Ads are back in: Monetizing beyond subscriptions and transactions in gaming

The rapid growth of direct-to-consumer streaming platforms has proven that subscriptions are viable. Subscription options have seen a massive increase as console, platform, and other industry players have tried to capture people’s time by creating an experience that offers a variety of games.

But in the same breath, we hear about rapid subscription growth across the game and entertainment sector, we also hear of subscription fatigue. Consumers cannot wrap their heads around the number of subscription services they’ve signed up for and now look for ways to cut back. The total cost of ownership of consumers’ recurring subscription payments has actually now, in many cases, exceeded what they might pay for other entertainment services.

While many think the industry has left advertising revenue for dead, I think the fatigue of subscription will bring it back to the spotlight. To get advertising right, here’s what gaming companies need to consider.

Advanced segmentations and agility

During COVID, many of my game-industry customers have said that they saw peak demand on their platform daily as loyal gamers and others looking for new entertainment options had to shelter in place. In fact, one gaming customer described COVID as “Christmas every day” in terms of comparing the scale of demand coming to their platform to pre-COVID days. And while this pandemic is hopefully a once-in-a-century event, it has demonstrated that the need to be agile is critically important for success in a consumer-first economy. The same applies to agility with revenue models.

Peak demand gave many gaming companies the opportunity to experiment with new revenue models and drive a better experience for gamers and advertisers. A focus on advanced segmentation has helped platforms present more targeted ads that improve click-through conversion as well as outcomes for advertisers. More targeted ads also improve customer satisfaction, net promoter scores, and the likelihood to recommend and overall improve the gamer experience. We’ve seen a few platforms experiment with exposing available ad inventory in digital channels while evaluating campaign performance in near-real-time. One innovative use case we’ve seen gives advertisers suggestions for programmatic ad buys based on how current digital campaigns and audiences perform within an hour of a campaign being launched.

From advanced segmentation to providing programmatic buying suggestions, business agility and scalable data platforms are critical to making advertising-focused gaming platforms a success.

The secret: data strategy

Above: Mobile marketers are confused by Apple’s IDFA change, based on a November survey by AppsFlyer.

Image Credit: AppsFlyer

We know we need more targeted ads that advertisers will buy and gamers will engage with, but actually getting the consumer to take action requires gaming companies to think more holistically about their data strategy. Many web browsers have already moved to block cookies, and platforms like Apple will pull back on IDFA and push consumers to give consent when tracking advertising in order to better comply with GDPR, CCPA, and other privacy regulations. The gaming industry has to shift its focus to consumer value in order to attain the data they need to monetize. In particular, they have to create consistent and personalized experiences — whether in a subscription or ad-supported platform.

While game designers and studio chiefs need to take the same care and consideration for the consumer regardless of how they monetize the experience, this does become more critical in advertising-based models. In ad models, capturing consumer attention and time on site is how platforms drive more revenue. Success on this front comes back to taking granular level consumer data like clickstream, preferences, demographics, and other indicators to start immediately driving a 1:1 experience. We worked with one ad support gaming platform recently that was able to increase player lifetime value by 30% over the course of six months simply by adding more personalized recommendation features in the game, such as enhancing user cold start to increase gamer time on app and drive personalization for ad targeting leveraging user behavior and preferences, which increased click-through rate. There are many steps and many data points like this where personalization for ad targeting and a focus on relevancy of experience work together in driving top-line revenue growth and a superior gamer experience.

With strong 1:1 interactions driven by data, advertisers can keep the interest of their audience at a time when gamers have many options to jump to when they’re dissatisfied with their experience. As John Clarke of Gfinity states in this article on the future of ads in video games, “Gen Z gamers have little or no time for brands that do not add value to their experience, so bringing something special is key.” It’s all about the value add.

The booming ad ecosystem

Not only are infrastructure providers doubling down to win gaming workloads, but they also see benefits to their ad businesses. Microsoft, Google and Amazon are all using the leverage of their advertising business with gaming companies to strike commercially beneficial deals for infrastructure. Above and beyond this, all three cloud providers are also investing heavily in architects, integrations and consulting services to optimize gaming companies’ use of cloud platform ad stacks so as much data (and advertising spend) as possible stays with each cloud provider. We’ve seen some gaming companies be the beneficiary of cloud platform companies willing to augment their customer teams with ad tech experts to optimize customer acquisition cost, targeting and other advertising use cases since this only benefits the cloud platforms’ ability to drive consumption.

We’re also seeing cloud companies innovate their advertising offerings specifically to address the needs of the gaming vertical. Google, for instance, has been very aggressive with creating advertising-based experiences beyond traditional display with the benefit going to gaming companies looking to increase time on site and improve user sentiment. Every cloud provider is investing heavily in the gaming space, so the concept of “buying the business” across infrastructure and ad stack is a trend that will certainly be with us for the next few years — and it’s one all wise gaming companies are pursuing as they mature their infrastructure and consumer acquisition strategies.

With consumer spending on gaming accelerated over the past year, now is the time for companies to take advantage of advertising to uniquely capture user attention and monetize playing time.

Steve Sobel is the Global Industry Leader for gaming, media, and entertainment at Databricks.