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.