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    As metaverse hype subsides, in-game advertising companies are focusing on their gaming roots

    This article is part of a limited editorial series, called The 2023 Notebook, and is designed to be a guide to marketing and media buying in the new year. Explore the series here.

    Over the past year, in-game advertising companies have hitched their cart to the metaverse. But as the cold of crypto winter seeps in, brands are becoming increasingly skeptical about the concept — and in-game advertising companies are starting to back away from it accordingly.

    The connections between in-game advertising and the metaverse were on full display at the Interactive Advertising Bureau’s PlayFronts event in April. Many of the presenters were intrinsic in-game ad vendors, and with the IAB on the cusp of releasing updated measurement guidelines for in-game advertising, they were ready to assert their product’s role as the base layer of programmatic advertising inside the virtual universe to come.

    “We’re still super bullish in the long term,” said Sam Huber, whose company, LandVault, pivoted from in-game advertising to the production of virtual experiences in June, only two months after Huber’s metaverse-focused presentation at IAB PlayFronts. “Obviously, there is a bit of a crypto winter right now, but it doesn’t really affect us, because most of the brands that are entering the metaverse now are not doing it for crypto reasons.”

    Not all in-game advertisers share Huber’s bullishness about the metaverse. The in-game advertising company Frameplay kept the metaverse at arms’ length during its own PlayFronts presentation, wary of playing into marketers’ misconceptions about the space. In the months since, the company has occasionally mentioned the metaverse in some of its forward-facing messaging, but it has primarily leaned on its roots in gaming, a more tried-and-true marketing channel.

    “We never have gone and said, ‘hey, do you all your metaverse stuff here,’ because that would just be inaccurate,” said Frameplay CEO Jonathon Troughton. “If you said you wanted to go into Roblox, you could argue maybe that’s a metaverse-like experience, but I certainly don’t think that necessarily is what people have been promised.”

    Part of the issue is indeed that marketers’ expectations about the metaverse often don’t line up with the reality on the ground. Hollywood films such as “Ready Player One” have sketched out a vision for a fully immersive and interoperable virtual world, and as the metaverse picked up steam in early 2022, in-game advertisers did not necessarily go to great lengths to clear up their association with this tantalizing concept.

    “Advertisers and brands are a bit misled,” said Natalia Vasilyeva, evp of marketing and strategy for the in-game advertising company Anzu. “They’re intrigued, and they’re excited about the metaverse, but they don’t know where to get started — and there are companies that say, ‘yeah, we are in the metaverse. I’m part of the metaverse.’”

    Experimental channels in a recession

    The crypto winter has acted as a preview for a potential economic recession, which could further reduce brands’ interest in activating in the relatively experimental metaverse space. In contrast, gaming has come into its own as a marketing channel, thanks to both the explosion of gaming during the COVID-19 pandemic and developments such as the IAB’s new measurement guidelines.

    “When recessions hit, the first thing that gets caught is always marketing budgets,” said Jude O’Connor, CRO of the in-game ad company Bidstack. “So when there’s less money to transact, a brand tends to have to lean into their more proven strategies. The things that kind of fall by the wayside are the bigger picture ideas, the checkbox things.”

    In-game ad companies’ decreased focus on the metaverse in the back half of 2022 was more of a cooling period than a full retreat from the concept. The in-game advertisers that Digiday spoke to for this report were unified in their belief that the metaverse, if it happens, will flow from gaming — they’re just less confident that both brands and consumers are as interested in the current state of the metaverse as the hype would lead some to believe.

    As in-game advertisers enter 2023, it feels inevitable that they will eventually return to the metaverse — but for now, gaming is king.

    “I think gaming is, ultimately, the core of the metaverse, and is what any good media agency partner is pushing brands towards,” said Sarah Salter, global head of innovation at the WPP agency Wavemaker. “A safer, more understood space, where this is scale and opportunity.”

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