For years, game ads — that is, ads that urge people to install the latest mobile game app — have quietly served as the lifeblood of mobile advertising.
As more people started playing games on mobile devices in recent years, a growing number of marketers were finding these games to be a solid place to run video ads.
But things may be changing.
The mobile advertising company AdColony let go of close to 100 people a few weeks ago. And one of the problems the company’s parent company Opera identified was unpredictability in mobile game advertising. In short, there were fewer hit games and softer ad prices than in recent years.
The company also said it is moving more of its focus toward “performance ads” and programmatic, as opposed to directly sold ad packages from leading marketers.
Overall, mobile advertising is growing at a rapid clip. So it’s worth asking, what’s going on here?
Jeremy Sigel, global director of partnerships + emerging media at the ad agency Essence, who previously logged a stint at the mobile ad company Linkstorm, explained it this way:
“Our clients were never comfortable with mobile gaming, but they wanted to run video in apps. So they looked the other way for years.”
Then, in the past few years, Facebook video became huge, and soon Snapchat came on the scene. “Brands would much rather run an ad next to video on Snapchat featuring content from ‘The Voice,'” he said. At the same time, mobile game ads “never graduated to premium for our clients.” “
“We used to work with companies like [AdColony] and Vungle [another mobile ad network] and we liked them,” he said. “But we don’t do business with them anymore [for brand advertising].”
The constant stream of mobile game companies advertising their own games isn’t what it once was, Sigel added. It used to be a lot easier to launch a mobile game when there were a few hundred thousand apps in the Apple and Google app stores. So lots of big VC-backed game publishers and indy publishers spent as much as they could on game install ads.
Now, “discovery is impossible,” in app stores, said Sigel.
Thus, ad spending from small, independent mobile game publishers has thinned out. KC Srinivas, vice president and general manager, video and gaming at the mobile ad company InMobi, said that because the top 10 gaming companies now fully dominate the app store charts, “they no longer have to spend purely on user acquisition, but on ROI.”
A few years ago, “it was about installs, driving ranks,” Srinivas said. “Now, the Top 10 mobile game rankings haven’t changed in 12 months.”
Overall, eMarketer says that app install ads climbed 12% to $5.7 billion in 2016 in the US so it’s still a solid market. Zain Jaffer, CEO of Vungle, remains bullish on game advertising, noting that consumers are expected to spend over $100 billion on mobile games globally by 2021, according to the analytics firm App Annie.
“The gaming app install market is definitely not drying up,” he said. “Advertisers are putting more of a priority on the metrics that matter … what we’re seeing instead is that the industry is growing but advertisers are shifting spend away from inefficient platforms that don’t meet their [goals].”
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