Playable Ads + Cloud Gaming

Playable Ads: Utilizing the Cloud

Cloud gaming has received significant negative publicity since the closure of Google Stadia, calling to attention the vertical’s inability to monetize the proposed benefits of cloud gaming. While cloud gaming promised multi-platform accessibility, negligible load times, and access to more powerful computers, the lack of consumer traction brought these claims under warranted scrutiny. Critics suggested the promises of cloud gaming were either not attainable with current technology, too expensive to operate, or lacked significant benefit over the status quo in gaming.

We have written before (Konvoy: The Invisible Arcade) about how traditional cloud gaming, where users are playing full games on a cloud server instead of locally, is likely to be dominated by large players that own the entire tech stack, including distribution, cloud infrastructure, and content. In short, the ability for small players to enter this market is largely stifled by the costs of infrastructure, access to content, and a lack of credibility in discussions with major publishers who are reluctant to commit to a platform that may not be around in a few years.

Despite the buzz fading away from the cloud gaming space and the uphill battle for any aspiring new entrant (i.e. early-stage companies), many companies remain undeterred and continue to build in the background. Some of these early stage entrants are taking unique approaches that utilize the technology and navigate around its pitfalls. In our view, we believe one of the most interesting use cases is cloud-streamed playable advertisements.

The Current State Of Playable Ads

A playable ad is an interactive advertisement that lets users sample a product, often a game, by engaging directly with the content before deciding to download or purchase it. You can find a few examples here. 

However, as novel as this idea might sound, it is important to note that playable ads are not a new concept. Agawi, an AdTech company acquired by Google in 2014, had pioneered the “try before you buy” concept as early as 2013 (Game Developer). Eventually, companies like Facebook, Vungle, Ironsource, Zynga and others began to offer these capabilities in their advertising campaigns.

Playable ads have performed quite well relative to other ad formats. A recent report by Liftoff showed that playable ads within games have the lowest CPI when compared to other formats (see chart below), largely due to reducing the time from when the user is exposed to when they are playing the game.

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Despite the impressive metrics, only 2.17% of mobile ads were playable in Q1 2023 (Pocket Gamer), which is likely due to the file size requirements imposed by the ad companies and the number of games that are conducive to this medium:

1. File Size Requirements: The current implementation of these ads is more akin to an illusion of a game than an actual game. These ads typically fall into 2 categories:1) interactive videos and 2) HTML5 playable ads. Interactive videos are short videos that a developer strings together to create the illusion of playing the game, these tend to be less dynamic and less engaging. HTML5 playable ads are a re-creation of the game in HTML5, not derived from the game's native code (Starloop Studios).

Both of these solutions drastically reduce the file size of the game snippet, which is a requirement of the advertising companies that are placing these ads. These file size requirements range from 2MB to 5MB (for context, that is roughly the size of a 1 min low resolution video). This limitation on file size inherently forces game developers to get very creative with the way they present a bite-sized version of their game. The downside of this playable format is that it can be quite expensive and time-intensive relative to other ad formats or traditional game trailer ads that we often see on TV or streaming platforms.

2. Style of Gameplay: Not all games are conducive to this style of playable ads. Games that require complex controls can be frustrating to play without a proper tutorial, story based games and RPGs often require a sense of immersion that can not be captured in a two minute demo, and some strategy games require hours just to learn how the in-game mechanics work in the first place (just to name a few).

The Future Of Playable Ads:

Cloud-streamed playable ads are a potentially unique and innovative way to utilize cloud technology while avoiding the traditional pitfalls, and also solve the unique problems with today's playable ads.

• Creating Better Playable Ads: Compared to existing playable ads, cloud-streamed playable ads allow for larger file sizes because the games will be stored and processed on the cloud. Streaming also allows developers to utilize their native game code instead of recreating a new game which can drastically reduce the price of development. This is likely to lead to better reception and retention due to the fact that the ad will feel identical to the actual gameplay.
• Benefiting From Cloud While Avoiding Pitfalls: Comparing this use case to the traditional cloud streaming services, playable ads also benefit from multi-platform accessibility, negligible load times, and access to powerful PCs, but do not have to account for peak server times, license IP, or encourage players to switch from their native platforms. Using cloud to embed a game in an app allows players to quickly try a game and provides an experience that they would not receive anywhere else.

Cloud-streamed playable ads are not going to stop at mobile games, and they may not even start there. Microsoft's xCloud is currently using cloud streaming to allow users to play games across multiple platforms and it would be an easy transition to market new games using cloud streamed playable ads across these devices. This format will likely find its greatest success initially in PC formats, then move into console, and lastly into mobile. Cloud-streamed playable ads are likely to increase conversion given how closely the ad experience reflects the experience of playing the actual game, and could even increase retention in the existing app because they are more fun to engage with compared to traditional ads. 

Additionally, cloud-streamed ads can help with discovery by allowing players to quickly try the thousands of games that are released each year and could even bring non-gamers into the ecosystem by placing games in the places that they spend time (e.g. a niche rock climbing game on the REI website or even on TikTok).

Takeaway: There are still hurdles with cloud gaming - latency and cost still remain at the top of the list - but as new use cases emerge, problems such as familiarizing players with the new format, deciding who is responsible for the server costs, and helping developers find seamless ways to splice their game for smaller bite-sized playables will begin to emerge. While it will remain difficult for small players to compete on traditional cloud streaming offerings, we believe the technology may find effective use cases in reducing the friction to try new games via playable ads on the cloud.