XFire ignites the interest of marketers

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It's friendster meets instant messaging for video-game players.

Xfire, the new IM agent for gamers, features a screen showing the names of the player's friends and the game they're currently playing, allowing gamers to jump in right beside a friend, or even a friend of a friend. Xfire's full version doesn't launch until next month, but already more than a million gamers have downloaded the beta version that sits on their desktops.

But it isn't just gamers who are crazy for it. Advertisers are quickly signing up.

Marketers are enthusiastic about Xfire because they can put brands and messages directly onto the desktop agent to more effectively reach the elusive demographic of 18-to-34-year-old male gamers.

frequent change

So far, advertisers such as Pepsi's Mountain Dew brand, MTV Networks' Spike TV, chip maker AMD and several movie companies are running ads similar to a small online banner inside the agent. The ads change every five minutes.

One of the key reasons Xfire has been successful is because it brings gamers together, said analyst David Cole, president of DFC Intelligence. More than 60 million people are playing online games, but they're playing different ones, which divides that mass number into small communities around each game. Advertisers who want to reach gamers have had to make deals with many different titles or properties. Until now.

`skins'

A popular way to view Xfire, again with both players and advertisers, is with "skins." The entire agent is wrapped in the colors and logos of a particular brand or product, similar to the new customizable wraps for iPod music players. While skins can be created by marketers for specific products, gamers also create their own and post them on Xfire's site for others to download and use; most use a particular video game theme, but at least one person came up with their own Puma (not an Xfire advertiser) skin.

Xfire charges advertisers a standard ad banner rate for the box, with the rate varying depending on the ad's size. There is an undisclosed fixed charge to buy the wrapped "skins" version. "Advertisers do like the skins because they cover the whole agent, but also because they like the viral spread of skins," said Xfire CEO Mike Cassidy.

Mr. Cassidy founded the company as Ultimate Arena in 2003 along with Dennis "Thresh" Fong (a world-champion Quake player) and Chief Technology Officer Max Woon, a former Internet entrepreneur who founded Blue Tiger Networks software. A fourth partner, David Lawee, a former executive with McKinsey & Co. and co-founder of Mosaic Venture Partners, has left. The company, funded by prominent venture-capital firms including Draper Fisher Jurvetson and New Enterprise Associates, changed its name to Xfire in April.

In an effort to reach even more gamers, Xfire is cutting deals with distribution partners. One is with Compaq, where Xfire will be a desktop icon on the X Gaming PC in the fall. It's already been bundled with Ubisoft games including Far Cry and America's Army, and is in negotiations with several game distributors for similar packaging. A Compaq spokeswoman said, "We only strike deals that we are sure will give the best experience to our customers."

So far, Xfire has no direct competition, although its buzz and success may inspire others. "They've got a great niche and a lot of buzz, especially in terms of gamers," Mr. Cole said. "So no matter what, they've got a great head start."

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