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Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.

In-Game Advertising

Early days of in-game advertising, crossover between traditional sports and gaming

In-Game Advertising - Early Days

Riot Games announced this week that in the next professional season fans watching official League of Legends esports broadcasts will start to see advertisements directly on the map. While these banners will be visible to those watching online, the pros will continue to see the standard map while playing their official matches.

This was inevitable and has already sparked a negative reaction from many in the community, but this is unlikely to have any negative impact on the game’s continued adoption or monetization. If anything, this can actually push the game forward, yet Riot (and any studio that pursues this route) will have to do it in a balanced manner.

The topic of in-game advertising is spawned by the massive player base and viewership numbers that exist in the video gaming community. There are over 2.5B gamers, 900M viewers of gaming content, and it’s a $152B industry (larger than film + music combined). Given the hours spent in these virtual environments, it’s natural for advertising dollars to want the exposure.

Here are 3 reflections on this topic:

1) Esports viewership - advertising that is visible to only the viewers of esports matches (now over 500M people) is a non-intrusive and productive step forward for the gaming industry. This will add revenue to the professional scene which will ripple into better viewership experiences (both online and offline). This is exactly what Riot Games did this week with LoL and I see this as a productive, healthy, and natural next step for the competitive scene of gaming.

2) Casual viewership - the audience for gaming content (Twitch, YouTube Gaming, Mixer, etc) is now over 900M people. Soon, it will be normal for game studios to integrate streaming tools that monitor how many people are actually watching/viewing an in-game ad. For example, if the CPM rate is $1.00, and I’m playing alone, then the game studio would receive $0.001. However, if I’m streaming and have 1k people watching my stream, then the game studio should technically receive $1.00 for that ad placement. This type of technology and many other tangential areas around it are coming quickly.

3) In-Game / While Playing - while playing a video game, there are many places where an ad placement would naturally fit in these virtual environments. The key feedback from the community is: 1) ads are intrusive and 2) a virtual environment should be free of the bombardment of ads I typically experience in the real world. While both of these points are true, the opposite is also true: people are very comfortable with highly relevant and targeted advertising. I expect more game studios to integrate in-game ad placements (tactfully) as an additional revenue stream.

For context, below is a sample list of gaming technology companies operating in the in-game advertising space (this is by no means comprehensive):  

  • Anzu: ad solution that integrates non-intrusive ads in games
  • Sayollo: ad placement in mobile games
  • Arlene: deploying ads in the real world through XR applications
  • 4D Sight: integrates ads directly into live stream gameplay videos
  • Admix: built an engine to add ads directly into a games environment
  • AdInMo: using texture replacements for in-game advertising
  • Immersely: turns 3D game environments into advertising space

The Crossover of Traditional Sports and Esports / Gaming

Esports has given traditional sports organizations a way to supplement some (even if very little) of their lost revenue during COVID. The organizations that leaned into the gaming/esports ecosystem before the lockdown have seen viewership and fandom growing (i.e. NBA 2K), which has resulted in sponsorship deals (Wizards <> Scuf Gaming, Nets GC <> Zeni, Hornets Venom GT <> GoCollect).

This is going to be a growing trend, as more traditional sports teams not only hedge their bets but also see this as a clear path to further leveraging their brand. This is already clear in the NBA as you can see below with the NBA 2K team alongside their NBA counterpart:

  • Raptors Uprising GC (Toronto Raptors)
  • Warriors Gaming Squad (Golden State Warriors)
  • Blazer5 Gaming (Portland Trailblazers)
  • T-Wolves Gaming (Minnesota Timberwolves)
  • Wizards District Gaming (Washington Wizards)
  • Hornets Venom GT (Charlotte Hornets)
  • Kings Guard Gaming (Sacramento Kings)
  • Mavs Gaming (Dallas Mavericks)
  • Hawks Talon GC (Atlanta Hawks)
  • Cavs Legion GC (Cleveland Cavaliers)
  • Pacers Gaming (Indiana Pacers)
  • Bucks Gaming (Milwaukee Bucks)
  • Knicks Gaming (New York Knicks)
  • Jazz Gaming (Utah Jazz)
  • Pistons GT (Detroit Pistons)
  • Magic Gaming (Orlando Magic)
  • Grizz Gaming (Memphis Grizzlies)
  • Heat Check Gaming (Miami Heat)
  • CLTX Gaming (Boston Celtics)
  • 76ers GC (Philadelphia 76ers)
  • Lakers Gaming (Los Angeles Lakers)
  • Nets GC (Brooklyn Nets)

Video game adaptations are extremely profitable to these teams (and leagues). EA just extended its partnership with the NFL which is projected to generate $1.6B in revenue for the NFL from 2021 through 2025. The time spent in the games currently allowing advertisements is not to be understated. For instance, EA has reported that more than 330 million hours of Madden has been played since it was released in August, 2019.

With traditional sports teams also having esports teams, they create a cross pollination in their fanbase (whether or not the fan is originally an esports or sports fan). This also allows sponsorship deals to be larger because they can now extend past just traditional sports and into gaming as well.

In traditional sports, you only see the sponsors or advertisements while watching live or replays. When you play a repetitive game like Madden or NBA2k, you see the sponsors every single time you play the game, leading to more frequent impressions on the players.