How the $1.8 Billion in-game advertising industry works

We had the privilege of speaking with Jeffrey Dickstein of Massive Incorporated who is a Microsoft subsidiary that handles in-game advertising. These are the familiar brands and ad billboards that are seen in games and are part of real-world campaigns. Sports games are the most popular way to deliver these ads since advertisements are already part of the in-stadium environment.

One of the most popular in-game ad placements were the Barack Obama: Vote For Change billboards that appeared in games right before that historic election in 2008.

Many ads are hardcoded into the game, which means that they are permanent fixtures for that game and will always appear. These deals are agreed upon during the early stages of game development.

Other ads, however, can be streamed in through the console once it connects online. This is where localized, time-sensitive and area-specific advertisements come into play.

Dickstein demoed how ads can be inserted in video games (in the photo below, we see Canadian bank TD as well as telco Telus appearing in an NBA game). There are also ways to push ads in loading screens as well as special downloads from within the XBox Marketplace.  

Whether or not ads are welcome in the gaming experience is debatable. Its bad enough that some games have outrageous loading times, wouldn't pushing unwanted adverts while  the game agonizes to load add insult to injury?

Massive maintains that it is harmless and that they have a stringent filtering and approval process in place that ensures the ads are a "right fit" with the game's audience.

Case Study

Dickstein presented a case study using TOMS Shoes' One Day Without Shoes campaign and focused on a multi-screen (through XBox Live, In-game, Online (web) and Mobile implementation) strategy to promote awareness.

"The One Day Without Shoes multi-screen campaign was a success, connecting with the target audience and driving awareness and registrations for the TOMS event. The campaign allowed TOMS to reach more than half (55 percent) of all U.S. residents 18 to 34 online, benefitting from Microsoft Advertising’s vast audiences.

While each component of the campaign added unique value, the most striking results are revealed when looking at all four channels of the campaign together, comprised of online, mobile, Xbox LIVE gaming, and Massive in-game. From high-level awareness metrics through event registration results, and even purchase of TOMS shoes, a common trend emerges from the data: advertiser value increases incrementally with the addition of digital media channels," explained the Microsoft report.

Big Money Business

Here's what you need to know about in-game advertising. It has grown exponentially since its introduction. In 2005, spending on in-game advertising was USD$56 million, and this figure is estimated to grow to $1.8 billion by 2010 according to Massive Incorporated. Modern video games in themselves can be blockbuster productions rivalling Hollywood films, in-game advertising apparently defers some of the development costs away from consumers.

Advertisers see in-game advertising as a prime way to target the male 18-34 demographic, who are increasingly neglecting television in favour of computer and video games. Just like how millions are watching TV on the Internet or via torrents, the trend of increased online and video game time is increasing. The situation, however, is ideal for advertisers.

You have a captive audience that's primed and ready to receive messages as they're already focused on nothing else but the game they are about to play. Hit them with an advert in the loading screen, hit them again within the game and the message will eventually hit home. There is also an incentive model where in-game credits are given away to users who download and view ads served from XBox.

However, some gamers see these moves as invasive, some even going to the extent of likening in-game advertising software to spyware.  In-game ads, after all, can be tracked and metered with similar metrics to that of web advertising. Massive Incorporated maintains that they go through great lengths to ensure that the gamer's experience is in no way diminished by the placement of ads.

No specifics on what a typical in-game campaign costs were given, but we can assume that depending on the game, market and distribution that this wouldn't be to different from traditional media models.

We see in-game advertising as an agressive and innovative business model that is laser targeted to the 15-35 demographic and which will continue to take a huge slice away from traditional media advertising as new and clever ways to implement campaigns go forward.