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Video games have been big business since Atari released the first coin-operated smash hit, Pong, in 1972. By 2010, U.S. consumers were spending nearly $16 billion annually on video-game software, trumping the $10.6 billion spent on movie tickets that year. Video-game hardware and accessories brought in another $9 billion. But these statistics don’t tell the story of how deeply the appetites of gamers are affecting other industries.

Games, game design, and our instinct to play them are forces now driving the technologies at the center of today’s always-on, always-connected businesses. Mobile devices and social networks have become as much platforms for playing games as anything else. Games, in effect, are a new mass medium. Companies that ignore games, even if only as a tool to market to consumers, face the same fate as those that ignored the rise of the Internet in the 1990s. At best, they will be forced to play an expensive game of catch-up; at worst, they will fall irretrievably behind their competitors.

Why are games important? Because people will reward businesses that cater to their appetite for fun, providing commercial incentives for every incremental improvement in the technology that delivers that entertainment. And game designers are masters at stoking that appetite. Every designer from Pong on has deliberately tried to make their games addictive, with a grab bag of psychological tricks that include humor, storytelling, and reward systems similar to the payoff schedules that lure gamblers. And some designers succeed, serving up jolts of pleasure in such a way that users can’t stop coming back for more.

No wonder that game design is at the core of successful mobile devices and online social experiences. Companies that ignore gaming may have to eat humble pie: in September 2010, Jeff Bezos told Wired’s Steven Levy why the third-generation Kindle’s inability to play games was a good thing: “The number one app for the iPad [is] Angry Birds—a game where you throw birds at pigs and they blow up. The number one thing on the Kindle is Stieg Larsson. It’s a different audience. We’re designing for people who want to read.” One year later, at the launch of the Kindle Fire, press photographs of the device prominently displayed an on-screen Angry Birds icon. ABI Research estimates that, worldwide, mobile games alone will generate $5 billion in revenue this year, rising to $16 billion by 2016.

Many of this new wave of mobile and social games are, like Rovio’s Angry Birds, so-called casual games; relatively simple amusements that can be played for a few minutes at a time and don’t require complex controls. Casual games have been essential to the rise of some social media sites, and to reaching new markets. Popcap, maker of the popular Bejeweled series of puzzle games, estimates that over 75 percent of its customers are over 29: Facebook used such players to expand beyond its initial college-age audience.  

The larger and broader audience for games is attractive to marketers, especially those worried about the decline in TV audiences in the coveted bracket of men 18 to 34. The natural response: in-game advertising, which may range from Web-style banner ads placed on a game’s opening screen to product placements, like racing virtual versions of the latest cars. The worldwide market for in-game advertising is still tiny compared to the $70 billion a year currently spent on television advertising in the United States alone, but it is growing rapidly, going from negligible sales just a few years ago to a predicted $2.67 billion by 2017, according to market intelligence firm Global Industry Analysts.

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Tagged: Business, Business Impact, gaming, game dynamics

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