Insert Coin, Insert Ad: How To Take Advantage of In-Game Advertising

March 23, 2023

When marketers think of in-game advertising, they jump to big-budget executions like building a universe in Roblox. But overlooking performance marketing in-games is a big mistake.

I spoke to Simon Spaull, CRO and Co-Founder of in-game advertising company GADSME, about:

+ how in-game advertising developed

+ why many in-game advertising algorithms punish non-gaming brands

+ how to capture the right KPIs

+ what to tell your media agency/buyer

You can listen to the episode using the player embedded above or read a full transcript below.

This transcript has been edited for clarity and does not match the audio word-for-word.

Jamin:

Hello, my name is Jamin Warren. I’m the CEO of Twofivesix, a strategic consultancy that helps brands reach gamers. Our podcast helps marketers, ad brands, and agencies answer the biggest questions of how to contact one of the largest audiences on the planet. Today we’ve got a great guest. It’s Simon Spaull, the CRO and co-founder of GADSME. GADSME is a fantastic new startup helping brands, and game publishers reach gamers through in-game advertising. In-game advertising is one of these spaces that doesn’t get as much attention compared to, say, some of those significant in-game brand activations on platforms like Roblox or Minecraft. Still, it’s a really important part of the ecosystem. I think many marketers who maybe aren’t familiar with some of the performance things that you can do inside of games; you’ll find this conversation incredibly illuminating. I hope you enjoy it. Simon, why don’t you tell us about what you do?

Simon:

Sure. Yeah. I’ve been in digital marketing for 18 years, so I feel very old. I’m a co-founder of GADSME with two other colleagues. GADSME is very much an in-game ad company. We help advertisers display non-intrusive ads inside games and maximize brand exposure, engagement, and awareness. We also have a performance clickable element, which is unique to GADSME. And very recently, we’ve also launched audio ads. So we now offer the full suite of non-intrusive ad solutions, putting ads and audio experiences inside games to maximize that exposure, but very significantly, not disrupt the playing experience for gamers. It’s a win-win for both sides, both publishers and advertisers.

Jamin:

How did you make your way into the game space? Because you’re at the exciting intersection between game-making and the advertising industry. How did you cross the divide, so to speak, over more onto the game side?

Simon:

Sure. Yeah. I’m probably a bit of a veteran in the industry now, which sounds scary when I still feel pretty young. But, in 2008, we had a digital ad agency. We missed the Google boat in 2003 and then pivoted in 2008. We saw the potential uprising of Facebook, and we were the world’s first ad tech company to build an ad tech solution that plugs into the backend of Facebook. So we were an Alpha API partner, which is a smart move now. But in 2008, it was super scary, and we were pivoting an entire business into essentially one website, which was still gaining traction. We’re still very small in those days. MySpace had failed, and Bebo had failed. People told us it was a bad idea, but we felt there was something unique and Facebook could offer something very interesting, especially to performance advertisers. So we went ahead and did that. And thankfully, it was a pretty good horse to back. That led me into the gaming space.

Gaming companies traditionally and typically live and die by their online results and therefore are highly sophisticated, inexperienced performance marketers. And when something like Facebook came along, they were the biggest spenders early on. So I worked with Zynga, Playfish, and Playdom early on when these were very small companies. And that company, thankfully, took off, and I ended up doing a year in America, launching offices around America and then the rest of Europe. So it got me great exposure to gaming, and I could see the excitement of gaming. And then, as we evolved with the Facebook product, advertisers and global brands became very interested in Facebook and social media. We helped facilitate that and onboarded several large global brands into Facebook. And then, as I moved through my career, that company got acquired by Sprinklr. I then joined AppLovin as the first hire outside of the US, which put me very much back in the gaming space.

Jamin:

Could you give me just a little overview of where in-game advertising is right now and maybe a little bit of history? It’s a piece of the gaming ecosystem that I think folks may be coming to it from the outside; they may not know as much about. Obviously, if you’re a mobile gamer, you always see them. But just a little background on how we got to this point for your company’s in-game advertising.

Simon:

Yeah, absolutely. Look, GADSME, we didn’t invent in-game advertising. I think any of my competitors that say they did is stretching the truth. We saw the first hard-coded ad inside a game in the ’80s. So indeed, in the early ’90s, hard-coding ads inside games, it’s been around for a long time. So we didn’t invent the idea or the concept. Still, it was very clear in the industry that the current landscape is hugely successful with your traditional gaming ads– your interstitials, awarded videos, banners, et cetera. They’re accepted now by players. It’s big business, but it’s very, very performance-orientated. And of course, that’s 95% of gaming companies advertising to drive in-stores of their games. So the non-gaming brands, top of the funnel, the bottom of funnel performance, and even the top funnel guys just really aren’t and weren’t playing in that space. I think two reasons for that.

One is that there’s a misconception that a gamer is your typical basement nerd of young age that never leaves the house, and that’s it. And secondly, the landscape of the current setup is just very challenging for brands to play in. It’s expensive from a CPM perspective, but the algorithms are built very much to drive a performance conversion, mainly an install of a game. So if you are Proctor and Gamble or you’re Unilever, a L’Oreal, or a product raising awareness, it’s super tricky. Because if you click on the ad, which you have to, where do you drive that user? And, of course, for a non-gaming brand, that’s a challenge. But secondly, the algorithms are taught to favor the higher-converting traffic. So they punish you if you don’t get that conversion or leave that ecosystem, which becomes very expensive.

So for us, there was that problem that needed solving. And, of course, trying to do it in a friendly way to everybody is super challenging. That’s where in-game comes in because it’s a very non-intrusive, intrinsic solution that puts these ads anywhere inside a gaming world. Many people think of sports examples or racing games, but we can adapt any game now to have some ad experience. So think bus shelters, think cities, thick jungles. It’s endless. That’s where we felt that a significant opportunity was not being met. A massive amount of advertising dollars are not spent in the gaming space. And I for many years, I have tried to solve that, and the in-game space seems to be the logical step.

Right now, there’s GADSME; a couple of others in the space are pushing this genre. And I think for me, in terms of where in-game advertising is today, it’s still very much… This year has been an educational phase. I think last year and the year prior, although there were players in this space for me, they came to market too soon. The game engines, particularly Unity, which many games are built on, were not ready to allow for the dynamic insertion of ads through a technological solution. Now it is. So I think this year has been about educating publishers and gaming studios about what it can do, how it can work, the kind of revenue projections that they could expect from it, the fact that it really is non-intrusive, so retention metrics are not being affected, session times and not being affected. People can continue playing, and nothing is spoiled. So that was getting those guys on board. It’s always a chicken and egg situation.

And now the supply side, the partners, the gaming studio side is ramping up and seeing the benefit. That, of course, creates more supply opportunities for advertisers. So then it’s a case of talking to agencies, DSPs, SSPs, and all the programmatic setups to help them understand what can be done, how it can be done, why GADSME is different from the competition, and what we can bring to the table. And then, for me, I think 2023 is shaping up to be a very exciting year for in-game advertising because a lot of that education has happened, and now there’s a lot more excitement, a lot more interest, and of course, a lot more supply and demand to fulfill.

Jamin:

That first misconception or objection from non-gaming folks is that gamers are all one kind of person. It does seem like there’s a corollary to that: gamers don’t advertise. We certainly hear that in our work, like, “Oh, that must be difficult. Gamers don’t advertise. People who play games are resistant to advertising.” Could you poke at that briefly about what you’ve seen in the relationship between players and advertising? If gamers were not interested, they wouldn’t be in this business. But tell me a little bit about what the relationship is between players and advertising that they see on screen.

Simon:

Absolutely. A lot of the frustration of players with current advertising setups, particularly in your hyper-casual games, your short, snackable gaming content that’s picked up very quickly, played in shorter game sessions, and riddled with a lot of ads to drive ad revenue, that’s the entire business model, there’s a lot of frustration. And that frustration typically comes from that game genre because they’re so heavily laden with ads. But people are frustrated with the intrusive ads on surveys that we’ve seen and have been able to carry out ourselves in-game is very much accepted and preferred because it’s non-intrusive. So if you’re in a racing game or running through a street on a shooter game and ads are on billboards, bus shelters, or on the track, it doesn’t affect the player in any way. So we are yet to see any negativity towards in-game.

And that for me is very exciting because that is why we’ve started this company and that is… The goal is to find a happy medium that pleases everybody and has potential. So many of the frustrations we hear are geared toward the current interstitials that disrupt. And when they have time delays, you have to wait 30 seconds before closing them down, which causes issues. But the flip side to that is I think most gamers understand why the ads are there, the fact that they’re getting lovely free content, and it’s just one of those things they have to put up with to get that free content. So I think, for me, it’s a minority that is frustrated. But in surveys, indeed, gamers know the preferred option, and players accept that this is a nice setup.

Jamin:

Yeah. It’s interesting because, historically, gamers or people who play games have been intensely loyal to brands that they feel deliver value. And many of those are very large companies, whether you’re Microsoft, Nintendo, or Sony. They are still brands at the end of the day. So I don’t think there’s a core level of resistance to advertising. It’s more that you need to demonstrate that, as you’re saying, you must ultimately have a reason to be there.

The second thing that you raised is the penalty, basically a CPM penalty. Can you walk me through that a little bit more, historically? Because so much of the advertising was focused on mobile game installs or game installations, the marketplace became almost entirely that. And so, it made it entirely tricky for someone not in that space to advertise and see the results they were looking for. Do I hear you right?

Simon:

Exactly. If you’re a Proctor & Gamble or a Unilever and you have a shampoo product, a food product, a new cosmetic product that you are looking to promote, or a brand that you are looking to promote —¬† the goal at this stage is more top of the funnel, not very much about converting that person to buying a product, of course, brand awareness is a huge business, as is brand advertising. And right now, the mobile setup in gaming is very much about performance marketing. So everything we see in a game with an ad that pops up in an interstitial or awarded video is clickable. They only have clickable options. So the goal for all of these companies using these is to try to drive an install or tries to drive a download, which is why 95% of ads that you will see in a game today on a mobile device are from another gaming company promoting their game and driving an install.

So if you come along as a Proctor & Gamble and try to advertise in that particular medium, it’s super tough because you have to set up redirection, a click URL where that person, when they click on your ad, they need to go somewhere. So you could drive them to your website, you could drive them to data capture, you could drive them to a coupon or something like that to try to track conversion. But the algorithms are geared up really to track and favor ads that stay within the store ecosystem, whether it’s Google or Apple. And they can easily track the install of that product, of course, in most cases a game. And they can see that before IDFA, anyway. They could see that very quickly in real-time. So they could start bidding aggressively toward those publishers that convert very well.

A large majority of gaming spend of these advertisers is done on a CPI, a cost-per-install basis, so these extensive ad networks take a lot of risks because they’re still buying on a CPM. Long story short, the algorithms are geared to find the conversions and bid up on those conversions and the people that download and do very well and install. It’s just not geared up for a world where you want to drive people away from an app store to a browser or raise awareness, which means that the algorithm bids up or costs a lot more to run your advertising in that setup. That’s why if you look within the gaming space today, you’ll rarely see a brand awareness ad.

Jamin:

Yeah. I was going to ask about when you have to educate marketers, so folks on the agency side, whether clients are looking directly for a place to advertise with you or with any media agency, do you give them guidance on what attribution model that they should be looking at in terms of how GADSME fits into that or what their media mix should look like? And if they’re looking to spend a certain amount of money, how do you give them guidance in terms of how… This is new; this is a new space for them. How do you walk them through that process of “Here’s how to set reasonable expectations for performance here,” but also how this might work in concert with other advertising you’re doing on other digital platforms?

Simon:

Yeah, for sure. It’s a great question. For me, it’s the golden question because what frustrates me about the industry today is that… Frankly, I learned this in 2008 and 2009 from my Facebook days. Brands, of course, spend sizable budgets, but it doesn’t mean they don’t want measurable KPIs or they don’t want to see some data points showing that that dollar spent converted into something positive, something they can show adds value to their business. It’s a massive misconception in the advertising space that brands want to spend a ton of money, and they just want to see a ton of impressions, and they’re happy, and that’s it. But that’s a big misconception and, for me, a big mistake.

I think that has happened in the in-game space for a while, and we are changing that methodology. And it’s vital that we first came to market because we’re essentially quite a newbie in the in-game space. We only came to market on January 21. We were building the technology behind the scenes for a couple of years, and we didn’t want to come to market until it was 100% ready, but we were still quite late to the party. But we always want to come up with something different, both technically and strategically. One thing I know about advertising and agencies is that you always need to add value. So we have a clickable option in-game, which is unique to GADSME. So essentially, we can run performance metrics, and we can also run performance campaigns. And it’s not necessarily just about driving installs or downloads, but it’s also trying to show advertisers more than just an impression. We can show them a CTR.

And again, that doesn’t have to run across every campaign, but it’s just an option. It also allows us to survey audiences. So if you run a campaign, we can then survey that audience. Using our clickable elements, we can do that. We can do it through third parties as well, which we are doing because I think this is very important. That’s about demonstrating more value than just impressions served. And start to talk to audiences about whether we have helped shift brand preference or brand awareness, have shown potential in brand uplift, and have improved net promoter score, for example. There’s a whole host of options that brands can still measure to show that the in-game world is adding value, and I don’t think that’s been done heavily enough. We’re trying to change that by building out these case studies. So when we talk to agencies and advertisers, we’re trying to look at building measurable results and helping them add value. Because for us, being honest unlocks more sustainable and ongoing budgets, which helps the industry and helps the publishers monetize through this method.

And of course, we can demonstrate very quickly that this highly engaged audience that is, of course, consuming vast amounts of content daily from all demographics, from all areas, is being exposed to these ads in a non-intrusive, non-intrinsic way that’s adding value to that brand engagement or that brand awareness. We’ve even gone down the roots, and we’ll go down the roots of measuring footfall into store. We can measure shopping basket value. We can offer a whole range of tools in third-party solutions that allow us to measure the impact. And I think it’s very important that companies like ours do this so that we can show the actual value being delivered.

Jamin:

Let’s say I’m a CPG brand, I’m listening to this podcast or seeing you speak, and I’m like, “Wow, this is interesting. This is something I’d like to add for our next campaign.” Ultimately, they will be working with a media agency that will be placing those dollars with you. And so, what guidance would you give to someone interested in the work that you’re doing, but ultimately at the end of the day, it’s going to be working through an intermediary, whether that’s an internal media department or external media buyer? What are the kinds of things that clients should be asking their media agencies about something like GADSME?

Simon:

Sure. Yeah, I mean, it’s a great point. Of course, we work with and are happy to work with any media agency on a global level, and we do work with many of them today. We’re, of course, fully set up for all types of programmatic buying. So technically, it’s very easy to do. And for interested brands and teams, it’s really important to note that gaming is massive. Time spent on games is enormous. And the big misconception is the nerd in the basement, when, for example, on mobile, more females are playing than males in mobile games, which is people are shocked by that data point. But the audience is massive, from young children to silver surfers of all ages. So it’s an ideal way to get your message brand ad in front of a huge audience. It’s targeted. So with our technologies, we can hone in on specific demographics, geos, and locations. The traditional targeting setups you want to see in any digital campaign can be done. Measurable elements, of course, can also be done, and you are impacting your audience.

For me, the perfect mindset of the gamer is relaxed. They’re enjoying themselves, playing a game; they’re having fun. Even if they’re losing or haven’t quite gotten through the level they want to get through for me, I still think it’s downtime for people, and it’s an ideal time to start talking to them about your particular brand or product. And it’s done very naturally and very organically. It’s not ramming it down their throats, annoying them in any way, or shouting about specific offers. It’s done organically and nicely, so people are receptive to it. And lastly, compared to above-the-line or your TV spots, it’s super economical regarding cost and CPMs. I think in five years it will be a lot more expensive than where it is today, but anything new. I remember when CPCs on Facebook were $.06 US dollars back then, almost anyone could advertise and see strong conversion and good ROI. I think now is a great time to get into this space and start testing, learning, and seeing its impact on your brand and your awareness. But hopefully, if we continue in five years, it will be a lot more competitive.

Jamin:

You’re in an interesting spot because you must make a case for your business and both brands. But on the other side, you also have to be an ecosystem player in the games industry. Tell me a little about the case for game makers to integrate advertising. It has been, I would say, one of the more curious pieces, I think, for the games industry. If you look at every film and TV or music or… Brand partnerships are a big piece of how those content forms come to life, whether through product placement, partnerships, or whatever. Gaming seems to have a different history there. So what is the case that you are making to game makers about why they should be integrating advertising into their work?

Simon:

One that adds realism to the game. So if you are walking down a street or you are playing a sports game, we’re very used to seeing ads in the real world, proper real ads. So when you are trying to play a football game or walking down the street, and you see fake brands, ads, or names that just aren’t real, it doesn’t resonate with the player as much as it does in the real world. Many games are trying to create this real-world experience. So what better way to do that than with genuine, real dynamic ads you see daily in a real-world environment? That’s certainly appealing. And of course, certainly for GADSME, one of the things we can offer on top is that product placement idea that we know is pretty successful and quite significant business in the movie space, in the… You can sit there in a bar in a game and pick up a can of soda. That could be Coca-Cola or Pepsi; those particular companies can sponsor it.

Another last point is that gaming companies are very good at building games, and they focus all of their efforts on marketing, game design, and game development. And a frustration for many studios is that they don’t want to build a sales team to go and find these sponsorship deals or advertising opportunities. It’s not easy. It’s expensive and frustrating, so they can’t do it. So GADSME, we add that third party, and we become part of that team that can go after them, can go after sponsorship deals for them. And, of course, revenue is always greatly received.

Jamin:

Yeah, I mean, there’s a bit of a virtuous cycle there with media, where I think advertisers understand because they at one point read newspapers or they read things on their website, or they watch film and TV or whatever it might be, and they see ads in those contexts. And so, they presume that that is a place where you can play. But with games, because it’s newer, you don’t see as many ads unless you play mobile. And so, as a result, I think from a literacy standpoint, brands that are not thinking long term, like this, will be a place where advertising is just as pervasive as it is in every other medium. So it does seem like there’s a bit of a flywheel at work here where it just… We need to get started. Then, once it gets started, advertisers will see their ads inside of games and ask their teams or marketing teams to place ads there. So it is, I’m sure, a real challenge to do the work on both ends, both with publishers and advertisers.

What are some of the challenges around viewability? You mentioned earlier, on the one hand, people who are playing games in an excellent mindset to be able to receive advertising. They’re comfortable; they’re hopefully having a good time. Even if they’re not, they’re undoubtedly engaged or deeply engaged with what they’re playing. Games are absolutely a lean-in experience. On the other hand, if you’re an advertiser, you want to be the center. At some level, it’s like you want to make sure you are also noticed. So tell me a little bit about how you’re making that case to brands, that their ads are being seen, not just that they’re in context, like you mentioned, unobtrusive, but also that folks who are seeing them are engaging with the content of the ad as well?

Simon:

Absolutely. Again, this goes back to my earlier points that it’s a hugely important element to the success of the in-game industry and one of those golden points that you must focus on extensively. That’s why we built a patented solution unique to GADSME that is very detailed and in-depth. You could read the patent if you like. It’s very long. But we worked very hard on the viewability metric and wanted to ensure that our technology could measure this in a very fair environment. We’ve gone to such lengths that for any object, angle, or time spent, obviously seeing the ad; any advertiser must pay a dollar for an ad or an ad impression or a thousand or more. They must get value for their spending, and of course, the actual ads are being viewed by the audience. Our solution tracks numerous data points to create a viewability score to ensure fairness.

I think it’s very important that companies like ours are transparent on this and that they build a very fair ecosystem that demonstrates that the ad and what’s happening is genuine and that the ad has been seen in an optimal place or a place that’s not behind a building or a block or a tiny little square in the corner of a game. That wouldn’t count. Yeah, that’s something that we pride ourselves on, and very happy that we have this solution. We’re also working with third parties to authenticate our viewability metrics so that we’re not marking our own homework because we understand that’s also not great. So we’ve got some big players, and we’ll announce stuff soon that will validate that what we’re doing is, of course, fair and genuine.

We want to build an honest and fair advertising ecosystem moving forward because it’s essential. And I think if you try to cheat advertisers, if you try to cut corners, if you don’t add actual value, then for me, you are dead in the water. You need to do something. I think this industry needed someone to come along and really shake it up and do things honestly and fairly. That’s what we’re doing. That’s what we believe is the right path, and that’s something that we work very hard on technology to ensure that we can track everything we need and that viewability is measured fairly. That’s where we’re pushing to show actual value to our partners and help them understand that every dollar spent leads to something that aids brand awareness and product purchase down the line.

Jamin:

For the audio ads, can you walk me… This is a new product for you. Can you walk me through how that works and how it works in practice for this new piece of your business?

Simon:

Yeah, sure. It’s quite a new industry across gaming. There are a couple of other players in this space. We wanted to offer the full suite of non-intrusive ad solutions. We had a 3D SDK already built, so it was… Technically, it was an option for us to build out. I don’t want to say it easy because nothing’s ever easy technically, but it was an opportunity for us to expand and create something unique, which, again, we like to do things differently. We are the first company in the world to offer in-game video display and audio ads, but also in one SDK. So on the gaming side, it’s very easy for them to install, download this SDK, and put it inside their game. So it’s a super easy technique for them. And, of course, from the mechanical side of it, the gaming mechanic, you can choose any part of a game, whether it’s a level or an area or however you wish to launch the audio ad.

But GADSME being that we like to do things differently, brought this 3D audio ad solution to the market, which means if you are a player running around, say, a real-world or a world, a city builder or a city game, you could direct that player to a specific part of that game. And when they walk into that space, a bar, a pub, or a sports ground, it would trigger the audio ad. The audio plays for 10 to 30 seconds. It’s pretty non-intrusive. A very small image appears so the brand can maximize its exposure. And then whatever the ad is will serve for that period, and then it stops, and the game sound and everything will continue as usual.

It disrupts the player for 15 seconds from just an audio perspective. They can still run around and carry on playing. They’re just going to hear the audio ad for those 15 seconds, which we felt was pretty relaxed compared to the more intrusive ads we see, especially on mobile today. And we’re seeing a significant uptake from very keen gaming companies. And so far, from players we’ve tested and spoken with, it all looks pretty positive. So yeah, we have a lot of good plans for audio, and we believe this is also a very interesting space to build a lot of non-intrusive ad solutions to help gaming companies.

Jamin:

Awesome. Well, Simon, thank you so much for your time. I appreciate it.

Simon:

No worries. Appreciate your time too, and I hope it was worthwhile.