156,967,020 is half the U.S. population – and by 2016, it will represent the number of people that will play mobile games at least once a month. Advertisers should be ecstatic about mobile gaming’s high potential, especially with 53 percent of smartphone users already playing games daily. Yet, while mobile comprises 12 percent of consumer media intake, the platform only received three percent of advertisers’ budgets last year – a striking disparity.
Naturally, the disconnect between mobile usage and associated advertising spend is evolving. Three trends defined in the gaming sector are helping drive this transformation.
1. Publishers Turn to Mediation
Monetization remains a challenge for publishers. While advertising can be an effective revenue driver, but it demands a significant investment of time and resources to effectively integrate, manage and optimize advertising from numerous sources.
The avid consumption of certain formats of mobile advertising – video in particular – results in user demand consistently outpacing ad supply. To meet these challenges, we see an increasing number of publishers turning to mediation platforms as one-stop shop solutions. These platforms provide a single point of integration for publishers and solve fill rate problems by aggregating, evaluating and serving optimized campaigns from a full collection of sources (agencies, demand-side platforms (DSPs), exchanges and networks).
Additionally, intelligent ranking algorithms, including ad filtering tools and algorithms based on historical campaign performance and user preferences, ensure both optimal eCPMs and effective content control.
Ultimately, these mediation platforms minimize overhead for publishers while helping maximize ad revenues, allowing them to focus on doing what they do best – making great games and apps.
2. Consumers crave interaction
With an annual growth rate of 112%, video is the brightest spot in the mobile advertising ecosystem. This success has been especially true on social and mobile gaming applications where ads see 30x the click-through rate of standard banner advertising campaigns.
Reasons for this growth include the immersive environment these games offer and high frequency with which mobile users play. A high level of video consumption within games translates directly to increased ad revenue, especially when advertisers understand how to adapt strategies for mobile devices.
Advertisers are also increasingly using video as a stepping-stone to deeper engagement with consumers. Recently, to promote The Hobbit: An Unexpected Journey, Warner Brothers ran a unit that prompted users to watch the trailer and then like the movie on Facebook.
The campaign was particularly successful because it ran in a game environment that matched the fantasy theme of The Hobbit, which not only meant smart integration, but intelligent targeting (gamers who enjoy fantasy games will likely enjoy fantasy movies).
Beyond sharing on social networks, users are commonly encouraged to visit a website, purchase a ticket or redeem a retail voucher. Click-through and conversion rates are higher than 20 percent when these engagement elements are placed immediately after a video ad.
As the ecosystem develops, brands will likely abandon display and static ad units in favor of more interactive formats.
3. Advertisers adopt value-exchange models
You may have heard of the value-exchange model back in June, when Jay-Z promised early album access to Samsung users who downloaded his app.
The same value-exchange approach – a model in which users unlock premium content in return for engaging with advertisements – is proving incredibly successful within the mobile gaming industry.
In games, these value-exchange rewards are built into the infrastructure of the app and usually take the form of virtual currency, lives, or animations.
With its opt-in mechanism, the value-exchange model is respectful of users’ time while simultaneously providing access to otherwise unattainable or costly features and content. In other words, advertisers access highly engaged audiences while publishers monetize non-paying users.
As an agile industry largely drawing on freemium models, social/mobile gaming has been quick to adopt value-exchange. Despite initial skepticism and a sometimes-lingering stigma, the model has proved lucrative, often driving more revenue than in-app purchases.
In Creative Mobile’s Drag Racing, value-exchange ads deliver 1.5 to two times the revenue of in-app purchases – rather striking for one of the highest-grossing Android apps of all time.
In coming months, value-exchange advertising will spread rapidly to other verticals where the freemium model is popular. Communication, dating, streaming media and news apps, among others, will soon adopt the approach as an additional monetization channel/alternative to dreaded paywalls or restrictive subscription models.
This piece was co-written by Projjol Banerjea, VP of marketing and business development for SponsorPay, and Jessa Moon, the company’s communications manager.
Becky is the Senior Content Marketing Manager at TUNE. Before TUNE, she led a variety of marketing and communications projects at San Francisco startups. Becky received her bachelor's degree in English from Wake Forest University. After living nearly a decade in San Francisco and Seattle, she has returned to her home of Charleston, SC, where you can find her enjoying the sun and salt water with her family.