The maker of the PlayStation3 system will offer an open platform, meaning in-game-ad-serving companies Double Fusion, IGA and Google-owned AdScape all will be able to sell ads in games that run on PS3, according to people familiar with Sony's plans. The three companies will strike deals with the major game publishers creating PS3 games, such as Electronic Arts, Activision and Ubisoft. Increasingly, those who score the plum publisher deals will turn out to be the winners in the competitive and fast-growing space.
"It'll come down to games and who has the largest catalog of games," said one person familiar with Sony's plans, but who did not have authorization to speak about it publicly.
In-house sales team
Sony is just starting to sell in-game ads and has its own PlayStation Network sales force to sell dynamic ads in Sony-produced games, such as the forthcoming "Pain" title. A Sony spokesman said the company doesn't comment on unannounced initiatives or products.
The decision will ramp up the competition for prime publisher inventory in a battle not unlike that in the greater internet space. There is no internet-ad-serving company that has a lock on web ads; however, ad networks (and their portal owners) duke it out for the right to sell those ads on publisher websites. During the past couple of months, Yahoo has expanded the network of newspaper sites on which it sells ads, Microsoft has inked deals with Viacom and Dow Jones sites, and Google has re-signed The New York Times' website as an ad-network partner.
While the ad-serving companies might have hoped for an exclusive contract to sell ads in PS3 games, analysts said that a more competitive model could benefit marketers and the in-game market in general. "Making things open only makes things better for marketers or people who want to place ads because they aren't the mercy of a given network," said James Belcher, a longtime video-game writer and senior writer at eMarketer. He said the market is already hypercompetitive. "Everyone's playing around with the best model -- how to charge, what gamers will and will not put up with."
According to eMarketer data, video-game advertising is a $400 million category this year and is expected to grow during the next five years at a compound annual growth rate of nearly 23%.
Dynamic in-game advertising refers to ads that are changed in and out of games post-development, from interactive placements to signage to sponsorships. Video-game advertising also includes ads that are "baked in" to games -- meaning they are integral part of the game's development and cannot be switched out once they're created -- and ads that run on the console communities, such as XBox Live and the Sony Home network, which is in private beta.
Dynamic ads are considered less risky than baked-in integrations because they don't require a marketer to speculate whether a game will be a hit. Marketers can wait, see how a game performs and then buy ads in it -- much like buying "scatter" TV inventory.
Sony's open platform is a clear departure from how things are done on Microsoft's Xbox, whose exclusive model means all dynamic in-game ads must be brokered through Massive, a company the software giant acquired in May 2006. That acquisition essentially closed off the opportunity for other in-game ad brokers to sell inventory in games that run on its Xbox and Xbox 360 consoles -- and it elevated the bet they are placing on Sony.
Of course, one potential complication of an open philosophy is that, at least initially, Sony's decision will make in-game advertising harder to buy, as an advertiser could have to buy through as many as three different parties to place ads in a single game -- Massive for the title's Xbox version, another for dynamic ads in the version that runs on Sony's PS3 and a third for baked-in product placement in the game.
Sony signed a deal with Nielsen over the summer to measure in-game advertising. In October, it hired Darlene Kindler, a veteran of the video-game business who was most recently at AdScape, to oversee its in-game advertising efforts.