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IN-GAME ADVERTISING

Sector Spotlight
Tim Ingham
Feb 21 2008

In-game advertising is rapidly becoming one of the most lucrative sectors in the games industry’s history – and it is even threatening to change the shape of the traditional business model. But what does the future hold for those companies that are currently running the show? Tim Ingham reports…

When mcvuk.com reported that Sony’s Howard Stringer and Activision’s Bobby Kotick had questioned whether video games could ever be fully sustained by in-game advertising last month, many saw it as a slight on the state of the market.

But the fact two globally leading bosses were willing to talk openly about the possibility of in-game ads changing the very financial shape of our industry shows just how much the sector has moved on – and how big a consideration it is set to be in the future.

Media Week’s deputy editor Colin Grimshaw certainly believes that future is rosy for the sector – and that its battle now isn’t with itself, but with more traditional methods of media marketing.

We’re all used to seeing product placement in the latest Will Smith flick or favourite Friends episode, but Grimshaw says that the value of this method for advertisers could be set to be outstripped by video games.

“Brand placement into entertainment offers an unobtrusive way of subliminal product association with a happy, target consumer experience, as TV and cinema have been keen to exploit,” he explains.

“The problem is that its very unobtrusiveness is its drawback. The product has to have inherent brand fame to get viewer recognition, yet that fame may also render the placement anonymous in the viewing experience.”

“But what if the brand was integral to the entertainment? Product placement restrictions prevent that in TV, but there are no such barriers in video games.”
Despite this potential, however, only a handful of companies have developed their own in-game ad networks – building up a hard-to-beat reputation for understanding a complicated media that latecomers to the market may have trouble besting in years to come.

Surprisingly, the UK’s top advertising agencies have been reticent to dive into the sector, preferring to stick with tried and tested marketing outlets – and resulting in a very close knit community of marketing companies and in-game advertising network providers.

“There are currently only a small number of other networks that exist and whilst the market for in-game advertising supports more than one network, any growth in the number of these will inevitably causes the audience to be spread more thinly,” explains Microsoft-owned Massive’s regional EMEA sales manager Tom Hosking.

“Any newer networks may find it a struggle to get the critical mass in quality gaming environments that advertisers need, which explains why the bigger networks, such as Massive, dominate the sector.”

Double Fusion European MD Frank Sagnier adds: “There are a few reasons the sector is ‘owned’ by a small number of companies. First, serving ads in games is quite complex. You need technology, infrastructure and an integrations team that knows how to work with developers and publishers and knows how to best map advertising placements in different sorts of titles, and a sales force with a keen understanding of the gaming space. Only a select few companies can provide this end-to-end solution.”

The jewel in the sector’s crown is the thing that all advertisers are looking for – the gaming audience. As anyone working within the industry can attest, the bulk of modern day consumers are an advertising man’s wet dream – media-savvy young males with plenty of disposable income. And these consumers not only engage with video games passively – they take part in the world in front of them.
But although it looks on paper like TV advertising has a great deal to worry about, Media Week’s Grimshaw believes it could eventually stand to gain a great deal – as entertainment media convergence shows no signs of slowing.

“TV is the medium most threatened by gaming – three-quarters of gamers say they watch less TV as a result of time spent gaming,” he observes. “Yet, TV also has, potentially, the most to gain. As the computer morphs into the TV set and gaming moves into the living room, opportunities for TV to tap into gaming abound. How much fun could boy racers have pitting themselves against Lewis Hamilton in a televised Formula 1 race via a game enhancement?”

It all sounds like a pretty spectacular situation for those that own in-game ad networks – not least because recent estimates valued the sector at a whopping $400 million.
However, CEO of IGA Ed Bartlett can spot one potential snag – and it’s very close to home.

“It might be a controversial answer but I would say our biggest challenge is actually the attitude of the games industry,” he says. “If people don’t start embracing the opportunity more effectively, above and beyond simply banking the royalty cheque each month, there is a very real possibility that advertisers will choose to focus their attentions, and budgets, on the myriad other new media opportunities like mobile, social networking and IPTV. And once that level of strategic decision is made en masse, no amount of back-pedalling will turn it back around.”

Double Fusion’s Sagnier agrees that there’s more that publishers and developers could be doing to take advantage of the potential of the sector:
“The enlightened publishers understand advertising is a way to increase your audience as well as generating new revenue streams. In-game advertising offers a huge opportunity to broaden the appeal of IP.

“Whether the publisher business model is retail, micro transaction, subscription or free-to-play; advertising, appropriately executed, is playing a key role in helping enable better, less costly games, and new ways to touch existing and new consumers.”

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