Video games? Not so much.

We could argue, however, that gaming was a pastime during the pandemic. A pandemic pastime, if you will.

No matter how you look at the numbers, the video game business benefited from the pandemic.

Why?

Michael Pachter, an analyst at Wedbush Securities, summed it up nicely: “You have more time and you’re bored.”

A handful of stats paint an almost unbelievable picture of the grip video games had on society over the past few years:

• Microsoft’s Game Pass surpassed 10 million users.
• Nintendo sold more than 12 million Switches during the pandemic. Its profits tripled as well.
• In March 2020, Twitch users cleared 1.1 billion watch hours.
• YouTube Gaming had its biggest year ever.

As video game usage soared, so did the ad spend for video game products.

Most of this ad spend came from virtual retailers, game subscription services, video game titles, and consoles.

But what about spending within games?

How are brands using in-game advertising to reach new consumers?

Exploring the Growth of In-Game Advertising

In-game advertising isn’t new.

The practice of putting ads in between content has been around for ages. But as gaming spread its wings and appealed to a more diverse audience, more advertisers jumped to get in front of a highly engaged yet niche audience.

In-game ad formats are changing

In-game ads have evolved over the years.

Originally, developers would work the ads into the code and release a game update for users.

With time, in-game ad capabilities advanced. Ads could be inserted dynamically, but this was still costly. It didn’t provide the best experience for users, either.

Today, ads can appear with far less disruption. 

“Rather than inserting adverts into the game for the players to see, there are solutions for inserting adverts into a stream,” explains founder and CEO at Cheesecake Digital Philip Wride.

Fortnite is one of the biggest names revolutionizing in-game advertising.

From Nike Inc. rewarding virtual Jordan sneakers to Travis Scott’s concert that attracted more than 12 million attendees, Fortnite is a pro at in-game advertising. 

Fortnite players were even able to test a new Coca-Cola flavor before it hit the shelves of supermarkets.

With nearly 400 million active users, Fortnite will continue to set the bar for how advertisers weave their brands into video games.

“Sites joke that Fortnite is no longer a game, but one big advertisement — and there is some truth to that,” writes Matthew Liebl. Even though fans know they are seeing ads, it’s not annoying to them because the ads feel part of an exciting experience.

In-game ads are reaching different personas

There’s an old stereotype that gamers are solitary guys chatting on headsets and drinking a caffeinated beverage — but that’s far from the truth. 

There’s a video game for everybody today. 

“I’d argue that almost every brand in the world has an overlap with the gaming audience,” said the CEO and co-founder of in-game ad platform Anzu.io Itamar Benedy.

Why?

In 2022, there was an estimated 3 billion gamers worldwide. While that’s down from the 3.2 billion gamers in 2021, the morale of the story doesn’t change: People love video games.

With that many people playing, you’ll see everybody from aunts playing Candy Crush to teenagers playing eSports.

With those different buyer personas, brands from Kindle to Disney to the NFL can find someone to market their brand to in a video game. 

Also, advertisers remember that younger generations are changing their media preferences. 

Younger generations, especially generation Z, are moving away from TV and opting for video games. According to Deloitte, Gen Z teen males spend an average of 12 hours per week gaming.

On top of that, they are turning to eSports instead of live sports. Heck, League of Legends gets more viewers than the Super Bowl. Even more telling is that revenue in the eSports market is projected to reach $1.6 billion this year.

With more attention on games, advertisers can get creative to reach their audiences. They can learn from brands like DHL and Wendy’s, which have used games to build brand awareness.

In-game ads may also hold a special place in the heart of brands in the post-cookie world. With Google expected to sunset third-party cookies in 2024, advertisers must find other ways to connect with their audience.

In-game ads could be one of those ways, especially if recent advancements with in-game ad measurability prove their worth.

The Impact of COVID-19 on In-Game Ads

During this pandemic, some ad tech startups and video game developers used technology to display public service announcements in games. 

Rebellion Developments placed ads that said “Stay home. Save lives.” in their games. Activision Blizzard’s London-based division, King, donated 230 placements to COVID-related information. 

As we reopen, we will likely see PSAs decrease, but the value of in-game ads increase.

Looking at the impact of COVID-19, an analysis from Technavio predicts the in-game advertising market is expected to grow by nearly $11 billion by 2024. Games have only become more popular during this time, and even though people will return to work and school, COVID habits will linger. 

As they linger, new technology—and inventory—will open up. Both Sony and Microsoft are exploring the idea of offering a private marketplace to allow brands to buy ads in free-to-play games.

For more insights, sign up for MediaRadar’s blog here.

While this idea may have surprised some of us back then, it may not be shocking to us today. According to Nielsen, time spent playing video games has shot 45% up during the last few months.

Hobbyists and new gamers alike are using video games as an outlet to get through stressful times. 

Our team at MediaRadar has seen a tremendous spike in advertising spend in this category. Here, we share the details. 

We encourage you to subscribe to our blog for the latest data surrounding the advertising industry. We will provide daily updates as COVID-19 continues to make its mark on the US economy.

Video Game Usage is Up Across the Board

Who’s playing video games right now? 

Video game enthusiasts with more time on their hands. Parents managing newly remote work and homeschooling. Isolated friends looking for somewhere to ‘hang out.’ 

Video games have something to offer people from any background.

Of those who were already gamers, 39% are spending more money on games during shelter-in-place. When it comes to new gamers, the sales of video game hardware alone was up 63% YoY in March. 

For many, video games are a new way to interact with friends. “It’s certainly not the same as being able to see people in person,” said LingLing Lau. “But I think for me it’s been nice. It’s brought some lightness to this whole situation.”

Just as Hollywood has become creative with major streaming events, video games have their own popular concerts. 

Fortnite and rapper Travis Scott joined forces to host a series of virtual concerts. Over 27 million people “attended” the five shows. Dave Thier writes that this virtual event has offered “a blueprint for an interactive music video of the sort we’ve never really seen before.”

While gaming is growing and transforming during social distancing, it doesn’t mean the industry doesn’t have its own set of roadblocks. It is difficult for game developers to produce new games and consoles, as much of its own workforce has also transitioned to remote work. 

While those challenges are real, we still see the ad numbers soaring. 

MediaRadar Insights

Advertising spend from the video game industry (game titles, consoles, video game retailers, etc.) in April was more than double what it was in January! Last year during the same time period, ad spend had only risen 18%.

Video game retailers, in particular, dramatically increased their spend. 

This includes virtual retailers like the Playstation Store. Playstation launched its “Play At Home” initiative allowing users to download two free games: Uncharted: The Nathan Drake Collection and Journey. 

Jim Ryan, CEO of Sony Interactive Entertainment, said the company took their role as a home entertainment company seriously during this time and encouraged people to continue staying safe by playing at home. 

While initiatives like this were taking place, the primary driver in increased ad spend here has been GameFly, a video game rental subscription service. Their ad spend is up over 500% YoY in March and April.

Spend from game titles is also up. When we compare January and April, spending increased by 60%. Some of the largest game title advertisers YTD include:

• MLB The Show (which had its best launch in the series in its nearly 15 year history)
• Forge of Empires
• Final Fantasy VII Remake
• Doom Eternal
• The Sims

Mobile games brands have also increased their spend. The average weekly ad spend from the category went from about $700k in February to over $1.4M in March, and has remained at higher levels in April. 

Key advertisers driving this trend include:

• Candy Crush
• Adventure Academy
• Terragenesis
• Pictionary Air.

Video game console spending has leveled off somewhat from the early spike in March, but it does remain higher than pre-COVID levels.

Video games and eSports were already huge industries — but now with everyone at home, it seems like they will continue to be a vital threat to other home entertainment companies. 

For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy.

The answer might be new toys and video games.

Toy sales were not looking good a little over a month ago, when COVID-19 appeared to be a problem primarily based in China. In fact, in late February, Hasbro warned investors of a decrease in revenue due to challenges with overseas factories. 

Ironically, Hasbro did not know that the coronavirus crisis would sweep everywhere and shift how families spent the majority of their days. The company’s shares are now up 12% and its current challenge is no longer vacant factories in China, but it’s empty shelves in the States. 

The coronavirus pandemic has ushered in a new lifestyle for families. How are toy companies responding with their ads?

We encourage you to subscribe to our blog for the latest data surrounding the advertising industry. We will provide daily updates as COVID-19 continues to make its mark on the US economy.

The spike in toy sells

It’s not just Hasbro. Toy companies across the board are seeing a massive surge in sales. 

Research from the NPD Group showed that toy sales were up 26% for the week ending March 21st. Games and puzzles were up 228%, building sets were up 76%, and arts and crafts were up 70%. 

Parents need activities for their children to do while they are cooped up at home, especially to prevent too much screen time. 

For some families, this may be a time to connect with their kids in a way that harkens back to their childhood. Classic board games like Monopoly, Game of Life and Operation are performing well. But it’s not all about the kids.

“We’re seeing a clear ‘kidult’ and adult trend here,” said Frédérique Tutt, global toy market expert for NPD. “Perhaps some of the buyers are grabbing the opportunity to use their newly found spare time to achieve a long-term dream to build one of these cars in Lego.”

Daniel Radcliffe is a prime example of this. He showed off his 3,200 piece completed Jurassic Park LEGO set on The Late Show with Stephen Colbert. 

Most of these sales are being made online through Amazon, Target and Walmart. 

It is interesting to note that Amazon has confused toymakers on its policies during this time. Although Amazon said it was not accepting non-essential items into its warehouses, toymakers have received messages directly from Amazon asking for shipments of toys due to high demand. 

MediaRadar Data

Do the ad numbers coincide with these new sales? Yes, and by a long shot. 

Games and Toys

When looking at a combination of children’s toys and games (i.e. action figures, toy cars, etc.) and adult toys or games (i.e. Board Games, Puzzles, etc.) companies invested $1-4m per week in advertising at the beginning of this year.

In March that number jumped to an average of $13.8m per week.

In March, 89% of the spend from the chart above came from children’s toys and games.

While the large majority of the ads are targeted towards children’s toys and games, not all of the ads are targeted at the kids themselves. 30% of the TV spend in March went to programming not explicitly aimed at children.

The most shocking thing here is that not just one company quickly adjusted. Ad-investment is up across the board. 

Here are the Month-over-Month changes in spend between February and March 2020 for different toy companies: 

• Mattel is up over 14x
• Hasbro is up over 6x 
• Lego is up over 5x
• Playmates Toys is up over 3x
• Spin Master is up over 2x

Ad creatives among toy companies have also changed. 

Hasbro launched a new spot highlighting people of all ages enjoying their products indoors. Within the ad, they promote multiple products as part of their new “Bring Home the Fun” initiative, which includes a new website specifically designed to help families during this time.

Video Game Systems

It’s not all about screenless games these days. Video games are benefiting too. 

Gaming systems saw a large spike in advertising over recent weeks. The first three weeks of March saw over $14M in ad spend. In comparison, the companies spent just over $10M in Jan-Feb combined.

The key contributor here is Nintendo. The company released a new product (Nintendo Switch Lite) in September 2019 and has been aggressive in its marketing.  

Nintendo ran ads most frequently on kids’ entertainment programming. With a price point of $200, it’s a viable option for parents suddenly needing to provide a diversion for their children. However, it appears that the biggest issue for Nintendo is simply keeping it in stock. 

Sony’s PlayStation and Microsoft’s XBOX are keeping their marketing minimal. Playstation is spending less than $100k a week, while Xbox is spending between $200-300k a week. For these companies, the timing is poor. They both have new consoles coming out in the coming fall, but their current product offering is stale.

As coronavirus continues to weave itself into our economy, some industries are set up to win more than others. While the gravity of COVID-19 is not lost on us, it does cheer us up a bit to imagine families coming together over board games and adults completing their childhood LEGO dreams. 

For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy.