Ad and hybrid monetisation in mobile gaming - deeper market overview

In my opinion, the topics of ad monetization and hybrid monetization will have a strong influence on discussions about potential and growth in the mobile gaming industry:

• on the one hand, they have become an essential element of almost every discussion related to monetization in mobile gaming.
• on the other hand, it is rare for people to explicitly mention this as a segment of the market. While the importance of ads in mobile gaming monetization is acknowledged, estimations of the mobile gaming market often focus solely on in-app purchases.

𝐌𝐨𝐛𝐢𝐥𝐞 𝐠𝐚𝐦𝐢𝐧𝐠 𝐦𝐚𝐫𝐤𝐞𝐭 𝐞𝐬𝐭𝐢𝐦𝐚𝐭𝐞𝐬

Data that is very often used to estimate/quote gaming market is provided by Newzoo (here is the update from October 2023).

It is amazing source of data, although we read there "𝘖𝘶𝘳 𝘳𝘦𝘷𝘦𝘯𝘶𝘦 𝘯𝘶𝘮𝘣𝘦𝘳𝘴 𝘦𝘹𝘤𝘭𝘶𝘥𝘦 𝘵𝘢𝘹𝘦𝘴, 𝘤𝘰𝘯𝘴𝘶𝘮𝘦𝘳-𝘵𝘰-𝘤𝘰𝘯𝘴𝘶𝘮𝘦𝘳 𝘴𝘦𝘤𝘰𝘯𝘥-𝘩𝘢𝘯𝘥 𝘵𝘳𝘢𝘥𝘦, 𝘢𝘥𝘷𝘦𝘳𝘵𝘪𝘴𝘪𝘯𝘨 𝘳𝘦𝘷𝘦𝘯𝘶𝘦𝘴 𝘦𝘢𝘳𝘯𝘦𝘥 𝘪𝘯 𝘢𝘯𝘥 𝘢𝘳𝘰𝘶𝘯𝘥 𝘨𝘢𝘮𝘦𝘴, (𝘱𝘦𝘳𝘪𝘱𝘩𝘦𝘳𝘢𝘭) 𝘩𝘢𝘳𝘥𝘸𝘢𝘳𝘦, 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴-𝘵𝘰-𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴 𝘴𝘦𝘳𝘷𝘪𝘤𝘦𝘴, 𝘢𝘯𝘥 𝘵𝘩𝘦 𝘵𝘳𝘢𝘥𝘪𝘵𝘪𝘰𝘯𝘢𝘭𝘭𝘺 𝘳𝘦𝘨𝘶𝘭𝘢𝘵𝘦𝘥 𝘰𝘯𝘭𝘪𝘯𝘦 𝘨𝘢𝘮𝘣𝘭𝘪𝘯𝘨 𝘢𝘯𝘥 𝘣𝘦𝘵𝘵𝘪𝘯𝘨 𝘪𝘯𝘥𝘶𝘴𝘵𝘳𝘺."

That means in general that 𝐭𝐫𝐮𝐞 𝐬𝐢𝐳𝐞 𝐨𝐟 𝐭𝐡𝐞 𝐦𝐨𝐛𝐢𝐥𝐞 𝐠𝐚𝐦𝐢𝐧𝐠 𝐦𝐚𝐫𝐤𝐞𝐭 𝐢𝐬 𝐥𝐢𝐤𝐞𝐥𝐲 𝐦𝐮𝐜𝐡 𝐥𝐚𝐫𝐠𝐞𝐫 𝐭𝐡𝐚𝐧 𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐞𝐬𝐭𝐢𝐦𝐚𝐭𝐞𝐬 𝐬𝐮𝐠𝐠𝐞𝐬𝐭 (as often it does not include any estimation for in-game advertising part). Fortunately, there are now efforts underway to better understand the size of this market.

𝐇𝐨𝐰 𝐛𝐢𝐠 𝐢𝐬 𝐭𝐡𝐞 𝐚𝐝𝐯𝐞𝐫𝐭𝐢𝐬𝐢𝐧𝐠 𝐩𝐚𝐫𝐭 𝐢𝐧 𝐦𝐨𝐛𝐢𝐥𝐞 𝐠𝐚𝐦𝐢𝐧𝐠?

For example, Statista recently estimated the in-game advertising market at $94.53 billion, compared to $89.25 billion for mobile games alone. Even if we start some disputes around accuracy of that number and it does not say clearly what % of it goes towards in-game advertising on mobile it still suggests that mobile gaming is a significant driver of growth for the in-game advertising market.

As more data becomes available (ie. some companies like Data.ai are working on that already):

• 𝐭𝐡𝐞 𝐨𝐟𝐟𝐢𝐜𝐢𝐚𝐥 𝐯𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐦𝐨𝐛𝐢𝐥𝐞 𝐠𝐚𝐦𝐢𝐧𝐠 𝐚𝐧𝐝 𝐚𝐩𝐩𝐬 𝐦𝐚𝐫𝐤𝐞𝐭 𝐢𝐬 𝐥𝐢𝐤𝐞𝐥𝐲 𝐭𝐨 𝐢𝐧𝐜𝐫𝐞𝐚𝐬𝐞 𝐬𝐮𝐛𝐬𝐭𝐚𝐧𝐭𝐢𝐚𝐥𝐥𝐲
• discussions about entry of the market, market concentration will be significantly reshaped.

Potential for growth in ad and hybrid monetisation in mobile gaming

According to eMarketer estimates even in Western markets users spent most of their time with mobile gaming. What is more estimates that time spent with mobile gaming will grow faster comparing with desktop or consoles.

If we go deeper into that data, even in US share of time spent with mobile gaming in mobile is still significantly higher than share of mobile gaming ad revenue in total mobile revenue.

Both those topics are especially important as more and more traditional brands (including offline brands) are moving their market budgets to online. And in their approach there is very strong correlation between importance of specific channel/advertising medium and time spent with that channel/advertising medium.

As the example we can see estimates for

• growth of mobile ad spend in CPG industry in US in the next years (in billions of USD).

• growth of mobile ad spend in Retail industry in US in the next years (in billions of USD).

This topic gets more interesting as there is more and more data around consumer behaviour towards mobile gamers and how they react towards ads. Especially in Emerging Markets (although with similar trend in Western market).

Top 10 places where mobile smartphone gamers in different countries have come across digital advertising in the past 4 weeks (based on Statista Consumer Insights Global as of August 2023).

In all that data it is visible that mobile smartphone gamers remember seeing ads in video games more often than the average consumer.

• Indonesia

• Pakistan

• United States

𝐌𝐚𝐫𝐤𝐞𝐭 𝐜𝐨𝐧𝐜𝐞𝐧𝐭𝐫𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐦𝐚𝐫𝐤𝐞𝐭 𝐞𝐧𝐭𝐫𝐲 𝐢𝐧 𝐦𝐨𝐛𝐢𝐥𝐞 𝐠𝐚𝐦𝐢𝐧𝐠 (IAP-driven games)

Mobile gaming became very competitive. One of important reasons is that, although it is really big market that has pretty nice growth rate overall over last years (excluding post-Covid anomaly, there is pretty high concentration of revenue among established games that were created many years ago.

• based on Data.ai once we look at the top 1000 games by revenue (revenue for period 1-10.2023), 38% of that revenue was taken by games that were done in 2016 and earlier. In case of iOS that ratio is even higher and is 41%.
• going further with that data we can see that games created in 2023 and 2022 took 14% on Android and 17% of revenue on iOS
• in US that concentration is even higher as once we look at the top 1000 games by revenue (revenue for period 1-10.2023) then games created in 2016 and earlier took respectively 44% of revenue on Android and 46% of revenue on Android.
• games created in 2023 and 2022 took 11% of whole revenue on Android and iOS (11% in case of Android and 11% in case of Android).

𝐌𝐚𝐫𝐤𝐞𝐭 𝐜𝐨𝐧𝐜𝐞𝐧𝐭𝐫𝐚𝐭𝐢𝐨𝐧/𝐦𝐚𝐫𝐤𝐞𝐭 𝐞𝐧𝐭𝐫𝐲 𝐢𝐧 𝐦𝐨𝐛𝐢𝐥𝐞 𝐠𝐚𝐦𝐢𝐧𝐠 (ADS-driven games)

It would be extremely hard to compare data from previous with ads-driven games. Once look at downloads as proxy for ads-driven revenue (it is of course far from perfect, although giving some inisghts, especially once looked at single country level).

Once we go with such approach towards the data, we can guess that concentration at downloads level is much lower than in case of IAP.

• based on Data.ai once we look at the top 1000 games by downloads (download for period 1-10.2023), 19% of those downloads was taken by games that were done in 2016 and earlier. In case of iOS that ratio is higher and equals 41%.
• going further with that data we can see that games created in 2023 and 2022 took 27% of downloads on Android and 31% of downloads on iOS
• in US that concentration is higher as once we look at the top 1000 games by downloads (downloads for period 1-10.2023) then games created in 2016 and earlier took respectively 14% of downloads on Android and 20% of downloads on Android.
• games created in 2023 and 2022 took 38% of whole downloads pool on Android and 34% of downloads on iOS.

Hybrid monetisation in mobile gaming - details

Based o the data and use cases we can see that Hybrid monetisation is getting important in specific genres (especially casual gaming). Below you can see share of IAP and ads monetisation in different mobile gaming genres based on Unity Gaming Report 2023.

What is more this type of monetisation has good perspectives as it seems has pretty strong popularity and preference among mobile gaming audiences (data based on Unity Gaming Report 2023).

Ad and hybrid monetisation in countries

Topic of in-game advertising is important in specific markets where users are more likely to pay with their time and using ads to get access to specific content.

Again there is not much data around value of in-game advertising market in specific markets. As I mentioned just recently (October 2023) Statista made an attempt to estimate that market in different countries. See that estimates below - it is shown versus estimation of mobile gaming market.

I believe in the next months and years as the market will grow, there will be more and more data points around in-game advertising. Especially in many markets in-game-advertising is expected to grow significantly (see its estimation for 2027 based on Statista estimates.

Another approach towards estimation of in-game advertising revenue was done by Insider Intelligence, eMarketer in October 2023. Here we have data and estimates for US, although with strong focus on understanding value of mobile in-game advertising market. Again even once we have lower numbers here, we can see it as serious market.

Attitude towards ads in different markets

We can see a specific correlation between a country's wealth and the willingness of its users to pay with their time and engagement for specific content when that content is provided for free.

A very interesting research study was recently published by Statista (online survey, August 2023) that examined attitudes towards online advertising in different countries. Below is a comparison of how many people from specific countries agreed with the statement 'I am often annoyed by advertising on the internet' versus the statement 'I don't mind advertising if I get free content in return'."

Here are results for developed/close to developed countries:

Here are results for Emerging markets

Valuation of the market

Even if we exclude China (estimated at $40.20 billion out of the $94.53 billion) and acknowledge the difficulty in precisely determining the mobile gaming portion, it's evident that we're dealing with a substantial market that will significantly impact the valuation of the mobile gaming market. This is particularly relevant for financial markets, financial analysts, and investors who often overlook this topic.

Additionally, in-game advertising is expected to grow at a compound annual growth rate (CAGR) of 14% to 8% over the next three years, as per Statista data.

Below you can find some countries with expected growth rate for mobile ad spend (based on Statista data from November 2023).

If we add some additional points - i.e growth of mobile ad spending in regions like:

• Latin America (data below based on eMarketer, March 2023)

• or India (data below based on eMarketer, March 2023)

so in places where those gaming parts are of course very strong, then we can expect that topic will be growing in importance.

Summary

In my opinion, the topics of ad monetization and hybrid monetization will have a significant impact on discussions about potential and growth in the mobile gaming industry.

• This topic is often overlooked in mobile gaming estimates.
• However, increasing amounts of data suggest that this topic will become increasingly important in the future.
• Data indicates that users are becoming more accepting of and open to ads in mobile games.
• As more offline and online budgets are allocated to mobile, mobile gaming is poised to benefit significantly.