Analysis: The impact of ad-blocking on the games industry

26.5 per cent of gamers are blocking ads, threatening the main source of revenue for indie publishers. Venatus Media’s co-founder Rob Gay discusses the consequences of ad-blocking

In just a few decades, gaming has gone from a cottage hobby to the fourth biggest entertainment industry on the planet – outselling movies and music (gambling, reading and television are the three biggest).

Gaming bean counter NewZoo forecasts the market at $91.5 billion last year alone. Factor in the ubiquity of mobile with the largest growth rate of players and it looks like we’re in rude health. But pull back the curtains and the industry is facing a huge financial challenge from ad-blocking.

While advertisers don’t pay for ads blocked, they still suffer lack of reach from campaigns not viewed. But it’s publishers who’re haemorrhaging revenue because gamers who ad-block are killing the thing they love.

Everyone saw PageFair and Adobe’s Cost Of Ad-Blocking report last year with global accumulated losses at $21.8 billion. And gaming sits at number one with 26.5 per cent of gamers blocking ads. While PageFair’s methodology has been questioned, it’s a warning flag – players want free content without realising the impact of their actions, not just on publishers and advertisers but the entire games industry.

This issue is compounded by the fact millennial men ad-block most. That means the highest ratio of blockers are the same ‘core’ gamers that visit many of the games publishers we represent. And while all publishers are suffering losses, it’s the core independents that hurt the most. Not only is advertising their primary source of revenue, they suffer from the highest rates of ad-blocking because their audience are young men.

"Players want free content without realising the impact
of their actions on the entire games industry."

Rob Gay, Venatus Media

The ad trade body IAB has tried to block the ad-blockers by teaming up with tech developers to circumvent the technology. That’ll just lead to an escalating arms race of developers deploying measures and counter-measures on both sides, so no one wins.

That leaves many gaming sites testing new ways to keep their audience and continue to make money. Bigger publishers have the finances and clout to offer paywalled content, opt-in” advertising or subscription services, payment models they can afford to experiment with because they have multi-channel revenue streams. There’s also the option of only serving ads that meet the reductive Whitelist” criteria to appease ad-blockers, which is tantamount to extortion and counterintuitive to next-generation tech – taking online advertising back to the 1990s while the rest of the internet moves forward.

For core independents operating on tighter budgets, advertising is their main source of revenue and it’s being taken away by the very same customers who use their services. That’s killing the goose that lays the golden egg. Some sites also politely asked their customers not to block-ads but, with so many gaming sites to choose from, their audiences are going elsewhere if they don’t like the ads.

For us, core gaming is a fantastic calling card for potential advertisers. And because of the exponential growth of gaming, many non-gaming brands want to tap the market. That’s why we have an eclectic array of advertisers on our books, from consumer goods companies to car manufacturers.

But the unsustainable rate of ad-blocking needs to be tackled head on by a games industry working collectively. There’s always a period of anomaly when new technology beds in. We see a future where open communication in the games industry will help define a better working eco-system between publishers, advertisers and gamers. But if it gets worse, would the last person to leave the internet please turn the light off?

About MCV Staff

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