In a previous article, we examined the practice of advertising real-world products within the virtual world of video games, studying both its origins and its implications for the future of marketing. This time out, let’s take a look at some of the most noteworthy examples of this form of advertising.

Two Distinct Forms

As video games have become more sophisticated, the range of options they present for advertisers has expanded considerably. In the early days of video games, any advertising they contained was limited by the available technology of the time. Gaming technology (like all forms of media) has taken massive strides in the last few decades and now presents many novel marketing opportunities.

The current gaming landscape is comprised of two dominant forms: platform games and persistent-world massively multiplayer online games (MMOs). Though platform games have been around since the Atari days, it is only with the advent of gaming consoles with internet connectivity (such as Xbox 360 and PS3) that in-game advertising in this format has become truly viable. Developers now have the ability to manipulate advertising that appears in a game so that the ads can be altered even after the consumer has purchased the game. A notable example is the case of the game Burnout Paradise, in which then-Presidential candidate Barack Obama appeared on billboards within the game. This time-sensitive messaging was only possible because of developers’ ability to alter in-game content on the fly. This has been a game-changer (pun definitely intended) for the industry, as companies now vie for the prime real estate of advertising space in a newly-released game. The older the game, the less valuable the opportunity to advertise within it as playership falls off dramatically in the weeks and months after release.

The real estate analogy is even more apt when it comes to the other main form of video games:  MMOs. Though many of these games, such as the wildly popular World of Warcraft, take place in fantasy settings where real-world advertisements would be ridiculously out of place, some take place in the modern world, and advertising real-world products in environments such as these actually help facilitate the illusion of reality within these games. The added benefit of advertising within this space is that, unlike the platform games previously discussed, there is a much longer shelf life for MMOs—indeed, many of these game worlds have been active for over a decade and show no signs of decline. Another consideration is that in the static, linear worlds of platform games, a player might pass any given advertisement only once in a one-time effort to get from Point A to Point B, never to see it again. In MMOs, the same player, playing a character he or she has played consistently for months, might pass the same advertisement literally hundreds of times while traversing the in-game universe. That’s a heck of an ROI for the advertisers using this medium!

An extreme example of this MMO model is the game SecondLife. Positioned as less a game in the traditional sense than it is an alternate on-line existence, SecondLife mimics the real world down to the smallest, most mundane details. A character in SecondLife may own property, buy furniture and clothing (often from real-world businesses that appear in the game, such as American Apparel and Sears), and otherwise engage in activities that could yield real-world benefits for the companies appearing in the game. Microtransactions within these games, whereby players would buy clothing and products for their characters, might even result in virtual products being purchased for real-world currency.  

At least, that was the way it was supposed to work...  

In the final article in this series, we’ll take a look at gamer reaction to advertisements in the game space and where this model has worked and where it has failed, and hopefully draw some conclusions about the best possible future for this form of marketing.

The current media landscape has become a very crowded, noisy place, and advertisers are called upon to find new, innovative ways to get their message out to their intended audience.  In-game advertising – the strategy of placing marketing messaging within the virtual world of video games – has recently emerged as a highly viable method by which advertisers can get products in front of the ever-desirable male 18-34 demographic. TV viewership among this demo continues to decline dramatically, and many of those lost viewers are turning off the DVR in favor of video games.  There are now 132 million teen and adult gamers in the United States alone, and nearly half of all households own at least one game console.  

In 2006, Microsoft purchased Massive Incorporated, a pioneer in the realm of in-game advertising.  Since that time, spending on in-game advertising has grown exponentially and in 2009, Massive reported double-digit year-on-year revenue growth.  The company has predicted that spending on in-game advertising will top $1 billion by 2014 (third-party estimates vary).  Clearly, this is a trend in advertising that cannot be ignored. 

Tentative First Steps

In-game advertising was first attempted in the earliest days of video games, but only found its footing with the development of game consoles that not only demonstrated massive market penetration, but also packed the hardware necessary to present a decent facsimile of an advertiser’s product (Adidas is well represented in 1994’s FIFA International Soccer, pictured).  

While these early examples were static and graphically primitive, they built the foundation for what was to come as gaming technology reached a level of sophistication that would allow for more impressive and innovative marketing strategies, some of which will be examined in the next article.  

A Mutually Beneficial Business Model

There are definite advantages to this arrangement for both advertisers and game publishers.  For their part, advertisers are able to get their products in front of a largely captive audience.  In-game advertisements aren’t subject to the dreaded fast-forward button, and the ads themselves have increasingly become an active component in the game.  For example, in Splinter Cell (pictured), the player must scale a giant sign for Axe deodorant in order to progress in the game.  Even better, with each replay of the game, as it is loaned to friends or sold pre-owned to a new player, the same initial ad spend pays additional dividends.   

Even as new companies are springing up to capitalize on this new model, long-established agencies are starting to test the waters themselves:  Ogilvy & Mather has placed ads in several games on behalf of Ford Motor Company, and with well-known brands such as Apple, Proctor & Gamble and Visa actively appearing in video games, the major advertising players can’t afford to sit on the sidelines.   

For the game publishers, advertising dollars provide a much needed financial shot in the arm, allowing often cash-strapped game producers to boost their budgets. This influx of funds frees them up to pursue more ambitious projects while also increasing their profits by as much as $1 to $2 per unit — a substantial gain when per-unit profit for an average $50 game is typically between $5 and $6.  And what’s the benefit to gamers, who might otherwise resent the presence of advertising in a game they’ve already paid to play?  Gamer reaction will be studied in a future article.