Gaming is bigger than Hollywood. According to a report by research and consulting firm Accenture, the gaming industry is valued at more than $300 billion – more than the combined markets for movies and music. In 2020, over 214 million people in the U.S. reported playing video games at least one hour per week, and three-quarters of all U.S. households include at least one person who plays video games.

Of the hundreds of millions of people who regularly play games, a whopping 80% are between the ages of 13 and 34. And they’re engaged like no other audience. When gamers are sitting in front of their big-screen TV or almost-as-big PC screen, with controllers in hand, they’re definitely not multitasking. In fact, video games might be the only medium in the world whose audience is paying 100% attention.

The introduction of brands and in-game advertising into this massive and fast-emerging media platform requires managing a delicate balance centered on a single, simple and unbreakable foundation: The player is in charge. And in this playbook, we outline what brands need to know and do in order to have their in-game advertising received and even embraced by this highly elusive but incredibly valuable audience.


Why It’s So Good to Be in the Gaming Business Today

Who Can Advertisers Reach Via Video Games?

Why Advertisers Must Follow the Gamer’s Rules

Reach and Reward: How Brands Can Win With Gamers

There is no shortage of writing these days about the emergence and disruptive powers of blockchain technology, bitcoin and cryptocurrencies. My apologies for adding to that growing mass, but hopefully this piece will make a point or two that adds to the broader story of why media companies should watch the crypto space very carefully. I believe they will be watching their own future.

 (early backers of Coinbase and Dapper Labs), I subscribe to the notion that crypto will usher in a next phase of enormous technological disruption and advancement in society and business that will eclipse what we have seen from the Internet over the past 25 years.

I believe that thesis will very much apply to the world of media. Just look at the South Vietnamese-created video game 

-style multiplayer game in which gamers’ “Axies" monsters battle each other as they evolve and grow. Each Axie is unique and represented by its own NFT (non-fungible token) and gamers buy tokens to transact, to buy land and Axie breeding rights, to buy and sell Axies and to vote in game governance.

The game has 10 million-plus players today, with almost one-half of them in the Philippines, and now generates more than $200 million of transactions per month. Yes, it’s that big.

, but many tens of thousands of them are now “playing to work,” building and selling their unique Axies to other players and fellow breeders for thousands of dollars, and significantly supplementing their incomes as farmers and laborers.

For sure, this may end up as another flash in the plan. We’ve seen that before. However, regardless of its fate, what 

 represents cannot be put back in the bottle, and it should cause everyone in the media ecosystem to think long and hard about what their businesses look like in a world that is increasingly driven by crypto markets.

Just think, with less than $10 million of capital, 

 built a very efficient platform for creators to make, sell and buy unique intellectual property at a scale and speed that we have never seen before. Its economy and governance are decentralized, which means it doesn’t depend nearly as much on big third-party distributors to reach users and build customer relationships with them, compared to most app businesses.

Finally, the network effect in attracting and retaining tens of millions of gamers and audiences that can be built and supported on a platform like Axie -- or other gaming platforms with their own proprietary currencies like 

 and their hundreds of millions of players -- cannot be ignored if you are in the business of provisioning consumer contact, the fundamental core of being a media business.

I’m not saying that you need to be buying and selling bitcoin, but I am saying that you should go build an Axie or buy a 

 -- and imagine what it could mean for your business.

Find out how you can reach and reward passionate gamers worldwide with 

An earlier version of this blog was originally published by 

Crypto will usher in the next phase of enormous technological disruption and advancement in society and today’s video games foreshadow what the future will hold.

The Future of Media Is Crypto... and Video Games Are Pointing the Way

Games developers are increasingly recognizing the contribution of their players' time and attention to their overall economy and sharing that upside back with their players, in the form of free in-game virtual goods including vanity items, boosts, characters and game currency, and NFTs, courtesy of brand sponsors.

Free-to-play (F2P) video games were originally considered a race-to-the-bottom innovation that would cannibalize overall game revenue and sacrifice game quality. But instead, F2P games (also known as “freemium”) have revolutionized the industry, first by helping to turn mobile games into the largest and most accessible segment of the market in less than a decade and, more recently, by ushering in a new wave of growth and creativity in the big screen console/PC/metaverse space. What was once a leak in the premium/paid pricing model is now a full-fledged flood of new gaming content coming to the big screen -- for free.

All video game business models are increasingly built around enticing players to make a financial transaction to unlock new game features, such as season passes, characters and items. Known as “live service” spending, this line item accounts for nearly 100% of the revenue for games like 

, and a meaningful chunk of the ongoing revenue from premium games like 

Big screen video game publishers on console and PC are soon going to find themselves in the same scenario that challenges mobile game companies: the fact that less than 5% of gamers actually spend any real money in the live-service game economy in their F2P games; the rest play completely for free.

Yet mobile games have figured out a way to collateralize these non-spending players in their freemium economies, through rewarded in-game video ads. In this model, a player watches a video ad and, in return, earns some sort of a valuable in-game item such as a boost, item or currency. Mobile games convert between 40% to 60% of their players into video ad watchers, meaning that they have largely figured out how to turn increments of 15 and 30 seconds of player attention into a form of sponsored game currency, while also helping keep those players engaged and on a relatively level playing field with those willing or able to pay a fee.

While there are other ways for video games to profit from in-game advertising, such as background billboards or integrated sponsorships, there is only one model that recognizes the player as a true contributor to the game economy, turning their time and attention into a valuable currency for them to “spend” on that paid in-game content they covet.

Once console and PC games developers are confident that they can provide a player-controlled ad experience commensurate in quality and creativity with their rich, immersive game experiences, they too will move to adopt this new form of sponsored currency. Expect increments of time and attention to be the next big payment type in these big screen F2P games and metaverse environments, because it will be the best way to engage and retain their savvy players.

 how PlayerWON® enhances the experience for F2P console and PC gamers while driving lifetime value and in-game spending for publishers.

I’d love to hear your thoughts. Leave me a comment at 

There is only one advertising model that recognizes players as true contributors to game economies, turning their time and attention into a valuable currency for them to “spend” on that paid in-game content they covet.

The New Currency for Video Games

 may be one of the most exciting developments in video games that I can remember in years. Why? Because with 

 and its metaverse, we now have a scalable way for brands to build their own player base of enthusiastic consumers who can immerse themselves in an experience that is uniquely interactive, entertaining and rewarding.

, “an advergame is a form of advertising in video games, in which the video game is developed by or in close collaboration with a corporate entity for purposes of advertising a brand-name product.”

The first wave took place circa 2000-2010 and was largely based on new 3D game engine platforms, notably Shockwave and the WildTangent Webdriver. The combination of broadly distributed, free 3D game engine platforms and a generation of gamers moving into leadership roles at ad agencies and brands provided the perfect storm for an explosion of free, high-quality, fun, brand-sponsored games that launched in the web browser.

My company at the time, WildTangent, dominated the market for high-production, console-quality advergames, with individual game budgets approaching $5 million, all funded by brands. A few of the more notable games during this period included 

. A full list of over 100 WildTangent games can be found 

Advergaming 1.0 fizzled out for a number of important reasons: First, the ROI for developers was sub-par and only got worse as brands like Nike set higher bars for what features they wanted in their games. For example, by the third year of our Nike football series, we had no way to meet the global multiplayer and production expectations of the iconic brand and their budget at the same time. It was a huge undertaking with no profit at the end of the day.

Secondly, it became readily apparent that making a fun game was only the start of the campaign, and that driving players to the advergame required a promotional budget that might be two to three times the actual production budget, a big hurdle for many brands and agencies to justify.

And thirdly, the rapid evolution of first downloadable, then social, and then finally mobile games meant that if you have a talented development studio, you would be far better off making your own hits to sell to consumers, with all the associated upsides.

 and other creator-lead metaverse platforms like 

 in particular, there exists a ready-made player base thirsting for great new content, essentially eliminating the marketing conundrum of 1.0. As proof, when I jumped into 

, day 2 of launch, there were 18,000 concurrent players, while over 3 million players had visited the game area already. These metaverse worlds are also dramatically reducing the complexity and costs of game production, including, in some cases, codeless development and drag and drop environments.

A skateboarding world is a wonderful launching pad for Vans to build lasting and deep connections with its target customer base. It’s a super popular youth activity and a game genre that is ripe for innovation, especially when it comes with a frictionless price of 

 for the gamer. I am sure we will soon see an explosion of high-quality game experiences brought to players for free, courtesy of brands on 

 and other emerging metaverse platforms that achieve scale and simplicity. Advergaming 2.0 has the potential to be infinitely scalable for the right brands and the right type of games.

 game is free, and players can earn a new free item each day, I do find it curious that players are encouraged to buy Vans items in the store to outfit their characters. This feels like a slippery slope of commercialism that might have been mandated by 

 or the developer, The Gang Stockholm, but nonetheless takes some of the benefit to players out of the concept. It will be important to see where this all plays out. If players feel compelled to spend Robux to update and improve their brand games… well, then the developers are really just making a skateboard game (or whatever) and bringing brands in to sponsor some free content. That’s been standard fare in video games for decades and may portend a quick fizzle for Advergaming 2.0. We shall see.

 enhances the experience for F2P console and PC gamers while driving lifetime value and in-game spending for publishers.


Thanks to the success of “Vans World,” we may soon see an explosion of high-quality game experiences brought to players for free, courtesy of brands, on metaverse platforms like Roblox, Fortnite and Minecraft. But will this evolution in advergaming succeed where the original model fizzled out?

Advergaming 2.0 & the Metaverse

There is a saying in the video game business: Players either have time or money, but not both. So far, game developers have done a pretty amazing job of extracting the value of money -- but not so much the value of time. Meanwhile, other media and entertainment services are sprinting ahead by excelling at converting their customers’ time and attention into a payment currency through user-friendly advertising models built on the power of “free.”

Take Spotify, for example: 250 million, or 70%, of its 360 million subscribers are on the service’s free ad-supported plan, instead of the $9.99 basic plan. Spotify thus provides a “payment” option for its listeners that converts engagement into money. A new 

, at $0.99 per month, provides even greater functionality for its ad-supported users. Brilliant!

Games, meanwhile, are by and large moving to a freemium model that provides unlimited access to full games completely free, but with additional content that largely must be purchased through “live service” economies. This free-to-play (F2P) model has been the norm in mobile games worldwide since 2011 and has been accelerating in console and PC games over the past few years -- most famously with the launch of 

in 2017 -- and will likely take hold in cloud gaming as well.

There are some giant franchises that will still be able to demand a premium upfront price from their loyal audiences for the foreseeable future, but in general, F2P will be the only sure way to launch new IP, garner large audiences and get the revenue flywheel spinning.

Inside the walls of most (if not all) game companies, however, 

is generally considered to be a scary proposition. Sure, it’s a major contributor to mobile game revenues. But the ads that exist in mobile games, while rewarding for players and largely their choice to watch or not, are often considered a necessary evil for developers and not a true enabler like the Spotify model.

And because of device-level ad targeting, the majority of advertisements in mobile games are ads from other mobile games, creating an arbitration market where the entire mobile game industry is both spending and receiving ad dollars all focused on acquiring the single-digit percentage of mobile game players that spend money in games to buy levels, packs, coins, items, etc. It’s essentially a treadmill business model that has become the norm for developers and that drives big market valuations for companies like Unity, ironSource and AppLovin, while contributing meaningfully to the revenues of Google, Facebook and Twitter.

So the best mobile games might convince 3-5% of their users to spend money in-game, and most are below a 2% spender level. Console and PC games will also face downward spending pressure as more and more games enter the F2P arena. The most successful F2P game of all time, 

, is headed in that direction already. In 2018, it converted 22% of its monthly active players into spenders and looks to be headed to 10% or below in 2021, according to the 

Console and PC developers worry that the introduction of a “watch to earn” type of ad model in big-screen games will turn players off and lead to a cheapening of the player journey in their high-production environments. They also have long memories of the overhyped dynamic in-game ad model of the 2010s that left them more than a bit skeptical that brands really want to invest their budgets against gamers. Finally, no F2P developer in the console and PC space that I have met with wants to recreate the less-than-optimal mobile ad experience in their larger-format games.

While game publishers and developers like to say that they are maniacal about thinking and acting player-first, 

 data shows differently. Our Reddit surveys of console and PC gamers across the top premium and F2P games reveal that over 77% of players welcome the opportunity to convert 15 or 30 seconds of their attention into valuable in-game content.

 players that we surveyed said they relish the opportunity to turn 15-30 seconds of their time into V-Bucks, skins and similar items. The same goes for gamers on the free version of Nvidia’s GeForce Now cloud gaming subscription service, which otherwise costs $8.83 per month. An overwhelming majority of those players, 89%, told us that they would like the ability to skip the waiting queue or earn extended free playtime in return for engaging with brand videos. Additionally, we have seen overwhelming positive social media sentiment from players of games that use the PlayerWON platform to provide a path to free rewards for their big screen, high-production console and PC games.

As with many contrarian business model developments, I suspect we will find the early adopters of a new “payment” type based on attention to be the more nimble game companies and services that tend to be more entrepreneurial and innovative. But fairly quickly, the idea of letting players choose how to pay for their content will become the industry standard, including for more risk-averse slow-following industry titans.

After all, any game developer that wants to survive and thrive really needs to give their players what they actually want – and what they want is more “free.” Just ask Spotify.

 how PlayerWON can bring TV advertising budgets to games in your portfolio.

In-game advertising is often considered to be a scary proposition. But surveys of console and PC gamers across the top premium and F2P games reveal that over 77% of players welcome the opportunity to convert 15 or 30 seconds of their attention into valuable in-game content and rewards.

Build Video Game Economies by Giving Players What They Want

Television has made brands into household names, 

 (and sites) and shaped how we think of ourselves and society for over 80 years. Despite all of the massive technological leaps and upheavals since the invention of television, video remains the ideal medium to tell stories, demonstrate your value and elicit a response from your target audience. Here’s why:

1. Sure, we’re spending enormous amounts of time noodling with our phones, engaging on social media and perhaps even occasionally stepping outside to enjoy some fresh air, decade after decade, television and video consumption has remained a cornerstone of most peoples’ lives and routines – averaging five hours per day for years. And during the pandemic year of 2020, daily viewership increased by 11-25 minutes across demographic groups, according to 

2. It isn’t “too expensive,” whatever that 

 means. Pricing is relative and, as always, you get what you pay for. But here’s one thing that’s steady: the fact that TV scales faster, and with a bigger impact, than pure play digital campaigns, generating five to seven times the brand lift. And initial investments of as little as $25,000 can provide a baseline for future 

3. Your brand needs TV more than it needs digital. Yes, really. Branding online is incredibly inefficient, and in terms of reach, it’s no contest: with national television, you can reach 71% of the U.S. population in just one day, 93% in a week and 98% in a month. Digital can’t do that for you, at any reasonable (or perhaps even unreasonable) price.

4. Along with reach comes scale. Massive scale from the combined power of linear TV and the rapidly expanding connected TV ecosystem. 

 that live plus time-shifted TV reached 80% of adults each week, with those viewers tuning in on average for over 30 hours weekly. Just as importantly, Nielsen’s monthly total TV and streaming snapshot, 

, reveals that over 74% of viewing in the U.S. occurs on video platforms that allow ads to be served, whether it’s traditional broadcast, cable or CTV.

5. Our references to “video” alongside “TV” aren’t just rhetorical parsley. Premium, TV-style 

 is now available. Games are the entertainment platform of choice for Gen Z, particularly men 18-34. It’s a huge potential customer base for brands that’s only growing: during the pandemic year of 2020, minutes spent playing video games daily increased by double digits, according to 

6. Put it all together – linear and streaming television channels and services plus games – and you have incredible access to mass audiences and the ability to 

your high-intent prospects whenever and wherever they’re consuming video content.

7. TV measurement is getting closer to its digital counterparts every day, providing marketers with insights on everything from awareness to conversion in near real-time. Is your TV campaign driving visits to your site, installs of your app or any other metrics that matter to your business? The answers are literally 

 for a detailed guide on how to unlock audiences on both linear and connected TV.

Want to see how Simulmedia can help you win with TV & video? 

Despite all of the massive technological leaps and upheavals over the past 80 years, TV remains the ideal medium for brands to tell their stories, demonstrate their value, sell products and elicit a response from their target audience. We explain the seven reasons why.

Games Are Ready For a Video Advertising Battle Royale

At virtually every NewFront presentation this year, networks talked about the fact that linear TV has lost 40% of its 18-49 rating points over the past four years. And, naturally, that their CTV and streaming media platforms were perfectly positioned as replacements in budgets of TV advertisers wanting to reach those younger-skewing audiences' premium, high-engagement video environments.

 generally, and ad-supported video streaming services specifically, are perfectly positioned to help advertisers fill that void. Same audiences; same kinds of content; viewed on same devices.

The short-term challenge with CTV today, as we all know, is that premium, fraud-free inventory is very scarce. Advertiser demand exceeds supply. The vast majority of streaming video time is on services like Netflix and Amazon Prime that carry no ads.

Fortunately, the media industry is working hard to fix that. Recent ad-supported streaming launches include Peacock, The Roku Channel, Discovery+ and an ad-supported tier of HBO Max.

But another branch of the media industry is also moving fast to fill this void. Keep a close eye on developments in the console-driven video game industry.

In parallel with video companies’ efforts to build ad-supported streaming platforms, video game publishers are beginning to introduce TV-like ads into console-driven gameplay to tap already massive audiences.

According to Morgan Stanley research, 310 million people globally play console-driven video games on their TVs and PCs every month and 124 million of them play daily for an average of two and a half hours per day -- and almost one-half of that group is in the U.S.

 regularly delivers movies, movie trailers and sponsored concerts to its players. Why shouldn’t other games offer their players permissioned, skippable 15- and 30-second TV 

Late last year, Brian Nowak of Morgan Stanley wrote that 

 on premium games could reach $2 billion per year in a few years, even if only 45% of gamers opt in.

For sure, linear TV is losing audience share among younger viewers, and for sure, ad-supported streaming services are going to capture a significant portion of those ad budgets over time.

But watch video games, too. They don’t just reach audiences under 40; they absolutely own them. As TV ads become mainstream within video game environments, the TV dollars will follow.

Can Ad-Supported Games Replace Lost TV Ratings?

Over a decade ago, as an executive at WildTangent (a pioneering games platform company), I helped create BrandBoost

, an advertising platform that provided brand marketers with the opportunity to reward gamers with complimentary gameplay and virtual items in return for brand engagement. It was the first of what became known as “watch to earn” ad products in the business, migrating to social games, massively multiplayer online games (MMOs) and virtual worlds to become the foundation for the booming mobile game ad business of today.

Now it’s time for advertising in video games to take another evolutionary leap forward.

. It’s the first engagement and monetization platform for free-to-play (F2P) PC and console games that provides players with opportunities to earn valuable in-game rewards in exchange for choosing to watch short, sponsored videos during downtime.

 began reimagining TV for marketers, brands and agencies back in 2008, we’re now doing the same for video games, which we see as well on the way to becoming 

. As Simulmedia’s CEO and founder Dave Morgan has said, “The introduction of advertising into these massive and fast-emerging media platforms will require managing a delicate balance centered on a single, simple and unbreakable precept: The gamer is in charge.”

To that end, with PlayerWON, gamers will decide whether they want to see brand videos or not. And if they do opt in and watch the video to completion, they’ll earn immediate and long-term rewards to use in the game (rewarded video ads).

We didn’t design PlayerWON like this just because we love games (though we do), but because it’s what 

 they wanted. We conducted extensive surveys of players of the most popular F2P games and found an overwhelming desire (77%) by gamers to have an option to earn free in-game content in exchange for watching 15- or 30-second advertisements.

And unlike the “watch and earn” ads that become standard in mobile F2P games, PlayerWON will deliver TV-quality brand advertisements – premium, fully immersive creative, as opposed to the app-install style ads that are typical in the mobile space.

But not only do gamers benefit from PlayerWON, it’s also a win for the game developers trying to keep them satisfied.

After all, with the massive proliferation and popularity of game titles, developers are competing for gamers’ time and attention more than ever before. By giving their players increased choices for how to “pay” for all the game content they’re creating, PlayerWON helps developers make the games more engaging for their fan base, deepening loyalty and reducing churn all while creating a new revenue stream for themselves.

Plus, given the fact that the majority of F2P players on PCs and consoles 

 spend any money in the live service area of those games, we’re providing a way for developers and publishers to help their loyal players get access to all the additional content that’s being created, while maintaining their games’ economics.

PlayerWON is already available in several PC and console games, and we’re happy to report that the metrics for actual player sentiment engagement and retention for viewers of rewarded video advertisements are nothing short of spectacular.

Having spent over two decades as a leader in this industry, I’m actually amazed that the PlayerWON model didn’t take off sooner. All of us at PlayerWON are thrilled that the network of games adopting our platform is expanding even as you read this.

Indeed, we expect our model to become the de facto new standard for console, PC and cross-platform games in the next 12 to 24 months.

Rewarded video game ads lets players earn valuable rewards in exchange for watching premium brand-sponsored videos on free-to-play consoles and PC gamers.

Rewarded Video Ads for Gamers

With 2021 already half over, it’s hard to believe how much we know now that we didn’t when the year began – about COVID, about our society, about our economy, about our leaders, and about ourselves. And the same holds true for the TV and video industry, which has experienced one change after another over the past six months, from the launch of new ad-supported platforms to crumbling cookies to mega-mergers.

But before we look ahead to where we’re collectively going, let’s take a beat to see where we are as Q2 comes to a close and summer heats up:

 We know innumerable habits have changed after a year-plus of pandemic living and working, but when it comes to television and video, consumption has actually remained steady and robust: the average time spent watching has been – and continues to be – over five hours per day. And even as some version of normal life resumes for most Americans, we don’t expect that behavior to decrease.

 The conventional wisdom about CTV is right in at least one respect: consumers are indeed spending more of their time watching streaming services and programming at the expense of linear television, and the trendline is only growing. But despite years of hype and headlines, cord-cutting is not yet king – linear is still by far the main source of viewing, time spent and ad inventory.

3. Linear Still Provides the Greatest Scale

 Although more streaming services are launching ad-supported tiers (welcome to the party, HBO Max!), linear still provides more than eight times the impression volume of CTV, giving advertisers their greatest opportunity to scale on both live and time-shifted television. We’re talking a difference of 

 We’ve been hearing how blockbuster video games rival – if not surpass – the biggest Hollywood hits in terms of popularity (and gross revenue) for eons now. But more importantly, what’s now indisputable is that gaming must be part of the consideration set for any advertiser trying to reach the 18-34 male demographic, who aren’t tuning in to linear or even CTV. The average gamer spends seven hours per week doing nothing but playing, with a hardcore subset spending that much time per day. In-game advertising packaged with gamer rewards will be key to marketing to this coveted consumer.

This article was adapted from a presentation given at the 

Adweek Elevate “TV and Video Measurement”

From the launch of new ad-supported platforms to crumbling cookies to mega-mergers, we look at the state of TV and video as we enter the second half of the year.

The State of TV and Video: 4 Things to Know at Mid-Year

Blogs: Linear & Connected TV News

TV advertising blog with the latest information, news, analysis and trends about linear television, CTV, media buying, measurement, and more.

Was Facebook’s announcement in June that it is introducing advertising into gameplay in its Oculus headset a surprise? It shouldn’t have been -- it makes total sense for Facebook to add ad support into video gaming on its emerging virtual reality platform considering the company derives 97% of its revenues from advertising.

Facebook cited its move as “a key part of ensuring we’re creating a self-sustaining platform that can support a variety of business models that unlock new types of content and audiences.”

Providently, Facebook made it clear that it wants the Oculus ad experience to be “built for people first,” so it will be enabling Oculus users to set ad preferences in its controls to block certain ads or certain advertisers. While it’s not as people-first as making the ads opt-in or rewarded, it is an important step in creating an ad experience with gamer-friendly elements.

My hope is that the user ad controls are just a first step, and that over time Facebook will truly 

put the advertising under the control of the players

: specifically, making ads opt-in, skippable and rewarded. Players who watch and interact with ads should be able to shape the experience and share in the revenue they create, not just be money-makers for the platform.

If there is anything I have learned from the time I have spent around the video game industry of late, it’s that everything revolves around the gamers, and that centricity is a good thing. Yes, an enormous, almost $200 billion annual industry has grown up around video gaming, but the industry is entirely dependent on keeping gamers at the center and in charge.

Gamers’ active interactions create and drive their media experiences. That’s nothing at all like most of our other media experiences -- from television viewers’ relatively passive consumption of a video stream, or a web searcher's selection from a set of prebuilt text links.

The video game ecosystem is special, and I am an enormous believer that commercial communication -- 

 -- will play a big part in it. I am hopeful that steps like Facebook’s to enable user controls over Oculus advertising will inevitably lead to giving greater and greater ad control to the gamers.

As noted professor and entrepreneur “SuperJoost,” Joost van Dreunen, reminded us regarding 

 into video games: “Ask not what games can do for you.”

In a discussion about the reshaping of the TV and video landscape, I was asked a question that I’m hearing more and more often: “Why are CTV ad rates so high?”

Because the question was posed by a super-smart industry leader, it presumed a well-known but not-much-discussed fact: that CTV ad rates are in fact high, both compared to other digital ads and to linear TV as well. The question was immediately followed up with: “Is it just a matter of supply and demand?”

As you’ve probably guessed, the follow-up question was the answer. CTV ad rates for premium publishers are typically priced from two to six times national linear TV ad rates, and the biggest reason is scarcity.

How is that possible, you ask? Isn’t everyone today watching streamed content? Shouldn’t there be tons of inventory?

Yes, lots of Americans today watch streamed content. Nielsen data tells us that 24% of TV viewing times is now on streamed programming. However, because the vast majority of that is on ad-free services -- Netflix, Amazon Prime, Disney+, etc. -- or ad-light services like Hulu and YouTube, that viewing is creating very little ad inventory.

In fact, Nielsen data and data from smart TVs tell us well under 10% of the ad viewing time on TV today is on streamed content. So, while streaming may have one-fourth of programming viewing time on TV, it only contributes a twenty-fifth of ad viewing time.

With much of the ad spend previously earmarked for the lost linear viewing time now looking for a new, premium video home, we have a classic situation of lots of money chasing a relatively small amount of CTV ad inventory.

Will this change soon? Probably not. While we’re seeing more ad-supported streaming (Peacock, Discovery+, HBO Max), it’s a question of human behavior change. And the ad-free services still have very attractive price points. Plus, Pew Research reminds us that 35% of American households still do not have fixed broadband at home. That’s 100 million people who can’t watch streamed video ads.

What can we do in the meantime? First, this is the time to be experimenting with CTV ads. They will be the future. Second, optimizing linear TV ad spend has never been more important. This is the time to stop “empty calorie” GRPs on TV and focus on more impactful -- and, more expensive -- optimized TV ad delivery. It is still well below the price of CTV and has a lot more scale.

Third, watch out for fraud. As we learned in the early days of mobile advertising, an imbalance of supply and demand is quickly filled with fraud and bots. We also know that it's not unusual for 40% of programmatic CTV buys to be fraudulent, which is why those rates are relatively cheap. Thus, buying directly from publishers like NBCU/Peacock, Hulu, A&E or companies with direct, transparent relationships with publishers like Roku is the best way to stay fraud-free.

Finally, this is also the time to be looking where premium video ad inventory may be opening up down the road, particularly in places like video gaming. As Netflix CEO Reed Hastings said at one of his company’s earnings calls, "We earn consumer screen time, both mobile and television, away from a very broad set of competitors. We compete with (and lose to) 

CTV ad rates may never normalize with linear TV, certainly not until gamer-friendly video advertising becomes an acceptable and valuable component of video games like 

Connected TV ad rates for premium publishers are typically priced from two to six times that of national linear TV ad rates, and the biggest reason is scarcity. How is that possible, you ask? Isn’t everyone today watching streamed content? Shouldn’t there be tons of inventory? Well... yes and no.

Why CTV Ad Rates Have Posed a Costly Challenge

Companies like Facebook and Netflix must put in-game advertising under the control of the players: specifically, making ads opt-in, skippable and rewarded. Players who watch and interact with ads should be able to shape the experience and share in the revenue they create, not just be money-makers for the platform.

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Video Game Ad Experiences Must Put Players in Control