Publishers, agencies, developers, and entrepreneurs gathered this week to discuss the future of advertising--and the role games are likely to play.
SAN FRANCISCO--With young men, the group advertisers most lust after, watching less and less television, a growing number of marketers are turning to video games as a way to reach the lucrative demographic.
They're not the only ones jumping on the bandwagon. As evidence mounts that game players are reacting favorably to in-game ads, publishers are also finding that the medium offers new ways to offset skyrocketing development costs.
"There's a lot of background noise and data to suggest that traditional media...are in a long-term decline," Mitchell Davis, CEO of Massive, said at the Advertising in Games West conference in San Francisco on Thursday. Some 200 people packed the gathering to hear experts on the topic talk about how big a market in-game ads will be, and the ways to ensure those ads best reach their targets. Massive has built one of the largest ads in games networks, "not only in a reach and media perspective, but also in advertising dollars."
While game advertising is only a $200 million business this year, most experts estimate that number will rise dramatically over the next few years. By 2007, in-game ads are expected to be worth nearly $400 million, more than $500 million by 2009 and close to $1 billion by 2010. The Yankee Group reports that cable TV ad revenues are around $22 billion, and Internet ad revenues are around $12 billion.
In-game ads are taking many shapes. Most commonly, they're simple billboards for things such as movies, soda, cars and the like embedded in stand-alone titles. But now there are also interactive ads placed in online games, including full-motion video, strategically placed vending machines, branded cars and an endless stream of other options. Some games are even entirely branded marketing vehicles paid for by advertisers.
According to Davis, who delivered the conference keynote, the key to succeeding with in-game ads is making them unobtrusive, realistic and ensure that they don't interrupt game play.
"What we've seen in our research is that 90 percent of gamers like advertising in games," Davis said, "for the simple reason that it adds realism into the games."
While that statement might draw chuckles from some, such ad placement is exploding. And that, according to Nielsen Media Research, is partly due to the fact that video games have drawn away 7 percent of 18- to 24-year-old males from television.
Not everyone thinks outfits like Massive have the best interests of video games at heart.
Ian Bogost, an expert on games and an associate professor at Georgia Institute of Technology, recently slammed Massive.
"Massive understands neither effective advertising nor games, and their principal goal is to make money by providing a deluded service to the deluded advertising industry," Bogost wrote in a column on Water Cooler Games, a Web site for game enthusiasts. "Their plan is evil genius: provide a media buying infrastructure identical to that of broadcast and outdoor for an advertising industry in crisis over degrading television advertising...Nothing could be more destructive to the ad or the game."
Still, for advertisers who depend on having their message reach as many people as possible, the fact that valuable eyeballs are glued to games instead of watching television is a wake-up call.
"You're starting to see big advertisers pull money out of television," said Michael Goodman, a senior analyst at the Yankee Group. "Proctor & Gamble announced...that they are pulling money out of TV advertising because they felt they weren't getting enough bang for their bucks, and they are looking at video games as a place where they can."
Goodman added that at E3, the video game industry's giant annual trade show in Los Angeles, Proctor & Gamble had been on hand and had asked him about the medium.
"That really floored me," he said.
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