Understanding In-Game Advertising’s Crisis of Confidence

While some games are thriving, it should not cloud the fact that free-to-play monetization is a granite-tough business, and for many developers, it is akin to chasing rainbows.

While some games are thriving, it should not cloud the fact that free-to-play monetization is a granite-tough business, and for many developers, it is akin to chasing rainbows.

The reality is that for most games, less than 1 percent of players make in-app purchases, leaving ads as one of the few viable options for monetizing the remaining 99 percent. However, integrating ads into your game does come with its own inherent risks, as overly aggressive or intrusive campaigns can be linked, rightly or wrongly, with the decimation of the player experience and demolition of player retention.

But the good news for developers is that players have become a lot more accepting of ads and the value exchange that they represent, so much so that according to Unity, players now actually prefer ads as a monetization experience, especially rewarded video ads.

With only one in five players currently consuming rewarded ads, there is a huge opportunity to move the revenue dial with more effective strategies. So what’s stopping fiscally challenged developers from taking full advantage?

The frequency fear factor

The primary reason is a lack of accurate performance data linked to player behavior data. Developers can’t see which networks are adversely affecting their retention or test different strategies because they can’t measure the outcomes.

Alongside the complexities of integrating, optimizing and reconciling numerous ad networks, it’s actually incredibly difficult for developers to ever truly understand which networks are delivering the greatest value and what impact each campaign is having on players.

As developers are essentially shooting blind, it has created a real crisis of confidence within the industry, with most typically adopting an ultra-cautious approach to avoid scaring players off.

This crisis is so widespread within the industry that our recent F2P in-game advertising report found that only 54 percent of developers felt confident in their approach to ads. That’s essentially the same confidence level you would have in predicting the toss of a coin.

Surprisingly, the study also revealed that while ad revenue averages 38 percent, those that claim to be most certain they are getting advertising right have, on average, only 34 percent of revenue coming from advertising. So is this a case of misplaced confidence, or an upper limit of efficacy

It’s complicated

Rather than misplaced confidence, it’s more likely to be indicative of the inherent complexities of getting ads to work in tandem with the rest of the in-game economy.

The optimum monetization strategy for any game requires the developer to balance player retention, social engagement and IAP engagement with advertising frequency in a way that doesn’t annoy or frustrate users, while ensuring fill rates and maintaining eCPM (enhanced cost per thousand impressions) values across multiple networks.

It goes without saying that this isn’t easy, especially when you consider the lack of performance data available to developers. The irony is that the industry is actually drowning in data, yet most game developers can’t do anything with it because it is housed in separate analytics silos; and the tragedy is that they are more often victims of their own data rather than masters of it.

While advertisers employ programmatic buying to drive down eCPM rates, the games industry has been slow to adopt independent active mediation tools to ensure that the developers, in turn, receive the best value from the advertisers and networks they employ.

Game developers running static mediation waterfalls are losing all ways. As soon as they implement an ad network, the eCPM drops like a stone. If they change the order, the same happens, and they daren’t make this up by increasing the ad frequency, as they’ve no idea how this will affect their players. It sounds bleak.