In-game marketing is at its tipping point as the industry's triumvirate of publishers, consumers and marketers begin to move in step.
A wide array of marketers are getting their names and products into video games. In-game ad spending is expected to hit $200 million this year and more than double over that by 2009.
"We've gone from 18 months ago when advertisers were willing to pay $50,000 ... to test video-game ads from an emerging budget ... to now some seven-figure spending and commitments for a whole year," says Justin Townsend, CEO of IGA Worldwide, a video-game ad placement agency.
It's a bit of a perfect storm. For one thing, high-quality publishers are placing ads in their games, whereas, for example, Electronic Arts only last year started accepting dynamic advertising for its games. In addition, an increasing percentage of average consumers are playing console, online and mobile games, and big-name brand marketers are eager to find measurable ways to reach them.
Add to that the ongoing struggle to reach young consumers, particularly the core 18-to-34-year-old male demo, and you've got marketers willing to spend significantly.
The current state of video-game advertising is "at a point of very dramatic growth" in both reach and in number of "high-quality" titles accepting in-game ads, says game ad veteran Nicholas Longano, who last month left his post as president-new media of Massive following the game agency's 2006 acquisition by Microsoft Corp..
In-game advertisers include marketing powerhouses such as Procter & Gamble Co., Unilever, Coca-Cola Co., McDonald's Corp., Burger King Corp., Chrysler Group's Jeep, Dell, Nokia, New Balance and all the major motion-picture studios.
"Whereas there used to be only one advertiser in each brand category, now you're four or five brands deep," says Julie Shumaker, VP-sales for in-game ad agency Double Fusion and former national sales director at No. 1 game publisher Electronic Arts.
And it's also no longer lumped into "discretionary" spending. Millions of dollars are pouring into some of the most popular titles for both product placement and dynamic-type ads. EA's "Need for Speed: Carbon," for example, pulled in about $5 million in ad revenue around its November launch, with spending split between the two types of advertising. Marketers that have placed dynamic ads in the game include Discovery Channel, Dell, Garnier for men and Wendy's.
The product placement is a flat, one-time fee, but dynamic advertising continues to generate revenue with the ability to insert new ads and marketers even as the game ages.
"I think we started 2007 with a surprising number of people saying, 'Here's how much my game budget is. Let's see what we can do,' " Ms. Shumaker says.
The concept of dynamic advertising is driving the current interest and rush to video games. IGA, for example, has placed dynamic ads for marketers including Jeep, Coca-Cola, T-Mobile USA, Intel Corp., Fox Studios and Discovery Channel.
"In 2002, video-game ad revenue was weighted more toward product placement than dynamic," Ms. Shumaker notes. "Five years from now, dynamic will make up 80% of the revenue from video-game advertising."
Many marketers, such as Intel, are using both forms of in-game advertising. To support its new Core 2 Duo, a high-power chip that would appeal to gamers, Intel placed product-placement and dynamic ads in titles including "Battlefield 2142," "World of Warcraft" and "Half Life 2." The dynamic ads are ongoing with plans to change out ads with other products that have gamer appeal, such as Intel's soon-to-be released and even faster Quad Core processor.
Advertisers like dynamic ads because they can buy in for as little as one month, receive return-on-investment data and then decide whether to cancel or increase their involvement. These days, most are choosing the latter.
"Many come in as dynamic advertisers, and then when they see the value of in-game ads, they often want to do more, like integration into the game," says Robin Kaminsky, exec VP-publishing at Activision.
Part of the appeal of dynamic advertising and combinations of online and integrated advertising is accountability. In-game agencies like Massive, Double Fusion and IGA have a layered method of measuring impressions that takes into account the angle from which the ad was seen, the length of time the ad was seen and a minimum size of the ad on screen (that is, the player wasn't too close or too far away to see it).
They can also, and usually do, put frequency caps on creative so that the same ad isn't overexposed and can swap out ads or only run them at specified times of the day. All these features make dynamic video-game advertising feel very familiar to marketers and their ad agencies, which are used to internet buys, and is another reason for growth.
"If you can deal in the currency of media, which is [cost per thousand], then buyers can translate it and understand it. They can stack it up," says Alison Lange, VP-marketing at Massive.
Still, it's not a cheap buy. Bulk ad rates for the internet can range in the $3-$5 CPM; rates for dynamic video-game advertising more typically fall in the cable TV range. IGA, for example, charges in the $25-$40 CPM range, Mr. Townsend says.