Gaming's ad dilemma
Why it matters: That dearth of ad dollars reflects a broader paradox. Gaming commands massive attention but still doesn't attract its fair share of ad investment.
The big picture: The sector is growing with Emarketer estimating U.S. 2025 gaming ad revenue will grow 5.7% to $8.6 billion. But gaming hasn't kept up proportionally with other digital growth, IAB's vice president of experience Zoe Soon said.
Soon shared that less than 5% of U.S. ad budgets goes to gaming — based off calculations of Emarketer data and initially released in a 2023 IAB study — at this year's PlayFronts, an annual event to educate marketers on ad opportunities in gaming.
Per a new report from ad agency Dentsu, that investment is small despite a global audience of 3.4 billion gamers and a 6% increase in time spent year-over-year.
But a shift may be underway amid generational changes and maturing ad tech.
Zoom in: Soon said outdated perceptions on who gamers are has held back spend. That sentiment aligns with Twitch CEO Dan Clancy referring to the platform's creators as "people who game" to avoid reductive stereotypes.
Structural friction has also slowed momentum, with gaming not fitting into existing ad buckets, metrics not aligning and programmatic buying lagging behind other digital mediums. To address those issues, the IAB released a gaming measurement framework last month.
"I think we just need to simplify it. When you say gaming, your mind goes in a million directions," Soon said. "Programmatic is what really is going to move the needle."
The intrigue: Gaming still makes a lot of money, and that might be why the industry has not been forced to figure out ads. Unlike traditional mediums, it's diversified across subscriptions, cloud services and hardware sales.
Advertising is expected to grow its share as global video game revenue surpasses $300 billion, more than double its 2019 revenue, per PWC.
But that diversification and expected growth hasn't been the case for gaming journalism, which is still dependent on displays ads and vulnerable to changing consumption habits.
Zoom out: Media companies have shifted away from dedicated gaming coverage with Vox Media selling Polygon, The Washington Post shuttering Launcher and Vice Media ending WayPoint.
Stephen Totilo, video game reporter for Game File and formerly at Axios, said gaming's richness — intersecting with tech, entertainment, business, health, labor and politics — makes it harder to place inside newsrooms.
"Gaming is a vagabond beat, with many potential homes, but one that winds up, in most outlets, with none," Totilo said.
At the same time, some publishers have leaned into gaming products, most notably The New York Times, but also BuzzFeed, Vulture and The Atlantic.
What we're watching: Gaming is becoming more central to some brand strategies, said PwC partner Samrat Sharma, as marketers view gaming as a way to reach younger consumers, an insights platform for product innovation and a bridge between physical and digital fandom.
"You are seeing brands who are looking to engage younger fans or recruit younger consumers very actively looking at gaming as its core channel," Sharma said.
A recent Dentsu campaign was " Level Up Lobby," a Roblox activation for skincare brand Differin that garnered more than 3 million visits, 400,000 mini games played and 12,000 hours of brand engagement in Roblox.
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