Social games ads potential still limited

Social games may be popular among users but advertising on platform still far from robust, industry insiders say.
Written by Jamie Yap, Contributor on

Social games are increasing in popularity and user penetration, and advertising on the platform is gaining traction, said industry watchers. But it isn't the main appeal as far as online advertisers are concerned, they added.

Pietro Macchiarella, research analyst at Parks Associates, for one, said ad spend on social games is "definitely" growing, but only major social game publishers are able to attract significant advertising currently. Even then, their revenue share from advertising is still much smaller than sales of virtual items, added the analyst in his e-mail.

Nick Fawbert, secretary of the leadership council at Interactive Advertising Bureau (IAB) Southeast Asia, concurred. Out of the United States' US$1 billion social games revenue market, for example, only approximately US$200 million is derived from advertising while the rest are predominantly garnered from virtual goods sold, he said.

Additionally, the US$200 million figure pales in comparison with the current U.S. online ad market of US$26 billion, representing just 0.75 percent of the total market, he pointed out in his e-mail.

"On that basis, it would be inappropriate to claim that social games are where the money is [for online advertising]", Fawbert said.

Benefits and challenges
However, both of them said social games advertising has its advantages due to the platform's immense popularity and pervasiveness among consumers--something big brands are not oblivious to. Disney, for one, spent US$563.2 million in July last year to purchase social game maker Playdom to tap on this opportunity.

Of its potential, Fawbert noted that the time spent by users on social games meant advertisements can be played out for a longer time to target audiences.

Macchiarella chimed in, saying that social games offer advertisers the opportunity to integrate brands with gameplay and can therefore obtain higher gamer engagement.

The challenge, he noted, is for advertisers is ensuring the ad message is properly integrated within the game to be perceived as beneficial rather than intrusive by users.

Bank employee and avid Pet Society and Restaurant City gamer, Kelly Liu, agreed with Macchiarella, saying in her SMS that once the ad "meddles with the playing experience", it becomes a no-win situation for both the gamer and the brand advertiser.

Jermyn Toh, digital planning director at advertising agency BBDO/Proximity Singapore, suggested that what is key is how to draw the gamer's attention to the advertising in a relevant and meaningful way.

"Higher relevance could lead to better returns on investment (ROI), whereas a cookie-cutter advertising approach that focuses too much on pushing the marketing message could lead to users ignoring the ad and [achieve] low ROI," he told ZDNet Asia in an e-mail.

Essentially, it is about creating an advertising experience gamers want, Toh surmised.  A mother playing Angry Birds, for example, would not want baby product messages flashing during game time because it disrupts her enjoyment. She might, however, be more inclined to play a bonus round that must be cleared within 30 seconds repeatedly, regardless if she stands to win a discount coupon, Toh explained.

No dominant online ad platform
Virtual goods, particularly those branded by corporate sponsors, are more readily received by social gamers, Macchiarella pointed out.

Fellow Park Associates analyst, Heather Way, added in her e-mail that advertisers can drive "brand awareness, response and loyalty" by strategically offering branded virtual goods of value to gamers.

Their views are corroborated by a eMarketer report published in January. The research firm noted in the study that as marketers look to promote their brands through social games, branded virtual goods will increasingly emerge as the market matures over the next two years.

Fawbert, though, argued there is no "best form" when it comes to online advertising.

Each online media channel--including social networks, display, search and games--has its own set of attributes and cost metrics, he said. The "best" choice for online advertising mediums, he added, will depend on the needs of the ad campaign such as the targeted audience and the cultural context of the particular user demographic.

Toh agreed, saying comparing social games advertising to display or search ads "isn't so straightforward". Elaborating, he said the choice of format used is dependent on the type of online behavior the advertiser hopes to elicit. For instance, display ads are better for building brand awareness while video ads help consumers build emotional connection with the brand.

Ultimately, he reckoned there is "no such thing" as the biggest market for online advertising, because online behavior constantly evolves in new ways.

"Each new option will get a spike in attention and budget, but once the sheen of newness has worn off, it then becomes part of the standard online advertising mix," Toh said.

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