Video games aren’t just fun. They can be profitable for savvy advertisers looking to reach one of the most lucrative and elusive groups of consumers.

In-game advertising merges ads with the game environment seamlessly. Imagine seeing billboards while racing through the streets or branded in-game products you can purchase. These ads are more powerful and effective than in-app advertisements — those annoying pop-ups or banner ads you commonly see in mobile app games.

With nearly 3 billion games worldwide, in-game advertising can give brands incredible reach. From virtual billboards to branded experiences, video games have become a marketer’s paradise for reaching the coveted gaming demographic.

This guide covers the basics of in-game advertising, including common ad types, available targeting options, associated costs, challenges and best practices.

Types of in-game advertising

Before exploring how to take advantage of in-game advertisements, let’s review the most common types of game ads.

Static in-game advertising

These ads are directly hardcoded into the game. Since the ads can’t be changed and will exist in the game ad infinitum, rates are expensive and charged on a fixed-fee basis.

Dynamic in-game advertising

Dynamic ads can be replaced quickly and deployed instantly. These ads can appear in different places and formats (display and video ads are the most common). The 2008 billboards from Barack Obama in Need for Speed: Carbon are a great example of this ad format’s simple yet powerful use.

Sponsored game content involves integrating a brand or product into the actual game content, making it even more tangible and visible to the player and engaging them with the brand.

Dig deeper: PepsiCo’s strategies for marketing via online games and esports

KFC did this exceptionally well when it partnered with Nintendo to create a virtual island in the popular game Animal Crossing: New Horizons. The island was designed with KFC-themed items and decorations and even allowed players to win a voucher for chicken in real-life.

Advergames

Rather than integrating the ads into an already existing game, advergames are games specifically designed to promote a brand or product. They provide a fun and engaging way to interact with a brand and can effectively build brand awareness and loyalty.

Chex Quest, made by Chex, was the first video game ever to be included in cereal boxes as a prize. It was a top-to-bottom conversion of the popular game Doom but adjusted it to be family-friendly. The game was a hit among consumers and even won several awards.

Activision Blizzard Media has recently created many Playables — branded stand-alone mobile app games.

Product placement

The classic advertisement method still works. Advertisers can put their products directly into video games to guarantee players see the brand and “use” the products.

I remember playing Mario Kart 8 on the Nintendo Wii and unlocking the Mercedes-Benz cars. This made the branded products more exclusive since they had to be earned.

Targeting options for in-game advertising

The other unique benefit of in-game advertisements are the targeting abilities. It starts with choosing the right game (or games). Advertisers can focus on consumers based on demographics, geolocation, device type or platforms. However, integrating these traditional targeting approaches with behavioral targeting makes in-game advertisements even more effective.

Behavior targeting uses the actions the player has taken (or has not taken) to create an ideal segment of users to reach. For example, an advertiser could target players who have demonstrated a willingness to open their wallets by spending money to buy items in a game — or players who have reached a certain level and are, therefore, more engaged.

Combining these different ways of targeting and deploying them across various games that reach consumers on multiple platforms (gaming consoles, computers and smartphones) makes in-game advertising extremely powerful. With abundant reach and powerful targeting, brands can build awareness, drive engagement and boost sales quickly and effectively.

How to buy in-game advertising

Getting started with in-game advertising will ultimately depend on the types of games you want to appear in and your budget. 

When selecting an approach to buying in-game advertising, consider the specific goals, budget and target audience of the campaign. 

Game publishers

• Example: Activision Blizzard Media

You can work directly with game publishers to create custom ad campaigns within their games. This approach provides more control over the creative content and targeting and a deeper level of integration with the game environment. 

However, it can be more time-consuming and expensive than other options and may not offer as much scale or reach since it is limited to a single game.

In-game ad networks 

• Examples: Admix, Unity Ads

Ad networks connect brands with multiple game publishers, providing access to a broader collection of games. They offer greater scale and reach and more efficient pricing and targeting options. 

The downside is that you have less control over the creative content and placement. Some ad networks are not as high-quality and have limited targeting options. 

Programmatic advertising platforms 

Programmatic platforms use data and algorithms to automate the buying and placement of in-game ads across multiple publishers and platforms. This approach can offer greater efficiency, scale and advanced targeting options based on user data and behavior. However, programmatic platforms may have less control over the creative content and placement and may require more technical expertise.

The costs of in-game advertising

How expensive are in-game ads? It depends, but it’s only going to get more expensive. In-game advertising pricing can vary based on several factors, including the type of game, ad format, targeting options and the size and scope of the campaign.

CPM pricing is the most common approach, and rates can vary widely based on factors like ad format and targeting. The average CPM for in-game display ads ranges from $10-20, with video ads from $15-30.

These numbers will vary dramatically depending on the audience, game, targeting and ad formats. For example, CPMS for in-game ads targeting Gen Z and Millennials were 30-50% higher than those targeting Gen X and Baby Boomers, according to an Interactive Advertising Bureau (IAB) study.

You can also expect CPMs to continue to rise with the growing popularity of games and the high demand to reach gamers who are otherwise difficult to reach. Other in-game ads follow a flat-rate pricing model, especially static ads or advergames.

Challenges and best practices

It’s all fun and games until your campaign stops performing well. In-game advertisements come with their own unique set of challenges — and fatigue is a real concern. 

• Players can quickly become bored or annoyed by seeing the same ads repeatedly. Be sure to monitor frequency and refresh creative as often as possible.
• Players will also be upset if ads are intrusive, distracting, or disrupt their gameplay in any way. This isn’t commonly an issue, but it’s an important consideration.

As with any advertising, targeting is critical. It’s best to use non-intrusive creative formats to engage users. If possible, rewarding users with in-game currency, items, or exclusive content can increase engagement rates and brand affinity. The aforementioned example of being able to earn Mercedes-Benz cars in Mario Kart is a simple but effective model of this in practice.

What’s in store for in-game advertising?

In-game advertising is a powerful way to reach a highly-engaged, lucrative and fast-growing audience. There is no shortage of different types of games and no reason not to try in-game advertising.

Mobile games and handheld gaming platforms like the Nintendo Switch make it even easier for brands to stay connected and engaged with users even more than ever before.

New technologies like virtual reality and the Metaverse will bring more gaming environments, unique experiences and even more diverse opportunities for advertisers to explore.