When It Comes to Ads in Games, These Guys Aren’t Playing Around

Electronic Arts is out to master the delicate dance of marketing and gaming

Team Detroit is late.

Reps from the WPP agency were supposed to arrive for their meeting with Electronic Arts at 2 p.m. on June 5, but the client, Ford Motor Co., seems to have its time zones mixed up. But it’s no problem—this is L.A., after all.

This week is a particularly busy one for the city. The Kings are trying to close out the Stanley Cup finals (successfully, it turns out). President Obama is in town for a fund-raiser. And some 50,000 people (at least 90 percent of them men), including the guys from EA, Team Detroit and Ford, have descended here for the Electronic Entertainment Expo, better known as E3, the video game industry’s annual confab, where eardrums and retinas are gradually destroyed amid one of the world’s great sensory overloads.

E3 is itself a small city of wall-to-wall video games, projected on giant screens and cranked up to multiple decibels. And front and center in the South Hall of the vast Los Angeles Convention Center, EA has built its own makeshift metropolis, featuring clusters of massive HD sets beaming the latest versions of megahit games like Madden NFL 13, NHL 13, Need for Speed and Battlefield 3. Some EA guests are led on walking tours while others are sequestered in gaming booths, trying out new titles. Every 15 minutes or so, Baltimore Ravens linebacker legend Ray Lewis (his virtual representation, actually) makes a booming, impassioned speech about leaving your mark after you’re gone. In between, it’s mostly the sound of explosions and gunfire.

Upstairs in EA’s spaceship-like booth at the show, its execs dart back and forth, scarfing down sandwiches and prepping for their next meeting—all the while trying to figure out where to now squeeze in Team Detroit. Come to think of it, “booth” might not be the best term—when your booth has an upstairs and is flanked by a security detail, it’s really not a booth anymore. But neither is E3 the typical industry gathering. As if to drive home the point, there’s Snoop Dogg and his entourage, wandering around EA’s digs. E3 attendees, decked out in their Halo T-shirts, barely notice. This sort of thing just happens at E3. And it makes sense that Snoop stops by—he is a gamer, after all, and has lent his likeness and/or music to several titles, including Fear & Respect Tekken Tag Tournament 2.

But what is Team Detroit doing here?

Actually, it was one of hundreds of agencies and clients to show up. A few years ago, gaming specialists from a handful of agencies would go to E3. This year, EA hosted 50 meetings, up from about 30 last year. Unilever sent more than 20 reps to L.A. Jay Sampson, evp, global sales at L.A.-based gaming/media company Machinima, scheduled 63 meetings. “It’s definitely sexy to come to things like this,” says Chris D’Amico, svp, group creative director at Hill Holliday. “Gaming is becoming a real media channel now.”

That E3 is still a destination will come as a surprise to those who thought in-game advertising was dead, or at least tapped out. It’s been two years since Microsoft shut down its in-game division Massive. Rival firms Double Fusion and IGA Worldwide essentially ceased operations in the U.S. after burning through piles of VC cash (Double Fusion's website now reads "coming soon" while IGA's New York phone number now yields a busy signal). Research firms such as eMarketer and Yankee Group, which published bullish reports on in-game ad spending in the mid-2000s, haven’t bothered with the space in years.

EA took its in-game ad business in-house a few years ago—a move that essentially proved the death knell for Massive, which lived and died on many of EA’s major sports games. Soon after, top gaming ad sales exec Elizabeth Hartz left the company. Then last year, Dave Madden, veteran of online gaming firm WildTangent, came aboard as svp, global media solutions to reboot EA’s ad sales efforts.

“We’re looking to move from being a packaged-goods company to a media company,” says Madden.

Media companies—at least those that own TV networks—host annual upfront presentations to unveil their latest products and negotiate deals with ad clients, and EA’s turnout at E3 felt a lot like an upfront. This even though advertising wasn’t mentioned once during the company’s press conference—which, naturally, was all about the games. Leading one to wonder: Just how serious is this company about the ad game?

“The business is less about selling in-game ads—it’s more about engagement,” says COO Peter Moore. In fact, he calls in-game ads as we have known them “dead,” adding that static ads—gaming’s version of product placement—are also limited.

Where is the business at this moment? While EA continues to place ads into games like Madden and Fifa13, it is most bullish about the latest version of The Sims. Because it is meant to simulate real life, the title is ripe for brand integration. Last year, Sims avatars were literally powered by Dunkin’ Donuts coffee, in a nod to the brand’s tagline “America Runs on Dunkin’.” Says Moore: “That’s engagement—that’s not a sign on the road [in the game]. Gamers need to be rewarded for their time, for doing something.”

Programs such as Dunkin’s aren’t easy to execute and can take months to build. But the company is looking to develop technology that makes in-game ad integrations more scalable and automated, says Moore.

During its earnings call, EA doesn’t say exactly how big a business advertising is. When asked whether it is a material business, Moore hedges. “I think it will be,” he says.

“According to the Internet, in-game advertising is the devil,” Brian McClary, digital marketing manager at Ford, says at the E3 show. A self-described gaming geek, McClary sips a lemonade at the Ford Rally Club, a sort of bar (though one free of spirits) built within the L.A. Convention Center. It is McClary’s fourth trip to E3, Ford’s second.

A decade ago, automakers like Ford were among the first marketers to get into advergaming and in-game advertising. More recently, Ford was baked into the latest version of EA’s Need for Speed. According to Mark Bentley, Ford licensing manager, 90 percent of Ford's marketing efforts toward games are focused on licenscing.

Thus, says McClary, “I’m not here to see the next in-game opportunity. We still do dynamic ads—they’re not dead. But if you’re playing a first-person shooter, you don’t want to see ads. Now, we can get around games and incorporate into gaming culture.” For example, Ford had a heavy presence in Sony’s Play-Station Home, its fledgling virtual world.

Indeed, among many advertisers, getting a brand “around games” has eclipsed in-game advertising, making it tough for companies like EA to get marketers to commit to long-term integration deals. After all, there are gaming tournaments to underwrite, events to sponsor. McClary says Ford’s presence at E3 isn’t just about reaching the crowd of some 50,000 gamers but also about getting visibility among millions of gamers reading about and streaming footage of the show.

Nowhere is the around gaming-vs.-in-game advertising debate more at issue than with Xbox Live, Microsoft’s digital network, which essentially serves as the user interface/media hub for 40 million subscribers. Via Xbox Live, traditional digital ads and interactive TV ads are available. And just last week, the company finally rolled out NUads, landing Toyota and Unilever as debut sponsors. With NUads, Xbox can deliver interactivity to advertisers while leveraging their TV spots—and bring a massive gamer audience. “It is the centerpiece of our [gaming ad] strategy,” says Ross Honey, general manager of Xbox Live entertainment and advertising.

Taking a spin around E3, one might wonder why a brand would even bother showing up. While the Nascar-esque passion is palpable (consider the not-inconsiderable number of gaming “journalists” dressed as Power Rangers or mushrooms from Mario Brothers), gaming remains a tricky medium. Yes, E3 featured family-friendly games such as the new Wii U Sports. But it also played host to the trailer for the shooting game Far Cry 3, whose dialogue includes the line: “You think you know what it takes to f–king kill?”

Well, actually no—and it’s a fair guess Procter & Gamble won’t know, or want to know, either. More than half the games at E3 involved people shooting people—lots and lots of people. Not to mention that E3 veterans were generally disappointed in the sequelitis infecting this year’s show.

But as important as the event is, E3 may not be the best representation of the industry, argues Jonathan Epstein, former CEO of Double Fusion. “Most of the games at E3 are rated M [for mature], but there are only, like, 50 of those games on the market,” he says.

With the growth of PC, social and mobile games, ad opportunities abound, Epstein adds. “We realized at Double Fusion that advertisers want volume and mass reach—they like big numbers,” he says. “But a 10-second exposure when you’re not sure when people are looking just wasn’t competitive.”

Plus, nobody wants to see another Fight Night Round 3 controversy. That title included a notoriously obtrusive brand integration from Burger King, including the presence of the King in a boxing ring. “That was a disaster,” confides an EA insider.

Others see great value in attracting brands to E3. “There are more opportunities out there,” says Dario Raciti, director of Ignition Factory at OMD, who met with eight clients at this year’s show. “It’s easier to be in the game than it used to be. The lead time is shorter; more games are connected.”

Raciti noted how Microsoft’s Kinect, which incorporates a motion-sensitive camera, has upped the around-game ante. Raciti’s team executed a campaign last year in which players could flash a Gatorade bottle at the Kinect camera and unlock free content.

Unlocking content appears to be the next frontier for in-game advertising. Matt Story, gaming specialist at Denuo, pointed to games like EA's Battlefield 3, which continually release 'extensions,' i.e. updates of the game that people can download well after purchasing their $60 gaming disc. "As games become almost like 'software as a service' there are great ways for brands to deliver content without directly linking to game play. There were a lot more of those talks going on behind the scenes at E3 this year."

That's where EA's Madden seems to want to focus his energies. "We're becoming a digital entertainment company, and the shift to digital is also a business model shift," he said. "Games now are a living experience, and there is a thirst for additional content. Brands can add value to that experience."

So, in fact, maybe more brands should come to E3. Raciti hopes so: “Gaming requires a very unique approach in the media space. E3 is all about meeting with the publishers, sitting down for a couple of hours and talking about next year. A lot of clients don’t know a lot about the space, and it’s a lot easier to implement big programs when you have the right people in the room.”

Back at EA’s outpost, key players from Dunkin’ Donuts are in the room, hammering out an integration in the soon-to-launch Sims City. It should be an easier sell than last time. “We had a lot of tough, tough meetings last year,” says Johnny Won, manager, mobile and gaming platforms at Hill Holliday, referring to discussions that led to Dunkin’s linkup with Sims Social. “I had people emailing me videos of sex in The Sims. This is extremely time-involved; you need to be really vigilant.”

Going against conventional research can be key. According to one CMO, media-mix modeling often doesn’t encourage brands to advertise in games. But for a brand, doing so can be worth the risk. “With something like the Dunkin’ Sims deal, nobody else is doing it,” D’Amico points out. “It’s a chance to go global on three platforms.” Hill Holliday even submitted the campaign for consideration at this year’s Cannes festival.

Near the end of a long day at E3, John Lisko, exec communications director for Toyota at Saatchi & Saatchi L.A., joins Dionne Colvin, Toyota’s national manager, in a debate on the brand’s future in games. Like Ford, Toyota had one of its new models on the E3 floor, accompanied by a game show-like host wandering around with a mic, shouting out trivia questions like: “What kind of car was made into a time machine in Back to the Future?” (A DeLorean, duh.) Like Dunkin’, Toyota is talking to EA about The Sims. (The Toyota Prius was featured prominently in the last edition.)

Toyota’s aggressive approach to gaming has helped the brand develop a body of knowledge about the space that helps it evaluate the effectiveness of in-game advertising better than most marketers, says Colvin. “Over time, we’ve really developed an index for each game, a standard way of evaluating this medium,” she says. “This has become fundamental.”

Lisko is particularly bullish on the advertising potential of games, particularly as more sophisticated titles become free to play. “We see a new business dynamic happening,” he says.

But before that dynamic takes hold, more imminent decisions are being made by the EA crew and several of its guests. Like, where to have dinner. And, do we have time to go back to the hotel for a nap? This is L.A., after all. More importantly, do you need a wristband for that party at The Standard? Will Usher be there? You never know—this is E3.