In this exclusive Q&A, WeGame2’s Ellie Edwards-Scott, Nina Mackie, and Lisa Menaldo outline the key trends, benefits, and challenges associated with advertising in gaming, and how the format is set to evolve over the year ahead.

What are the key industry trends set to affect the video games industry through 2024, and how are these set to affect advertising within the sector in turn?

There are five key trends that we've noted will impact the future of the video games industry and how advertising within gaming will adapt. Specifically, these are:

-  Technology

- Consumer behaviour

- Regulatory changes 

- Monetisation strategies

- Market growth.

Technology - 
The evolution of VR and AR technologies is expected to continue rapidly this year, transforming the gaming industry by providing immersive gameplay experiences. VR and AR are anticipated to become more integrated into mainstream gaming, offering novel ways for players to experience games. 

Cloud gaming is transforming access to games, allowing players to stream games without the need for high-end hardware. This tech is set to expand, enabling seamless gaming experiences across various devices. 

AI and machine learning are becoming more sophisticated, enhancing game development and player experiences. These technologies are introducing more dynamic and intelligent game environments.

The rollout of 5G is enhancing mobile gaming, providing faster and more reliable internet connections. This is expected to support more complex and multiplayer mobile games, expanding the possibilities within mobile gaming. 

Finally, blockchain technology and NFTs are creating new opportunities for digital ownership and monetisation within games, this is anticipated to revolutionise game economies and player interactions with digital assets.

Consumer behaviour -
The trend towards mobile gaming is expected to continue, with a growing number of consumers engaging in gaming on smartphones and tablets. This shift is influencing game development and marketing strategies as gamers are increasingly seeking immersive and interactive gaming experiences, driven by advancements in technology such as VR and AR. 

This is shaping the types of games being developed and the features they offer, we've seen a surge of studios specialising in brand experiences specifically for games such as Roblox & Fortnite. The social aspect of gaming is becoming more and more important, with players valuing games that offer community building, social interaction and freedom to express individuality. This trend is influencing game design and online features and will drive innovation in ad products.

Regulatory changes -
Digital Services Act: New regulations like the Digital Services Act are encouraging game developers to adopt safety measures for online gaming environments. This is impacting game development and operations

Depreciation of IDFA: - Game developers are quick to adapt, as are marketers. There are already excellent anonymised and contextual targeting tactics that provide equally good results.

Monetisation strategies -
Having attended a number of gaming conferences this year, already the two most common trends we have heard are a diversification of revenue models: Game developers are exploring various monetisation models, including in-game purchases, subscriptions, and advertising and a direct-to-consumer sales approach - there is a growing trend towards selling games directly to consumers, bypassing the traditional retail channels. This approach is influencing how games are marketed and distributed 

Market growth -
The video games industry is projected to continue its growth trajectory, with significant revenue increases expected through 2024. This growth is being driven by technological advancements, consumer demand, and new monetisation strategies.

E-sports is also experiencing rapid growth, with increasing interest from both players and spectators. This expansion is contributing to the overall growth of the gaming industry. Agnitio Capital have predicted a rise in M&A and investment in the second half of this year.

So what are the implications for advertising strategies?
Immersive ad experiences: Advertisers can leverage VR and AR technologies to create immersive and engaging ad experiences within games.

Targeted advertising: The use of AI and machine learning enables more targeted and personalised advertising, improving the effectiveness of ad campaigns.

In-game advertising opportunities: The growth of mobile and social gaming provides new opportunities for in-game advertising and brand partnerships.

Community engagement: Brands can engage with gaming communities through sponsorships, events, and community-driven content, aligning with the trend towards social gaming.

Regulatory compliance: Advertisers need to be mindful of regulatory changes affecting the gaming industry, ensuring that advertising practices comply with new regulations. 

By understanding and adapting to these trends, advertisers and marketers in the video games industry can develop effective strategies to engage with gamers and capitalise on the opportunities presented by the evolving gaming landscape

Likewise, what are the key challenges impacting advertising in gaming, and how are these being addressed?

The advertising landscape in gaming today is shaped by several key challenges across different domains, including monetisation, user experience, regulations, technology, and market trends. If we look at some of the challenges and the solutions that the industry has come up with:

Monetisation - The gaming industry faces challenges in maintaining ad quality, integrating new ad formats, balancing monetisation with user experience, navigating privacy regulations, and adapting to economic fluctuations. Some strategies to overcome these include adopting hybrid monetisation models, developing brand demand within games, optimising ad performance, and compensating for decreasing CPMs.

User experience - Advertising can often impact the gaming experience through disruptive ads, the choice of ad tech platforms, limitations in VR/AR technologies, and the need to satisfy diverse gaming audiences.

A great way around this is delivering ads that match the gaming environment, ensuring seamless ad tech integration, combating ad fraud, and utilising diverse ad formats to engage users in relevant ways.

Regulations - As already referenced, the depreciation of IDFA is being combatted using more contextual targeting and opt-in elements.

Technology - Technological challenges encompass respecting user experience, choosing the right ad tech platforms, overcoming VR/AR limitations, combating ad fraud, and integrating gaming with advertising technology. A huge part of solving these challenges is educating advertisers, providing unique value, ensuring brand safety, and advocating for data interoperability are among the approaches being taken.

Market trends – Currently, the gaming advertising market is challenged by increasing competition, targeting difficulties, and concerns over ad intrusiveness. The solutions so far are Integrating native ad formats, leveraging influencer marketing, and exploring technological advancements for monetisation.

By addressing these challenges with strategic solutions, the gaming industry continues to evolve, creating more effective and user-friendly advertising experiences

How does attention within gaming compare with other formats, and how can creative be optimised to maximise this in a non-intrusive fashion?

The landscape of advertising has seen a significant shift with the rise of gaming platforms as a viable medium for reaching diverse and engaged audiences. Below are some insights on how advertisers can adapt their creatives to engage gamer audiences effectively.

Gaming versus TV - Gaming platforms offer a unique advantage in terms of engagement, with ads integrated into gameplay ensuring 100% viewability. This contrasts with TV commercials, where viewers may multitask or ignore ads. 

Gaming also boasts a diverse audience, with 70% of players being over 18 and a nearly even male-to-female ratio, providing a broad reach for advertisers. According to Newzoo Gen-Z spends more time gaming than watching TV and streaming services combined!

Gaming versus social - The immersive nature of gaming experiences leads to higher engagement rates compared to social media. Gamers prefer rewarded video ads, finding them more appealing than other ad formats, indicating the effectiveness of interactive and reward-based advertising within gaming platforms. Gen-Z spends more time on Roblox than TikTok. 

Gaming versus movies - Time spent gaming averages between 9-11 hours per week for Gen-Z with Gen-Alpha even higher. This is comparable to around 5-6 hours watching movies. 

How can advertisers adapt creatives for gamer audiences?
Advertisers should ensure rewards are intrinsic and compelling, tie the ad experience to the game itself, and avoid misaligning KPIs with ad formats. Interactive formats and real-time analytics are recommended to enhance campaign effectiveness. Demographics are important! The gaming audience is diverse, with a near-even gender split, and a significant portion aged 25-54. Gamers are highly engaged, influential, and have disposable income, making them a valuable target for advertisers so messaging should include a variety of audience segments.

How are brands recognising the diversity of gaming audiences, and how are agencies helping them to leverage these consumers?

The perception that gaming carries a weighted demographic of 16-24 year old males is slowly becoming a thing of the past as marketers grasp the fact that gaming is truly for all. A recent study from Statista showed that female gamers in the UK rose to 61% in 2022 compared to just 23% in 2018 and by 2027 it is forecasted that there will be just over 57 million regular gamers in the UK let alone the ROW!

Breaking down these numbers it is evident that the gaming community consists of multiple ages, demographics and sub-cultures, so how do marketeers begin to navigate the gaming landscape? Should you be looking to the metaverse to reach the buyers of both today and tomorrow (Gen-Alpha), Strategy-led games for a higher skew of the over 40’s, casual gaming for a higher density of women and so on 

At WeGame2, we have seen that the known agencies sit in three camps when it comes to the channel, with the majority sitting in the latter two categories  

• ‘All in’ with dedicated specialists/ teams who consistently educate their brands on how gaming is evolving and how to both activate and engage with these valuable audiences across the multiple disciplines.
• ‘Toe dippers’, typically activate in casual gaming, rewards-based and supported by the data that is available to them. 
• ‘Not priority’ 

This has opened the door to a rise in specialist agencies, which is becoming the ‘go-to’ for the brands as they not only understand the current and future value of the channel but also recognise that each and all genres of gaming has its own nuances, and marketing strategies need to reflect this including creative, ahead of activation. 

As a company, part our role is to work with both agencies and brands in educating them on the ecosystem, it is different and needs to be treated as such – rolling out a standard display ad in a game can work in some environments but not in others, you also need to understand not all brands are naturally suited to all the channels and rarely are all gaming channels suitable for all brands, that said there can be room for all - by understanding the genre of game, audience and demographic, brands can leverage their creative and messaging in an optimal fashion.