Gaming and Online Advertising

The online advertising market increasingly looks like it is ripe for disruption.

While a big part of this can be attributed to Apple’s recent aggressive actions to limit data-gathering, a lot of it also seems to simply reflect changing consumer behaviors.

The disruption that is coming for advertising is particularly remarkable because, for the longest time, online advertising almost appeared destined to be the “cockroach” of the Internet – Entirely undesirable yet indestructible and possibly able to survive nuclear Holocaust.

Don’t take my word for it, even the dystopian show Black Mirror has dedicated an episode titled Fifteen Million Merits to a future where we are enslaved to advertising (it also portrayed a very unflattering view of one potential end state for the creator economy, but that’s beyond the scope of this post):

Fast forward to the future and advertising may look like what we see in “Fifteen Million Merits.” Advertising takes up more and more surface area. The ads are all video (something we’re getting very close to already, with the “pivot to video”), and they autoplay based on what you’re feeling or thinking. They’re always listening and always watching (i.e., digital assistants like Amazon’s Alexa, Apple’s Siri, and Google Home). In this future, however, you’re welcome to mute/skip ads. For a price. And because the currency in this future is all digital, you barely feel the loss.

Source: Medium / Howard Chai

To imagine a future where advertising is less central to our lives is hard to do, but, increasingly, it seems possible.

Last year, I proposed one way in which this happens through digital payments where digital payments begins to absorb the functions currently served by online advertising:

One thought that I can’t seem to shake from my head is that digital advertising is currently in an unstable equilibrium and is ripe for disruption.

A lot of the changes happening in the space might already be obvious to you and consumers like you.

But what I think is less obvious is the role that payments can and may play in the coming years.

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You have Facebook apps on your phone. You have Google apps on your phone. I’m very willing to bet that you have or will have a (or many) payment app on your phone. Perhaps Venmo or Cash app or Apple Pay / Apple Wallet. You may not use it all the time, but your usage is likely to increase in the coming years as digital payments penetration grows.

Payment apps also have the potential to gather meaningful data. This is because payment players / apps directly capture relevant data around your purchases, whereas Google and Facebook and others have to infer this. In addition, you likely are increasingly using digital payments in the offline world, whereas the internet giants likely have much less data on your offline habits. Currently, the data captured by payment players is still quite limited but is likely to grow over time.

And lastly, context. You might spend a lot of time on Facebook, but you’re probably not usually in the mood to buy things. You probably scroll past most of the ads. Sometimes something might catch your eye, but not always. Google search has much better context, but you’re not on it all the time.

Payments, on the other hand, has a unique positioning with respect to context – It can see exactly when you are in the mood to buy something because your transaction directly runs through it. A payment app may see that you’ve bought one thing and can use that data and context to push relevant ads directly to you via push notifications. For example, perhaps you book an airline ticket and pay for it with your digital wallet. In the future, it’s not inconceivable that the digital wallet can use that airline purchase info to recommend hotels or travel activities to you.

Source: Trouble in Paradise – Advertising and Payments on Collision Course?

Today, I’d like to propose another way in which advertising could be disrupted – Games!

I’ve already written before why I think games are potentially eating the world, but this is slightly different.

I don’t mean ads popping up in games.

What I mean is quite literally ads that ARE games.

What does this look like?

It might look like Gucci Garden in Roblox where players can wander about a Gucci-designed garden to experience the promise and essence of Gucci:

Or it might look like branded Snap lenses that reimagine your world or your face / identity with branded props:

Source: Medium / Danny Sapio

I’m obviously taking a very liberal interpretation of what can be considered a “game”, but I don’t think I’m off-trend. Increasingly, what people consider games is expanding to encompass things like experiences, simulations, and simply anything fun.

Is Roblox a game? Not in the traditional sense. Are Snap lenses games? Not in the traditional sense.

But what they are is FUN.

Why does this matter?

In the old world of advertising, advertisers needed to pay gatekeepers to reach their audiences.

This used to be TV / media companies. And then Google and Facebook.

This is why Google and Facebook make insane amounts of money.

But I have bad news for them…advertising is now better served in other ways.

Similar to how payments can allow brands and companies to reach consumers in a more cost effective and data-driven way, games are increasingly serving that purpose, too!

It costs a lot of money to advertise on Google and Facebook.

You know what it cost Gucci to create Gucci Garden in Roblox?

NOTHING!

In fact, the economics are entirely reversed. Not only does it cost Gucci (or any brand for that matter) NOTHING to create this wonderful piece of living digital advertising in Roblox, Gucci actually made money on it! Scattered about the garden were digital Gucci items that were purchasable. And many gamers, indeed, purchased!

Gucci Garden, in a way, was a living digital branding ad that also served as a performance ad that converted traffic into sales.

This model is not unique to Gucci. In fact, this model is increasingly something that many brands are likely waking up to.

For example, Nike and LVMH have partnered with Fortnite before to place their items into the game. This is advertising and quite literally creates digital walking billboards. But instead of paying for it, both companies made money because gamers purchased the items.

In a way, advertising is evolving.

And what makes this evolution doubly attractive to brands compared to the old way of doing things is that consumers actually like it.

Gucci Garden and digital Nikes on Fortnite characters are fun.

Google and Facebook ads are not fun.

I don’t know that this will replace all advertising in the future.

But why would anyone bet against fun? If people want cake, let them have cake!