In-Game Advertising to Continue Exponential Growth

In-game advertising is expected to reach $732 million by 2010, according to “Video Games Are the Next Frontier for Advertisers,” a DecisionNote report from Yankee Group.

The projected figure of $732 million is five times the current market value of the category. Ads placed in video games accounted for $56 million in spending in 2005, and $34 million the previous year.

A recent keynote address by in-game advertising firm Massive Inc. said spending in video games would near $2 billion by the end of the decade. A February report on digital ads placed in-game spending at a more conservative $432 million.

Growth in the consumer and video game industry is expected to continue. In the current calendar year, the number of games with in-game advertising will likely double. The report says approximately 200 titles with in-game advertising units will be released. Titles will be spread across all major video game consoles and the PC.

Currently, in-game advertising firms such as Massive, IGA Worldwide and Double Fusion create networks with video game publishers to sell inventory. However the report suggests that the console manufacturers including Sony and Microsoft, as well as game publishers like Electronic Arts, may bring in-game ad serving in-house in the future.

According to recent NPD Group figures there are approximately 100 million current-generation gaming devices in the U.S. market. While the 100 million installed-base is significant, overlaps exist. About 40 million U.S. households have one or more video game consoles. The next generation of consoles includes the Microsoft Xbox 360 that was released in November of last year; and the Sony PlayStation 3 and Nintendo Revolution, both of which are expected to launch in the fall.

The forecast projects ad spending based on current and historical estimates and the expected release dates of upcoming video game titles.