How gaming is changing the marketing and advertising worlds

The Christmas season is upon us, which means that gaming obsessives everywhere are emptying their bank accounts and using up any remaining sick days on new video game release season.

November and December, being so close to the shopping season, is when the most-anticipated video games hit store shelves.

But for someone who went to high school with the “video game crowd” 20 or 30 years ago, the market for games would today look unfamiliar.

Now companies of all stripes – not just the Nintendos and Playstations of the world – are turning to augmented reality, in-game advertising and “advergames” to further expand their reach and build customer engagement.

A changing industry

The market for video games used to be pretty straightforward. Gamers would go to the store, pick up a cartridge (or, in later years, disc) and then go home and play on a console or computer.

Console video games, played on systems like Playstation and Xbox, are still around. But now they’re not even the largest segment of the market.

Mobile games continue to gobble up more of the video game pie. Mobile generated $46.1 billion in revenue, or about 42 per cent of the market. That eclipsed two traditional mediums, console ($33.5 billion revenue, 31 per cent market share) and PC ($29.4 billion revenue, 27 per cent market share).

As a whole, the gaming industry now claims $91 billion a year worldwide in revenue. That’s expanded its reach well beyond the Dungeons and Dragons and chess club crowd who used to dominate the market in the 1980s and 1990s.

The demographics of video game consumers have also changed. Exact numbers are difficult to pin down, but the Entertainment Software Association now estimates around 41 per cent of gamers, to take one example, are now female.

New ways to reach customers

Here is how the video game industry is changing the world of marketing and brand engagement.

By far the biggest shift in the video game industry over the last decade is towards mobile. Mobile gaming is big money, which is why the past few years have seen somewhat major celebrities like Kate Upton and Arnold Schwarzenegger earning big bucks to appear in commercials for video games that are free to play.

The business models vary, but in most cases game developers create “freemium” titles ­– games that are free to download and play, but offer in-app purchases (IAP) to enhance the experience.

Others are using selling in-app ads, product placements to advertisers, or some sort of combination of the above.

Augmented reality
The Pokémon Go phenomenon of 2016 underscored the potential for augmented reality – which alters real-life experiences with graphics or data – as a marketing tactic. Everywhere you looked, people were holding their phones up to try to catch Pokémon or, in some cases, overrunning sites that are inappropriate places to play a game.

Regardless, the effect was real: At its peak, Pokémon Go had 45 million daily users.

Now that the title has taken augmented reality mainsteam, other brands are lining up to see how they can use the technology. IKEA recently developed an augmented reality tool that allows you to virtually place a potential item of furniture in your living room to see what it looks like, exciting industry types about how AR will be used for marketing in the future.

Others are optimistic about the possibilities of Apple boosting the augmented reality mix with its new series of phones.

(For more on augmented reality, check out this June 2017 post on the Banfield blog).

Brands hoping to use video games as a marketing tool are going beyond simple ad placements. Companies are now also developing their own games as a tool for building audience engagement.

In 2013 United States-based restaurant chain Chipotle produced The Scarecrow. The game, in which players had to help break up a monopoly, helped to promote the company’s values and connect with customers. It was also a huge hit with fans, reaching 250,000 downloads in just four days.

Advergames like The Scarecrow are a great tool for raising brand awareness, gaining followers, accruing data and research and promoting products. Plus who knows ­– you might even go viral.

In-game advertising
Sponsors are finding more and more ways to get their brands in front of gamers, both on console and mobile games.

In-game advertising allows for native and programmatic advertising to reach gamers.

For example: The latest edition of NBA 2K18, Visual Concepts’ best-in-class paean to professional basketball, features a story mode that is littered with sponsors and advertising.

The game’s “The Neighbourhood” mode allows gamers free rein over a fictional neighbourhood that is littered with advertisements for products like Gatorade.

Another tool, known as dynamic in-game advertising (DIGA), “allows media buyers to purchase real-time and geo-targeting capable advertising inside of video games,” writes RapidFire.

In-game advertising is an especially popular revenue generation tool for mobile games. Ad mediation partners can help you get your brand in front of mobile gamers.

(For more on choosing an ad mediation partner, check out this post from the University of Ottawa’s Jonathan Simon).

In-game economies
The cost of playing a video game is no longer limited to the purchase of the base game. Now game makers are further expanding their revenue channels by selling in-game items that are supposed to give players the opportunity to improve their experience. These enhancements usually allow players to speed up their progression in the game by buying, with real-life money, items that would otherwise only be “earned” through game play.

For example: FIFA, the popular soccer video game, allows players to accumulate currency that can then be used to purchase new and better versions of real-life soccer players. This can be done one of two ways: Players can accumulate coins by playing actual matches in the video game, or they can get another kind of currency – known as points – by using real-life money.

These in-game purchases (or “microtransactions”) can also be a source of controversy, however. Star Wars Battlefront II, a marquee property in this season’s video game release schedule, has seen less-than-stellar sales after outrage from players over an online multiplayer system that allows players to pay money to get an advantage over other gamers.

The outrage is causing jitters about the game’s designer on Wall Street and unhappiness at Disney, the owner of Star Wars, over the potential negative effect on the franchise as a whole.

Video game streaming services
Pop quiz: Which online streaming service generated more viewers in 2016 than HBO’s 130 million subscribers or Netflix’s 93 million customers?

The correct answer (for our purposes) is Twitch, an online video streaming service for gamers. Twitch, which allows video game users to stream games they are playing online, attained more than 185 million viewers in 2016. That means that more people would rather watch someone play a random game of Madden, EA’s iconic football game, than get caught up on the latest episode of Stranger Things.

(Retail giant Amazon acquired Twitch in 2014.)

If Twitch’s success is any indication, it shows that the market for watching other people play video games is only going to grow in the years to come.

The future

It’s difficult to say what the future holds for the video game market. The way it looks today would probably be entirely unfamiliar to anyone jumped in their Delorean in 1985 and fast-forwarded to today.

Still, there are a few trends that marketers should follow in the years to come.

Virtual reality

The virtual reality (VR) gaming market is going to grow from $5.2 billion in 2016 to more than $162 billion in 2020, according to International Data Corporation. A number of popular video games, including Elder Scrolls v: Skyrium, Fallout and Doom, will be or are available in virtual reality.

The industry is still working out the kinks, including the nausea people feel after putting on VR headset.

Branded mobile games
Mobile games are increasingly moving towards association with a brand, whether it’s a product like OREO or a celebrity like Kim Kardashian.

Hooking up with a well-known brand is a great way for mobile game publishers to get attention in an increasingly competitive marketplace, writes Jonathan Simon.

Oxford Royale Academy thinks we’ll start to see companies put more effort into making franchise video games that are more than just products tacked-on to larger productions as a way of separating consumers from their money.

Instead video games will become synchronized with other parts of the franchise.

Star Wars Battlefront II is the most high-profile recent example of a big-budget franchise video game. Battlefront II, for example, featured a story situated in the context of the movies that is now considered “canon”.

Bringing it all together

Gone are the days when Super Mario, Duck Hunt and Sonic the Hedgehog dominated video game screens. Now gaming is a multi-billion dollar-a-year market involving some of the biggest brands in the world across a number of devices.

How companies choose to leverage the growing interest in games to drive value will be exciting to watch.

Are you looking to build a relationship with your customers through games? Reach out to Banfield to connect on how video games can help.

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