In mobile game advertising, failure‐depicting advertisements, which intentionally showcase unsuccessful gameplay scenarios, have emerged as an unexpectedly effective promotional strategy. This study examines the psychological mechanisms underlying the effectiveness of fail advertisements, with particular attention to the emotional response of schadenfreude and the influence of individual differences in competitiveness. Drawing on prior research on schadenfreude and Trait Activation Theory, we propose that schadenfreude experienced in response to fail ads is positively related to individual competitiveness and is, in turn, associated with higher download intention. We conducted two vignette‐based experimental studies to test this theoretical framework. Study 1 (N = 241) demonstrates that hypercompetitiveness predicts schadenfreude, which in turn impacts download intention, while general competitiveness only influences schadenfreude indirectly through hypercompetitiveness. Study 2 (N = 247) extends these findings by showing that perceived game difficulty moderates the experience of schadenfreude, such that failures occurring in reasonably challenging scenarios are associated with greater schadenfreude than those in extremely difficult ones. These findings contribute to the literature on the impact of schadenfreude and individual competitiveness on consumer responses. Marketers can enhance ad effectiveness by calibrating difficulty and targeting hypercompetitive consumers with fail‐based narratives.