualization is no longer sufficient for immersive product story-telling. Therefore, more brands are starting to update their asset catalogues with 3D file formats flexible enough for deployment across a multitude of multimedia environments. Pokémon Go maker Niantic is taking playability to another dimension with its recently released rewarded AR ad format. Players are being encouraged to engage with interactive brand experiences inside of worlds to unlock bespoke in-game rewards.
Should your brand be one yet to modernize its creative — fear not! There’s a host of ad-tech companies like Anzu, Azerion and Frameplay that specialize in taking IAB-standard formats and manipulating them to fit native formats and converting them into custom digital goods.
Accessibility is sure to keep mobile gaming firmly in the ascendancy for the foreseeable future as it pertains to total player count, but its position of superiority from a revenue generation perspective may be susceptible, as once category-exclusive ad formats creep into less casual channels.
Once gatekept by exorbitant investment minimums, branded experiences and sponsored integrations are becoming commonplace across premium titles on PC and console. Third-party partners like the aforementioned Frameplay and Anzu have an abundance of ‘standard’ in-game inventory that offers brands tremendous scale at reasonable rates.
More interestingly though, we’re seeing some of the industry’s biggest players soften on creative and pricing restrictions. For example, Fortnite amassed $6 billion in revenue in 2022 with much of that coming from the wildly lucrative microtransaction shop that offered collaborations from the likes of Nike, Coachella and Marvel.
The Metaverse Ambition of Gaming
Speaking of Fornite, the impact of immersive 3D gaming on in-game advertising is also reflected in the rise of user-generated digital third places — popular MMO games such as Fortnite and Roblox. Together, this increasingly popular category of games has stolen a significant share of the player base from publisher-built realms.
Free-to-play sandbox environments like Roblox and Minecraft were literally designed for users to dream up and construct new ways to play. Games like Fortnite and Halo have since added features — Creative and The Forge, respectively — that allow users to manipulate existing digital templates using low-code or no-code tools to bring their vision to life.
Crafty kids are not alone in developing alternative entertainment experiences across these digital spaces — more and more brands enter the fray every day. McCain Foods, Shell Gasoline, iHeart Media, H&M, Man Cityand many other companies have created worlds for passionate brand advocates — or really bored people — to come and engage with the brand through a collection of immersive entertainment experiences.
Interestingly, the MMO games of this nature also factor heavily into the development of the metaverse — Fortnite, Minecraft, and Roblox all have monetization programs for creators who drive major traffic for the platform. In other words — brands that create compelling enough content can actually monetize off of consumers congregating and conversating in their game world.
Among the three category leaders, Roblox stands out as arguably the most brand-friendly platform. The company introduced a self-serve ad platform in September 2022, which allowed brands to place in-game ads in the form of digital billboards, video ads, and “Portals” that allow users to jump from one experience to another. Since the announcement, Roblox has been beta testing its advertising offerings with a select group of brand partners, including Puma and the NFL, to early positive results. In June 2023, Roblox doubled down by enlisting the likes of Dentsu and Vayner3, the Web3 consulting arm of VaynerMedia, to help further scale its ad business.
Microsoft’s Continued Ascendance in Gaming
As gaming culture takes the spotlight in digital culture, there has been a growing appetite for brands to see their names showing in popular console and PC games. As a result, there’s no shortage of partners who can help place you execute inside of a premium environment. Beyond the aforementioned Roblox and Fortnite, Microsoft is quickly emerging as one of the leaders in premium gaming ads.
To be fair, Microsoft has been in the gaming ad business for a while. Previously, Microsoft Advertising only carried brand solutions across its suite of Casual Games — Solitaire, Minesweeper, FreeCell, etc. That changed in 2023, thanks to the company’s strategic investment in cloud gaming, as well as its blockbuster acquisitions of game studios. Now the team behind one of the top-selling consoles globally — Xbox — have inventory across more than just the set of six or so games that come pre-installed on your PC. A recently leaked Microsoft presentation from 2022 revealed the company plan to quickly grow revenue from mobile purchases and advertising over the next few years.
Microsoft has been on an acquisition spree in the last two years — notably bringing Bethesda and Activision/Blizzard into the fold to diversify and enhance the portfolio and compete creatively with counterparts over at Sony and Nintendo on the “premium exclusives” front. Following the completion of its acquisition of Activision/Blizzard in October, Microsoft reorganized its Xbox gaming and marketing leadership, prioritizing a consolidation of its gaming-related operations.
While recent additions certainly bolstered the collection, Microsoft’s true advantage lies with the hundreds of titles on Xbox Game Pass. Microsoft’s relationships with the disparate publishers that make their games available on Game Pass allows them to broker deals on behalf of brands and place them in those environments.
As a result, Microsoft is winning the ad game on console and desktop gaming: the company has a great number of titles in which it can sell sponsorships in the near term. Further out, Xbox will have the most expansive inventory when it comes to selling ads against cloud gaming experiences. For the uninitiated — cloud gaming allows users to play games without expensive hardware. All that’s required to start playing is a stable internet connection and a controller as the game is streamed to your screen in real time. As cloud technology becomes more sophisticated, there is sure to be a correlative uptick in user adoption — giving advertisers another channel in which to reach a captive audience.
Through its cloud gaming efforts, Microsoft has an ambition of becoming a leader in the Netflix-fiction of gaming, potentially shifting the business model from a purchase-based one to a subscription-driven one, which, of course, would lend itself well to an ad-supporter tier. It is also worth noting that Microsoft also currently provides Netflix with the ad infrastructure for their ad-supported tier, which now has 15 million monthly active users worldwide. Considering Netflix’s recent entry into mobile gaming, which are currently ad-free, Microsoft would stand to further benefit from the ad partnership and grow the reach of its ad network.
The Game Live Streaming Landscape
Given the ascension of gaming as a cultural force, it is no surprise that the gaming community is active across other media channels beyond the games themselves, thus creating more channels for brands to potentially reach and engage with the gaming audience.
The most obvious example here is live streaming, which has been a mainstay in the gaming media ecosystem. Stream Hatchet reports that there were 29.5 billion hours of live-streamed content viewed in 2023 across platforms like Twitch, YouTube, Facebook Gaming — and new entrant — Kick.
Twitch is the market leader by a country mile, accounting for 77% of total live-streaming hours watched last year. The Amazon-owned entity also boasts the most mature advertising product, with formats that bring an element of dynamism to the broadcast beyond programmatically purchasable spots and dots.
More adventurous advertisers will experiment with formats that drive engagement like chatbots and extensions. Chatbots allow brands to insert custom !commands into the Twitch chat environment that will push users to any pre-determined external experience. Extensions bring brands to life on the Twitch platform in a more meaningful way — they are interactive overlays and panels that live on top of the broadcast experience.
Newcomer Kick was founded last year and is backed by the founder of Stake.com, a crypto gambling site. While still in its nascent stages of development, many content creators are moving to the platform because of its extremely generous revenue split (95% / 5%) and ability to go simulcast while streaming on Kick. One of the other major draws to Kick is that there are very loose content moderation guidelines — excellent creators, but worrisome for brands. The platform is still rolling outs ads and could be a way for brave brands to take advantage of shifting consumer eyeballs.
Should Kick continue to successfully recruit live-streamers from different platforms, the landscape could experience some turbulence. As greater emphasis is being placed on individual creators’ ability to monetize and exercise their creative freedom, there becomes an increased focus on specific channels rather than the platform itself.
Brands looking to get ahead a move of this magnitude should explore activation opportunities with OBS (Open Broadcaster Software) orgs like StreamElements and talent-management companies like UTA and GameOver. Working directly with an influencer unlocks the most valuable advertising real estate in live-streaming for brands — the gameplay screen. Here, brands can create omnipresent branding elements that flit and float about the screen while the action unfolds. More importantly, they have the authentic backing of a celebrity that thousands of individuals are tuning into on a near-everyday basis.
Go Where the Gaming Conversation Happens
Moreover, we’d be remiss to not mention the ancillary opportunities centered around the gaming culture and community than the actual gameplay itself. Beyond live streaming, conversations about gaming taking place all across the interwebs, and Reddit and Discord have established themselves as the fan favorites.
In spite of some turbulence earlier in 2023, Reddit remains the preeminent place for gamers to share tips, tricks and highlights with the world wide web. With 430M MAUs, Reddit is amongst few platforms in the gaming universe that can tout sophistication and scale when it comes to advertising. Discord, though a bit behind Reddit’s MAU mark (154 million), is the platform driving the most conversation — both on it and about it. One of 2023’s most frequently asked questions from brands was, “how do I get on Discord?”
While Discord does not currently offer brand advertising, third-party partners like Wildfire do offer solutions to reach audiences on Discord through formats native to the environment. Wildfire can help brands promote messages across managed spaces, create assets for channels and even build custom bots that users can install across their own servers to enhance functionality. If all that seems daunting — consider that brands like Gucci are managing their own server, on which they are responsible for around-the-clock moderation and content updates. Strategies to reach audiences on this platform are sure to evolve in the coming years, especially as momentum continues to gather.
When gamers do finally take a reprieve from the online discourse, you can find them scrolling publisher sites like IGN, Kotaku, Polygon, and Fandom for the latest industry news, walkthroughs and reviews. All of the aforementioned have a plethora of ways for brands to activate — from programmatically available inventory to co-developed editorial. These sites are akin to the existing ‘traditional’ digital advertising spend and should be considered as a part of a brand’s standard mix and not relegated to an ‘innovation’ budget.
Want to Learn More?
The gaming market and the in-game ad industry are evolving rapidly in 2023 and beyond, driven by new ad formats, emerging channels, and new business models. Here at the Lab, we’re keeping a close tab on the latest developments in the gaming space and the resulting brand opportunities.
If you want to learn more about gaming and the myriad brand opportunities it presents, please reach out to Ryan Miller, our Director of Partnerships, (ryan.miller@ipglab.com) to start a conversation.
