Industry Forecasts, Industry News

The Future of Mobile Game Ads in China

My Learnings from China Joy

Last week I attended a huge conference in Shanghai called China Joy. It was fascinating and awesome and like everything in China it was really, really big, but I’m not here to talk to you about that.Your Ad Here Icon

One of the things that took me by surprise was that games in China don’t have ads in them. I mean, that’s almost embarrassing to admit. How did I not know such a thing about an industry I live and breath? And…if I missed something like this, what else did I miss about China?

Where are the Mobile Ads?

You might think that Chinese users are less receptive to ads, so game designers choose not to include them in favor of superior user experience. However, the reality is a bit different. It is not the game publishers choice not to include ads, but actually the App Stores in China that object to ads. There are roughly 300 App Stores in China, so users can install apps from multiple stores. This creates quite a competitive atmosphere between the various App Stores, so they do everything in their power to prevent users from downloading games from other stores. They want to own the user exclusively and that can’t be done with the way ads are managed today.

Mobile game advertising in China could be a huge thing. Mobile game advertising is already worth about $5B in thChinese Appstorese US. Think about how big it could be in China. Maybe it would be smaller, but we are looking at a billion dollar opportunity at the very least. In addition, unlike in other parts of the world, the biggest advertising company, Facebook, doesn’t exist. While this could potentially be a huge opportunity for ad networks, there are some pretty big challenges to get there.

What the Future Will Hold

My estimation is that by the end of 2016, there will be ads in mobile games in China. The more innovative ad networks, will find a way to work with the App Stores to offer ads inside games while respecting the needs of such App Stores. One way this could happen is via white labeling. Basically, the stores will take the part of the ad network by leveraging advertising technology from ad-networks outside of China. For the App Stores it seems like the best move. They will make additional revenue while keeping their game publishers happy. However, there is one problem, ad networks tend to be better when they are bigger. There are advantages to scale for both sides of the network. For advertisers, bigger networks means they have to deal with less interfaces and get more reach for their ads. For publishers, scale means better fill rates and more ad diversity.

Therefore, I’m anticipating that soon after, the App Stores will grow their own networks. Therefore, three types of services will evolve:

  • DSPs focusing on aggregating all the App Stores into a single interface for advertisers.
  • Network-to-network marketplace between the App Stores.
  • Publisher side dashboards allowing publishers to monitor and manage their ad monetization across different App Stores while still respecting the boundaries.

These are, of course, my opinions and estimations. I’ll be monitoring this market closely to see if I was right. If you have other thoughts about how this market will evolve, feel free to share.

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