To boldly go noone knows where

As I said previously, my goal in this blog is to combine a business perspective with a passion for games. Truth is, though, a year ago from now I only had the latter and not so much of the former. This is why an article by William Vitka, dated 2005, was still news to me when I first read it this year. The title read “In-Game Advertising” and was discussing the trends in this new and exciting marketing frontier. Sitting in class and reading this article three years after its publishing, I thought I must have missed a lot in the meantime.

The perpetually new frontier

Or have I?

Here is a quote from an article by Phil Elliott (Advertiser’s Context, 2008):

“In-game advertising is set to be one of the hottest subjects of 2008 and while most people seem to agree that there's a lot of potential new money to be made for videogames publishers, quite how that will be realised is still debated.”

This debate stems from another important question; what is the most effective way of employing in-game advertising? Much of the research undertaken in this field in the last three years comes from the agencies themselves, and therefore gives cause to skepticism about the true potential of the medium.

Another reason, Elliott proposes, is that the video games industry is moving at an intimidating speed for advertisers, changing at much higher rates than traditional channels such as TV and radio. Even though this makes sense when you compare games to television, the explanation is somewhat less convincing when you hold comparison to a more similar medium. The internet is not so slow moving at all, yet it is already thoroughly infested by all kinds of advertisers.

What is the difference then?

There are opposing forces at play here. On one side companies are trying to avoid the first mover disadvantage by watching the others first and learning from their mistakes before launching their own in-game campaigns. On the other side, there is the pressure of the possibility that your competitor might just get it right before you do. When Nike reaches out to the masses of 18-34 year olds through in-game advertising, how long can Adidas afford to leave them completely unchallenged and unchecked? Or think Coke and Pepsi. Not so surprisingly, the answer is ‘not very long.’ An article on Gamasutra.com ( back in 2006) proves the point perfectly. Traditional brand rivalries are strong propulsion for in-game advertising.

There is no huge difference between general internet advertising and in-game advertising in this regard. The latter is simply at the beginning of its life cycle and is on a very healthy growth rate to maturity in the future. Innovators and early adopters of the medium will eventually provide the critical mass of good and bad examples necessary to make the leap to wide adoption.

The one big difference lies in the structures of the two media. The internet has a great multitude of channels to reach the consumer with advertisements. The conditions are close to perfect competition and the dynamism allows for quick experimentation. This is not so much the case in the video games industry dominated by two big publishers such as EA and Activision, where the number of PC and console titles at one time is limited. Add to that the long (and sometimes unpredictable) development cycles of blockbusters, as well as the complexity of advertiser-agency-publisher-developer relations in developing of advertisement capabilities. Looking from that perspective, advertising in big PC and console titles may be more similar to ads in movies.

In-game advertising is not limited to the cutting edge of hi-tech gaming, however. Research from eMarketer shows ad spending in web based games has a growth rate of nearly 40%, compared to 30% in PC and consoles, between the years 2007 and 2008. This is more in line with the “Do It Wrong Quickly” philosophy of internet marketing, for the flexibility the web provides.

The suggested offset to this lack of flexibility in big titles is the use of dynamic ads, placed on billboards or other in-game surfaces, which can be changed in real-time. In theory this sounds pretty sweet. In practice, however, what you can change in real-time is the content of your advertisement. The context (the game in which it appears and the method of interaction) remains largely the same. Compared to web advertising where you have greater control over both content and context, there is still a considerable disadvantage.

Frag or Coke?

The original article from Vitka does not mention the issue of metrics, but a good deal of the debate boils down to that point. Again, Elliott explains the situation:

“…the three big sellers of aggregated in-game ad space don't even have the same measure for what constitutes an 'impression' (the oft-used number on which the advertiser gets billed).”

The problem with in-game billboard ads is that it is almost impossible to identify and formulate the instances where the interaction with the user is meaningful and the message is properly delivered. While the ad may show up on your screen when you are playing a game, your attention could be highly focused on anything (such as the enemies trying to kill you) but the ad at that specific time. A good study on the issue is the report on advertising effectiveness in ‘Battlefield 2142’ (Mindshare, 2007). It seems a big challenge for the sector will be inventing new ways of creating dynamic ad space that allows for meaningful, measurable, in-depth interactions with the brand that is being advertised.

Only it's not always a pleasant walk in the battlefield

This argument then leads to the two big components of in-game advertising: gamers and developers. The sentiment has pretty much been the same in the two articles with three years between them; if the consumer will not be getting anything out of this deal, then nobody will. The acceptance of advertising in games depends largely on winning over the gamer and operating in a way that will not disturb their entertainment experience. This is very critical considering how outspoken the gaming community can be. An aggressive strategy could cost both the publisher and the advertiser dearly.

I would suggest that the best way to explore new techniques and ways of non-intrusive in-game advertising lies in collaboration with developers. In that respect, the exact size of the cut that the devs will get out of this trend probably depends largely on how much of this opportunity they can realize and incorporate into their business models.