In-Game Ads Win Cachet Through a Deal With EA

Publisher Signs on With Massive to Sell Inventory in Popular Sports Titles

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When sales teams from Massive pitched marketers to buy in-video-game ads across a number of titles, the inevitable question was: "Where's 'Madden'?"
Star player: Marketers have been clamoring to advertise in EA's 'Madden' franchise, which has sold more than 60 million copies.
Star player: Marketers have been clamoring to advertise in EA's 'Madden' franchise, which has sold more than 60 million copies.

Last week, Microsoft-owned Massive answered that, boosting the dynamic-in-game-ad industry and filling its own coffers in a deal with Electronic Arts to fold five of EA's top-selling sports titles -- including "Madden NFL 08" -- into the network's ad inventory.

In the past two years, video-game advertising has been ballyhooed as the next great ad medium, pegged as a possible $1 billion to $3 billion industry by the beginning of the next decade. But until now, the ballyhoo-ers tended to be in-game-ad companies. The endorsement by EA, the largest game publisher, changes that by giving in-game advertising more credibility and more mass. "This is going to be a big boon for the industry," predicted analyst Michael Cai of Parks Associates.

"It's a validation that this is a medium people need to take seriously," said Shelby Cox, senior director-in-game advertising, EA. "'Madden' alone carries so much cachet." More than 5 million "Madden NFL 07" games were sold last year, bumping the total tally to more than 60 million.

Dynamic ads
The deal will allow marketers to buy dynamic ads -- which can be changed by an online connection -- in "Madden," "Nascar 08," "NHL 08," "Tiger Woods PGA Tour 08," and "Skate" for Xbox and PC. Marketers with existing league sponsorships and affiliations will get first opportunities to buy, but ad spots will then be open to others, said Jay Sampson, Massive VP-sales.

The move comes just one week after Xbox chief Peter Moore's announcement that he is leaving Microsoft to become president of EA's sports division. Microsoft announced that former EA President Don Mattrick, who is consulting at Microsoft, would take Mr. Moore's spot.

The parties involved said the job switches and ad deals were independent of each other, and Mr. Moore said in a statement that his motivation included moving his family back to the San Francisco Bay area.

Mr. Moore, known for his marketing skills and passion for online gaming, likely will continue that in his EA role, which he will assume in September. Mr. Sampson said Mr. Moore's team was "instrumental" in the Massive acquisition and integration, noting that Mr. Moore had visited Massive's New York headquarters at least four times in the past year. "He absolutely gets it," Mr. Sampson said, referring to in-game advertising, adding: "And it doesn't hurt to have a friend at the top of EA Sports."

High hopes
Mr. Cai estimated sales of in-game dynamic ads were just $15 million in 2006. However, he said he expects that number to more than double this year and reach $676 million by 2012. Static ads, or fixed product placements, make up the majority of in-game ad sales, but that balance is shifting as well.

Electronic Arts took in more than $10 million in total in-game ad revenue last year -- a significant chunk of that, about $4 million, from just one title, "Need for Speed: Carbon," Mr. Cai said. Ms. Cox called the game, EA's first dynamic-ad-sales title, "a benchmark" internally.

And while a few extra million may not seem like much to a $3 billion company like EA, the ad revenue is easy money -- that is, it adds to a publisher's bottom line without adding much to top-line development costs. And in a low-margin business with only $3 to $5 in profit on a $50 video game, even one extra dollar per box is significant.
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