Why one of the largest Web3 game publishers sees in-game advertising as a path forward

In late July, the game launched its first intrinsic in-game advertising offering, with clickable ads located in natural in-game locations such as billboards and banners. So far, the experiment appears to be showing some promising results: one in-game billboard achieved a claimed conversion rate of over 20 percent, with over 50 of the 237 users who clicked within the ad’s first two weeks purchasing some of the crypto token advertised. 

Although the Web3 gaming space is smaller than it once was following the cold of last year’s crypto winter, millions of users still play blockchain games on a regular basis, making the Web3 community a potential gold mine for advertising looking to reach a young, technologically literate audience. 

Thus far, however, all of the advertisers who have participated in Pixels’ in-game ad test are other blockchain game publishers or cryptocurrency companies — which makes sense, given the game’s crypto-native audience. However, the game’s publisher believes that the opportunity to advertise to a Web3 audience could eventually be attractive to brands in other sectors, such as gambling. 

“It’s the same advertisers that are advertising in free-to-play games, like the social casino category. This is a group of users who are very high-LTV; these users have spent hundreds of dollars on digital profile pictures and avatars in games,” said Pixels founder Luke Barwikowski. “It’s a super digital-native crowd that likes spending on digital experiences — not just Web3.”

At the moment, the presence of intrinsic in-game advertising inside Web3 games is still dwarfed by brands’ interest in custom-branded game worlds inside blockchain metaverse platforms. The prominent platform The Sandbox, for example, is focused on this type of bespoke brand activation and does not currently offer intrinsic in-game ads.

“What Pixels is doing is buying a known recipe/model for revenue generation that works once you reach a certain tipping point of audience, but might degrade the overall user experience if they abuse it,” said The Sandbox COO Sebastien Borget. “Let’s monitor over time how the CPM will follow, because when CPMs start to decrease, you have two ways to resolve that: either you’re going to put in more ads, or you need to work with a team who actually have a great supply of cool advertisers.”

One reason why many Web3 games have not yet implemented clickable intrinsic ads is because those ads inherently risk taking players away from the game. Even in the traditional gaming space, where intrinsic ads are more commonplace, most in-game ads are not clickable.

“Obviously, the stats look great — but did people come back into the game after it?” said Nina Mackie, co-founder of the agency WeGame2. “If you click out of the game, the majority of developers and publishers don’t like it.”

Whether Pixels manages to scale up its ad business, the addition of intrinsic in-game ads is already providing benefits to the game’s users, who are able to harvest revenue from billboards placed inside their virtual plots of land. For Web3 publishers, highlighting the benefits of blockchain tech and digital land ownership could be reason enough to integrate in-game ads into their titles.

“It’s the landowners who are the publishers, right?” said Quinn Campbell, whose ad tech company PTAL helped set up Pixels’ virtual ads. “$100 per land where it runs isn’t really anything to Luke — but to these landowners, it’s 33 percent annual yield on their NFTs.”