Wednesday, September 16, 2009

In-game Advertising - Next Big Thing in Digital Marketing

Video gaming is expanding in popularity across Asia Pacific and so is the practice of in-game advertising, as its offering available to marketers expands. In-game advertising (IGA) refers to the use of computer and video games as a medium in which to deliver advertising.

Companies like Google and Microsoft have already joined the bandwagon and are offering interesting propositions of in-game advertising. Microsoft, which bought Massive in May 2006, is a leader in placing dynamic advertising in games. The market is filled with many smaller players, such as a company called Double Fusion. But it's also attracting other big technology names, including Google, which bought AdScape Media for $23 million in 2007. The new ad format is provided by Massive Inc., a wholly owned subsidiary of Microsoft. In-game advertising is available through Microsoft Advertising across the region and campaigns are currently running in Korea, Australia, New Zealand, Singapore and Hong Kong.

Microsoft showed off its Massive advertising platform in Sep 2007. Flashing high above 43rd Street were clips from a series of games that showed avatars stopping to view a movie trailer for the Hollywood blockbuster 300. A Toyota advertisement also lined the outfield wall in a baseball game that's played on Microsoft's Xbox game console.

"The idea is to have advertisements appear and fit in naturally to the games just as they would in real life. But these advertisements are also dynamic. So the ads can be updated or changed by the advertiser at any time." -- Jay Sampson, VP, North American and Asia Pacific sales for Massive, Microsoft's in-game advertising marketplace.

"In-game advertising provider Massive Inc., acquired by Microsoft in 2006, has signed up or renewed contracts with several publishers, notably EA, Blizzard Entertainment, THQ, and Activision. Eagerly anticipated games like Need for Speed: Shift will feature the technology that continuously collects 'anonymous' information about users, sends them to the Massive database for analysis, and downloads advertisements to be shown in the game.

"The games industry sees in-game advertising as a promising new revenue stream. Video Games with revenue expected to break the $10 billion mark this year and garner over $300 million in advertising investment, the gaming industry represents a strong marketing opportunity.

Video gaming offers the opportunity to connect with traditionally difficult-to-reach consumers-- young affluent males. It attains the fourth-highest reach (after TV, internet and radio) against teens and heavy gamers. Not only can in-game advertising efficiently reach key consumers, it can also reach them while they are actively engaged with the medium.

In order to maximize the value of in-game communication, several studies have examined the role of brands within video games and players' attitudes towards gaming and in-game communication. The goal has been to learn how best to use games to create meaningful relationships between brands and consumers.

The results are a set of insights and guidelines that will help deliver more effective in-game communication.”
-- Fran Kennish, Senior Partner, Director of Strategic Planning at MEC MediaLab

Industry figures suggest that such advertisement could increase profits for publishers by an extra $1 to $2 per game unit sold - a significant increase over the current $5 to $6 profit per unit.

Publishers see this revenue stream as a way to offset growing game development costs, which are estimated to rise up to $20 million per title for a 7th generation console. Some developers believe that the extra revenue will reduce the risk involved in a game development project, allowing them to experiment with more innovative game-play and new ideas.

In-game advertising has even replaced purchase price as a revenue model for some mobile phone games. In 2005, spending on in-game advertising was US $56 million, and this figure is estimated to grow to $1.8 billion by 2010 according to Massive Incorporated, although Yankee Group gives a lower estimate at $732 million.

Yankee Group revealed that the global in-game advertising market, which generated $77.7 million globally in 2006, continues to develop at an exponential rate. By 2011, worldwide in-game advertising expenditures (fixed product placement/static ads and dynamic ads) will grow to $971.3 million.

"As ubiquitous connectivity continues to reshape the media and entertainment landscape, media fragmentation and clutter are a result, making traditional advertising channels less effective. Advertisers are increasingly finding in-game advertising to be a greater investment value because of the variety of opportunities that exist in and around games. Video games represent an 'above the line' opportunity, which means that video games should be used to build brands and not as a call to action that distracts from the game play." - Michael Goodman, Director, Digital Entertainment, Yankee Group's Consumer Research Group

In-game advertising is seen by some in the games industry as offering a new revenue stream, allowing developers to offset growing development costs and to take more risks in game play. Advertisers see in-game advertising as a prime way to target the male 18-34 demographic, who are increasingly neglecting television in favor of computer and video games.

However, some gamers see these moves as greedy and invasive, dubbing in-game advertising software as spyware. This view was demonstrated by the backlash against Electronic Arts' Battlefield 2142 which contained in-game advertisements from IGA Worldwide. This has not, however, stopped traditional firms such as Nielsen Media Research branching out into the in-game advertising space, by announcing a new video games ratings service (similar to Nielsen ratings) called GamePlay Metrics to serve in-game advertisers.

According to a recent news in Media Asia, McDonald's becomes Microsoft's first in-game advertiser in Hong Kong -- McDonald's is to set to unveil its first in-game advertising campaign for the Hong Kong market in conjunction with Microsoft Advertising. The initiative will feature a series of virtual 'McDelivery' billboards in five leading video games on the PC and Xbox 360 platforms. The games include PES 2009, The Need for Speed, Undercover, Rainbow Six: Las Vegas 2, NBA Live 2009 and Burnout: Paradise.

“There is a growing opportunity for in-game advertising because it is the only platform where people are completely immersed in one activity. When gamers play a game, they tend to only play the game. We don’t see trends that indicate they do much multi-tasking which would split their attention away from the game.” -- Richard Dunmall, Managing Director, Microsoft Advertising Asia Pacific

“Computer and online games are where young man and women often hang out with their friends these days. The in-game advertsing platform is suitable for advertisers like fast-food chains, sports and fashion brands alike who are looking to target the demographic using gaming. The in-game advertising is imbedded in the game environment, and should be an extension of advertisers’ existing marketing campaigns, as part of the media channels across multiple platforms". -- Kenneth Andrew, Marketing Director, Greater Asia Pacific, Microsoft Advertising

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