In-Game Ads Put Brands in Play

Your audience will continue to shrink. It’s that simple. You’ve already lost young men to digital media. New demographics disappear from traditional media every day. And the problem gets worse: Married women are spending more time playing online games and continuing to drift away from broadcast and print. Will blindly shifting your spend to the Internet solve the problem? Nope!

Increasingly, video game consoles — Microsoft Xbox 360, Nintendo Wii, Sony PlayStation 3 — will steal consumers from traditional channels. Every hour spent playing Wii is an hour lost to broadcast. And the console makers have an ambition: to own the consumer home entertainment experience. PlayStation 3 can host and wirelessly stream pictures, music and video from your PC to your TV. Xbox Live members in the U.S. can obtain premium entertainment content — including select TV shows and movies from the Disney-ABC Television Group and MGM Studios — via Xbox LIVE Marketplace Video Store.

Consoles will continue to gain importance as an advertising channel to reach consumers leaving traditional media. According to Nielsen GamePlay Metrics, two-thirds of all men ages 18-34 in television households have access to a video game console in their homes. That “typical gamer” averaged nearly 3 hours of console game play per day, according to 2007 research from Nielsen. Valuable brand marketing opportunities could be lost forever as these behaviors become entrenched.

How to respond? Brand advertisers must figure out how to exploit video games to maintain mind share. The consoles serve as a key element in the emerging digital media landscape. Fortunately, a potentially outstanding marketing opportunity has surfaced: dynamic in-game ads.

Dynamic ads advance traditional in-game product placement to the bonus round. The current generation of console platforms is online and ready. Ads can be served on a spot basis and — with emerging digital advertising networks and growing inventories — targeted by geography and demographic and customized for campaigns. The emerging medium brings the best of a broadcast spot while providing real-time reach and awareness.

Dynamic in-game advertising has been trumpeted as the next big thing for years. Yankee Group predicts that the market for in-game ads will rise to $971 million in 2012, and internal IBM market analysis projects global compound annual growth of 19 percent by 2010. Though this market may seem insignificant in comparison to the television advertising behemoth, dynamic in-game advertising lets advertisers reach valuable consumers, capturing low-cost incremental revenues today while refining digital channel strategy.

With dynamic in-game advertising, the long lead time required to insert static product placements disappears while the possibility of reaching targeted demographics with relevant ads increases exponentially. That realistic billboard in a driving game can display McDonald’s summer blockbuster tie-in when the kids are playing and a Dockers campaign when dad’s “behind the wheel.”

Despite limited research, one thing stands out: Console games are “multi-tasking proof.” Gamers often play for hours at a time and cannot afford to be distracted by other media; doing so could result in severe gaming consequences, such as missing a virtual hoop or crashing a virtual car. Dynamic ads ameliorate the “attention-deficit” challenge that traditional advertisers face as consumers become increasingly fragmented across multiple platforms.

However, no standards or reliable methods for calculating CPM, CPC or other currencies yet exist. Nielsen has fielded a credible alternative with GamePlay Metrics, but this measurement does not differentiate between actual gaming play versus other console uses, such as watching DVDs. This inhibits brand advertisers’ ability to calculate ROI. Without a common digital metric, we predict slow advertiser and brand marketer interest in dynamic in-game advertising.

“The tail is trying to wag the dog,” says Justin Townsend, CEO of in-game ad network IGA Worldwide. “For dynamic in-game advertising to take off, gaming needs to adapt to advertising industry practices and coalesce around a common currency that media buyers will accept and standardized impression measurements.”

Lack of inventory and traditional ad agency access are key impediments to the growth of dynamic ads. Until recently, each console maintained closed, “walled-garden” online platforms. In the quest to own the consumer relationship, manufacturers limited the range of advertising opportunities available. Sony’s recent announcement that it will open up the PlayStation 3 platform to third-party in-game dynamic ads will literally change the game and will create new opportunities for advertisers and brand marketers to test dynamic ads.

The recent Electronic Arts-Massive partnership will also offer an excellent test of the impact of dynamic ads. EA’s sports-centric catalogue provides an ideal platform to reach the typical gamer in a genre where product placements are part of the authentic experience. IGA Worldwide is working with a wide range of leading brands including Burger King, Diesel, Gillette, Sling Media, CompUSA.com, Vizio, JL Audio and others to incorporate static integrations including billboards, retail stores, radio stations and vehicles into EA’s Burnout Paradise game.

So what’s a sponsor to do? We recommend that brand marketers test dynamic ads selectively. Advertisers must realize that emerging media channels will continuously disrupt business as usual. Testing dynamic in-game ad campaigns today will provide immediate and future benefits.

Traditional media will continue to erode. However, consumer mind share is up for grabs for those bold enough to take the first steps into dynamic in-game advertising.

Grant Jenman and Stephanie Becker are strategy consultants at IBM Global Business Services.