Business Report

Advertisers Follow Audiences into Games

Broadening demographic reach makes entertainment software appealing for branding campaigns.

Roughly $1 billion will be spent this year on ads in games in the United States, according to PricewaterhouseCoopers, and the figure is predicted to increase by a third in the next four years.

Ad gaming: Google’s in-game advertising services allows markers to insert text and video messages into games, such as this McDonald’s ad being displayed in a title from Playfish, a social games publisher.

The bulk of this money will be targeted toward casual games: simple puzzle or word games that can be played for short stretches of time on a mobile device or in a Web browser. Casual games are attractive to advertisers such as Sprint and Esurance (an auto insurance company) because they are as popular with middle-aged women as they are with the adolescent males who are the stereotypical enthusiasts of Xbox and PlayStation consoles.

“Gaming has shifted from a young male pursuit to much more of a mainstream activity,” says Paul Verna, who follows in-game advertising for eMarketer, a New York–based digital consulting group. “If you are a 45-year-old mother, there’s very likely a game out there that appeals to you, and it will probably have nothing to do with what your son is playing.”

By eMarketer’s estimates, there are now roughly 90 million casual gamers in the United States, more than double the number of gamers who regularly play on consoles. And the number of casual gamers is expected to continue to grow thanks to the increasing popularity of smart phones and tablets.

See the rest of our Business Impact report on The Business of Games.

While a lot of in-game advertising takes a form similar to Web-style banner ads, more innovative advertisers are weaving advertising content into the games themselves.

For example, the Chili’s restaurant chain sponsored a version of Bistro Stars, a popular game published by Alawar Entertainment, in which players attempt to line up food items in a grid. In the Chili’s version, the items are from the restaurant chain’s menu. Brand awareness among users who played the game increased 20 percent, says Paul Rothkopf, director of advertising sales at Exent, which helps companies market within games.

Many advertisers take advantage of the “freemium” business model used by some game publishers. Freemium games are free to play, but users pay for additional content or virtual goods, like a new track or faster car in a racing game. Advertisers can let gamers choose to watch an ad in lieu of being charged for a game upgrade. Players typically tolerate these marketing messages better than they do more traditional ads, which are often seen as intrusive. “When a player can pay a dollar for something or click on an ad, nine out of 10 of them will choose the ad,” says Joel Brodie, whose Gamezebo website reviews games.

The in-game ad market has attracted scores of startups, as well as giants like Apple and Google. Google’s AdSense for Games, for example, lets companies place a message before, during, or after a demographically appropriate casual game, while Apple has a mechanism for serving in-game ads built into its mobile operating system. Apple deals with the advertisers and gives developers 60 percent of the ad revenue.

Whatever differences it may have with traditional advertising, the in-game variety has one similarity: its effectiveness is often hard to judge. Which is why, says Verna, most companies are now using it to raise general brand awareness rather than to attempt to directly increase sales of specific products. “They are still testing the waters,” he says. And so far, game advertisers have produced nothing particularly memorable. “There’s no game ad that has gone viral,” says Brodie. “Nothing like the Old Spice guy [a popular TV commercial] where I’d want to call my friend and say, ‘Hey, you’ve got to play this game.’”

Marketers and consumers can expect to see some rapid evolution in in-game advertising, however, as it moves further away from simple banners and product placement. “Right now, we are only at the ad experience 1.0 stage in casual games,” says Matt Spiegel, CEO of Tap.Me, a Chicago-based company developing technology for game advertisers. “There will soon be a whole new generation of advertising for games.”     

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The Business of Games

Long a multibillion-dollar industry in their own right, video and computer games are now affecting a broad range of businesses. The appetites of game players are driving social and mobile technologies. Games are being used to train and manage employees, as well as to encourage customer loyalty and reduce health-care costs.

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