Where are people going to advertise games in 2023?

When we ask Gamesight CEO Adam Lieb and CMO Nicole Yang what's the big story in the world of game advertising, the answer they give is very clear: TikTok.

"TikTok went from having virtually no publishers working with it two years ago to a platform now that is in almost every game marketer's budget somewhere," Lieb says. "I don't know I've ever seen anything grow as fast, in terms of both prevalence and the percentage of companies on TikTok, as well as the size of budgets folks are putting into that platform."

TikTok was big last year. He says it will be big in 2023. And he says the scale of the platform is now large enough that it's doesn't even need to grow much more in order to stay relevant.

Lieb attributes the social network's importance in part to its focus on performance marketing from day one. Where other social networks created an advertising business and then gradually came around to offering advertisers greater data on who was clicking on ads, whether those clicks were leading to purchases, etc., TikTok has always been focused on driving results and conversion rates.

"They don't come from a historical 'brand awareness' place, so the amount of emphasis put on performance matters a lot," Lieb says.

That emphasis shows up in the technicalities of how products work and are optimized, he said, how the API can be used to communicate back to TikTok to let them know which users wound up engaging better and then TikTok can focus further advertising toward more similar users.

"You're spending more money to talk to the same people, so even if the conversion rates are the same, the cost goes up" Adam Lieb

Lieb says TikTok started with that focus, while platforms like Facebook and Google developed it over time. Twitter didn't even have a performance advertising product for the PC and console game developers that Gamesight focuses on until very recently, he notes.

The downside of TikTok moving from a challenger in the space to a mainstay is that it can charge more for advertising to its audience.

"There are more players on the network, there are more brands who want to advertise, so sometimes performance will go down just by the nature of the inputs," Lieb says. "You're spending more money to talk to the same people, so even if the conversion rates are the same, the cost goes up."

Speaking of conversion rates, TikTok's aren't all that impressive at first glance. In Gamesight's 2022 Ad Network report, it said TikTok's average conversion rate was 0.96%, far lower than more entrenched players like Google (3.79%), Twitch (5.5%), Facebook (3.48%), and Twitter (7.1%).

But the price of an ad on TikTok is considerably lower, Lieb notes. Ads are also integrated into the platform differently, which changes the value proposition. They are more fleeting so people miss them more easily, but there is no way to opt-out of ads on TikTok by paying a premium subscription fee as there is on some other platforms, so there's no need to worry about whether the audience you're targeting might disproportionately pay to avoid ads.

There's also the issue that TikTok users are generally watching on their phones instead of a PC (and there is no TikTok app for consoles yet), so there's considerably more friction in getting someone on the platform to make a purchase.

"You're looking at TikTok as largely an awareness push," Yang says. "You're looking at high volume of being able to put out impressions there and look at a wide audience who largely have marked themselves as interested in this type of content."

Developers also need to be mindful of exactly what sort of content they put on TikTok.

"The format [of TikTok] is a little different," she says, referring to more than just the app's vertically oriented video. "The format that exists there and what is topical or culturally relevant changes and is fleeting. So it is important for developers to also be aware of those macro trends in determining what type of content will work for them on a specific platform."

As for Twitter, while it may have a higher conversion rate, Lieb and Yang are clear that it's a relatively small player in the overall scale of things.

"Comparatively, Twitter's ads revenue last year was $5 billion compared to Facebook's $115 billion and Google's $210 billion," Yang says. "We see games marketing budgets correlate similarly."

"Unless there's another black swan event and people are yeeting on Twitter altogether, we don't assume it's going to be that insanely volatile"Nicole Yang

With the new performance marketing product rolling out and some aggressive matching funds programs for advertisers, Gamesight sees more stability in Twitter than one might expect given the procession of headlines since it was purchased last year by Elon Musk.

"The platform traditionally has been hard to scale from a marketing point of view, but certainly with new products like a conversion API, it gives advertisers a reason to reinvestigate and test it as a new channel," Yang says. "And unless there's another black swan event and people are yeeting on Twitter altogether, we don't assume it's going to be that insanely volatile."

One thing to note about all these platforms is that not all advertising works the same. You can look at the conversion rates and decide to run ads on Twitch, but the type of ad you run can vary greatly in both cost and effectiveness.

As Lieb says, "You can't just say 'How important is Twitch?' You have to say 'How important is each of those different types of content?'"

For example, Lieb says clicks from content creators doing sponsored content deals lead to purchases at the highest rate by far.

"It outperforms every other type of games marketing that exists," he says. "That's not new, but it continues to be prevalent and content creators are part of virtually every single game launch."

He puts the conversion rates of clicks coming from sponsored content at roughly 60%. There are also Twitch Drops, which let you give in-game rewards to a content creator's audience when that creator streams your game. It costs less, but the conversion rate drops to about 20%.

On the other hand, a traditional in-stream display ad of the sort that requires no participation from the content creator only has 2-3% conversion rates. However, all three of these options could have similar return-on-investment given how widely the cost of them varies.

"In terms of budget going to promote and grow games, I think Reddit is not nearly as used as it could be"Adam Lieb

As for where people could consider advertising that might offer unexpected results, Lieb points to Reddit.

"In terms of budget going to promote and grow games, I think Reddit is not nearly as used as it could be," he says. "My assumption is that's because the creative it takes to work on Reddit is just different. You can't just take your ad unit on Facebook and put it on Reddit and expect it to work. It's a different audience you talk to differently, and it's unlike TikTok where that's more obvious… Maybe that's either intimidating to folks, or they don't know that and use stale creative from another platform and it's not going to be as effective."

Even so, when people ask Lieb where they should be advertising but aren't right now, Lieb says Reddit is his answer these days more often than not.

So that's a fair bit about what happened in game advertising last year and what's happening right now, but what about the future?

"I think 2023 in a lot of ways is going to be a reset year where strategies, tactics, and budgets are scrutinized," Lieb says. "For a lot of companies we're seeing budgets tightened. A lot of games have been cancelled."

With fewer games coming out, publishers will need all of them to hit, and Lieb expects there to be a more heavy focus on performance marketing, things that people know will work and can be proven. That means less investment to build a general brand and fewer experimental tests on novel advertising concepts.

He believes it will be a contrast to the past couple of years where "everyone was riding high and trying cool new things."

"This year we're going to see a lot more focus on making sure every dollar actually counts, and being able to prove that money was successfully invested," he says.

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