Ad Dollars Flow Into Online Games

New Model: P&G, Others Give Free Play to Gamers Who Pay By Watching Ads

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YORK, Pa. (AdAge.com) -- "Fate," "Bejeweled," and "Diner Dash" may sound like the names of racehorses at the track, but they're actually some of the hottest online casual games right now. Those titles and hundreds of others are expected to attract up to 100 million players in the U.S. this year.
Who needs a console? Casual games like
Who needs a console? Casual games like "Fate" are expected to attract up to 100 million players in the U.S. this year.

That number, along with some innovative new ad opportunities, explains why even though console or "hard-core" game systems such as Xbox and PlayStation get the most attention, casual gaming on computers with more diverse audiences is beginning to attract significant marketing dollars. Marketers spent about $150 million advertising in casual games last year, up from $124 million in 2005, according to research by DFC Intelligence and the Casual Game Association.

Paying for bigger bites
Traditionally, casual games are offered as a free basic trial; users then can buy the more complete premium game for $15 to $20. The problem with that model, however, is that like with food samples at the grocery store, most consumers take the free nibble and walk away. But now casual-game companies are offering alternatives such as free premium play if consumers agree to watch ads. Consumers get to play, and game companies get paid in advertising dollars.

"The try-before-you-buy model just doesn't work that well. The conversion rate is only 1% to 2%, so in 100 plays, you only convert two people, and that's only $40," said Michael Cai, analyst at Parks Associates. "The hope in the industry is to monetize the people who play but never buy a game. That's where advertising comes in."

Leading online-game publisher WildTangent modified its free-trial system last year by adding Wild Coins, a micropayment system where consumers can buy rounds of play for as little as 25 cents. But WildTangent also offers those "coins" for sale to marketers. Consumers who want to play "Bejeweled," for example, are offered a free coin courtesy of Procter & Gamble's Oil of Olay brand. (The game's core audience is women 35 and older.) In its network of more than 300 games, WildTangent has some 60 advertisers including Coca-Cola, Chrysler, Nike, Unilever and Discovery.

"Only 2% of people buy the game they try, but you can sell the other 98% by advertising on a per-play system, and it works very well," said Alex St. John, co-founder and CEO of WildTangent. "Our biggest challenge is inventory. We're completely sold out through the next quarter, so we're out signing up more games for the network."

PopCap tests ad models
PopCap, creator of "Bejeweled" and other casual hits such as "Zuma," last year began testing ad models for the first time, including showing video ads for longer free trials and free ad-supported play. RealArcade, owned by RealNetworks, began streaming video ads into its downloadable games and offering consumers extended free trials or free unlimited play last year via a partnership with Eyeblaster. Initial results reported by the two were encouraging: Click-through rates were above 20%, and more than half of all ads were shown to the end.

"The original market for advertising in games was the PC gamer, and the model was relatively cut and dried," said NPD analyst David Riley. "This was really all you had when the concept of advertising in games was first being batted around. But the model has changed dramatically since then."

Even the big console makers are exploring ways to bridge the ad-revenue gap between console and casual gaming. Microsoft's Casual Games division and the Xbox Live online service include popular casual games in Xbox Live Arcade. Sony recently launched Home, its online real-world console extension for PlayStation 3.
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