Video Games: The Next Ad Medium?

Video games aren’t just for kids anymore. Faced with decreasing returns from traditional media, marketers increasingly look at video game ad and product placements.

The Yankee Group, in a report titled “Marketers Look to Video Games to Drive Their Messages Home,” forecast the nascent market for in-video game ads and advergaming will be worth $260 million by 2008, up from a scant $79 million in 2003. In-video game ads are essentially product placement inside a video game, while advergames are branded entertainment — the game is the ad.


Video Game
Advertising Forecast
Year In-Game
Advertising
Revenue
Advergaming
Revenue
2003 69.0% 10.0%
2004 83.6% 11.5%
2005 113.7% 17.2%
2006 153.3% 30.1%
2007 203.5% 52.8%
2008 259.9% 92.4%
Source: Yankee Group

Market dynamics for the video game industry as a whole are also very strong, and offer marketers an attractive demographic. The video game industry is expected to grow from $7.4 billion in 2003 to over $8.3 billion by 2008. The ranks of 108 million US gamers 13 years and older will swell to over 126 million by 2008. (See Chart at bottom of column)

According to Michael Goodman, Yankee media and entertainment analyst, “The two main challenges for video game marketing are measurability and timeliness.” Goodman explained initiatives are underway by a number of companies to provide real-time ad insertion in games, which will help the market take off.

Video game publisher Activision and Nielsen Entertainment are actively engaged in initiatives to measure the effectiveness of in-game advertising. According to data released from their study, 87 percent of research participants had a high level of recall of a well-integrated brand inside a video game. They also found 40 percent of male gamers said in-game ads influenced purchasing decisions and made them more likely to buy the advertised product. In fact, in-game advertising was cited by respondents (67 percent) as a factor that makes a game more realistic.

“There are certain types of games that lend themselves more to advertising, the real easy ones are sports games,” explained Goodman. “It would look strange … if we were looking at a baseball or football stadium and we didn’t see advertising on the stadium walls because that’s what we’ve come to expect.”

“It’s also an opportunity for the video game makers to generate revenue from those ads,” he added.

Risks

Properly integrating ads is crucial, according to Goodman.

“The most critical component of this is that the ad has to be unobtrusive,” he explained. “If it feels like a commercial than you’ve defeated the purpose, and all you’re going to do is create bad feelings regardless of who the target demographic is. You always have to keep in mind that first it’s a game, and second it’s an advertisement. You have to entertain the gamer.”

Video Games Reach a Broad Spectrum of Consumers

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