Will in-game advertisements backfire for video game companies?

The most recent statistics from the Entertainment Retailer’s Association reveal that the UK video games industry outperforms the music and video industries by a significant margin. Combined physical and digital sales of games reached £3.86bn for the year, a significant improvement on last year, where physical and digital sales for music and video achieved £1.33bn and £2.34bn respectively. That effectively means that games are responsible for over half of all UK home entertainment sales for 2018, a testament to the increasing numbers of the public who have grown up with games as a medium.

video game advertising
Macho nachos.

Monetisation opportunities around games have similarly increased as technology has enabled more ways for consumers to support game developers and publishers. Where once one-off purchases were the only way to support a game, the rise of free-to-play (F2P) games and paid-for downloadable content (DLC) have paved the way for many other models. Despite publishers being ever-more hungry for sources of incidental revenue from their titles, one potential form of revenue – in-game advertising – has never really taken off in the West. But that could be about to change.

In-game advertisements have existed in some form for years, most commonly in the form of the whole game being a piece of content marketing. Zool, a Sonic the Hedgehog competitor for the Amiga, was published in 1991, and was an unashamed advert for the Chupa Chups lollipop brand. Pepsiman is a bizarrely fondly-remembered 3D action game which featured a humanoid embodiment of a Pepsi can tooling around real world locations. Sneak King, which is decidedly not so fondly-remembered, featured Burger King’s mascot in a “stealth food-delivery themed game”.

Other types of sponsor-based advertising have included real-world items being included in-game, no matter how immersion breaking that might be. The Metal Gear Solid series, a franchise primarily about exploring the threat of nuclear armaments and the giant robots that deliver them, has included Doritos as a health restoring item and as a tshirt, and an iPod. Sonic the Hedgehog has worn Soap Shoes. A Vivienne Westwood dress and a Pot Noodle appeared in Final Fantasy XV. H&M clothing was sold as an add-on for The Sims franchise. The list goes on – and unfortunately more of the examples are remembered with embarrassment than not.

Outside of sponsored or branded materials within games, the examples that work the best are arguably those that are least noticed. In sports games, for instance, sponsors’ brands will be advertised on pitch-side advertising boards and shirts much as they are in the real world. However, with the ability to regularly update games through patches, that need not always be the case. As an example, Capcom recently chose to open its flagship fighting title Street Fighter V up to potential ad partners, with logos set to appear on fighters’ gloves and costumes where appropriate. The benefit to the player was an increase in the amount of in-game currency they received – the downside was the perceived ‘theft’ of that currency when the in-game ads weren’t turned on. A week after the system was implemented it was quietly disabled in-game, with many news outlets reporting it was due to fan backlash over ads in a game for which many had already paid full price. More likely, though, is that Capcom are seeking new partnerships with advertisers based on the data they gathered during the trial.

While ads in triple-A games have to be carefully managed, the same isn’t necessarily true of mobile games, which account for roughly half of all gaming revenue, and has an audience more habituated to seeing advertising in-game than console or PC gamers. Some titles – like the Sega classic Sonic CD – are made available for free on iOS and Android devices, provided the user is prepared to watch an ad or two between levels. There is also considerable innovation taking place within that space, as Venturebeat reported in February 2018:

“When Featherweight Games released Rodeo Stampede, it introduced an interesting twist on the traditional rewarded video model that typically rewards players upon completing a video advertisement. In Rodeo Stampede, Featherweight flips the model, giving players who meet an untimely death an opportunity to continue the game immediately in exchange for watching a video ad after the level has been completed. Delaying the ad keeps the player engaged at critical moments, and in many instances leads to longer game plays and happier players.”

While the video games industry is in relatively rude health, competition for the coveted best-seller lists is fierce. The price for being a follower rather than a leader is frequently bankruptcy and an ignominious crashing out from the industry. So as game companies look for more incidental revenue, it’s likely we’ll see mobile game advertising strategies make their way over to console games. Efforts like Capcom’s attempt to create ad space in Street Fighter V will become much more common. Time will tell if the console gaming audiences will respond well – or if the encroachment of immersion-breaking ads in-games will be a bridge too far.

Chris Sutcliffe

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Martin Tripp Associates is a London-based executive search consultancy. While we are best-known for our work across the media, information, technology, communications and entertainment sectors, we have also worked with some of the world’s biggest brands on challenging senior positions. Feel free to contact us to discuss any of the issues raised in this blog.