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Holidays Looking Flush for In-Videogame Advertising

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A-list advertisers are in videogames in a big way this holiday season, with their logos sprinkled throughout titles launched in the fourth quarter—the time of year when nearly half of all videogames are sold.

Just as important, said software makers, this year the deals have gone from mostly barter agreements to cash payments for space, ranging from five figures to $1 million-plus, for billboards in a virtual Times Square and storefronts in synthetic cities.

"What we started pushing last year has developed into an entirely new revenue stream," said Erick Hachenburg, svp and general manager for the No. 1 videogame marketer, Electronic Arts. "We've done a lot of games with barter deals where it has been difficult to break out [cash value]. Now it is really buying space."

EA in Redwood City, Calif., has tie-ins with clients and products including Honda and 7-Up's dnL soda in SSX3; 20 distinct car models and Radio Shack in Need for Speed Underground; and Procter & Gamble's Old Spice Red Zone in NCAA Football 2004.

Hachenburg said the deals remain wildly variable in value, especially if they involve an online component or a co-sponsorship.

EA rival Activision struck deals with companies such as McDonald's, Nokia, Butterfinger, AT&T Wireless (Tony Hawk's Underground) and Motorola (True Crime: Streets of LA).

While clients naturally still peg the value of adver-gaming to sales, they are also beginning to "attach impression-based values to various games," said David Anderson, senior director of business development at Activision in Santa Monica, Calif.

While EA and Activision are both having record years for adver-gaming revenue, "even super-conservative metrics show how good a deal it still is [for advertisers]," said Sam Huxley, director of Internet strategy at Brand Buzz, a unit of WPP Group's Young & Rubicam in New York. "The pricing was all over the place years ago. Now it's not the Wild West—maybe the Wild West after barbed wire."

Clients are increasingly bullish about the medium. "It's too early to declare how well it has worked, but we're pleased with the initial results," said Lisa Kranc, svp of marketing for AutoZone in Memphis, Tenn., which purchased its first 60 videogame placements in Activision's Need for Speed, including a flashy Times Square sign. "We are looking at game sales but also broader, image-related metrics to measure the appeal of our brand against a targeted audience."

Kranc declined to put a dollar value on the buy.

For agencies, it's a chance to reconnect with young men, who have gone missing from TV. "We perceived a bit of a [brand-awareness] deficiency with the younger target," said Jim Decker, account director and partner at Y&R, which placed Colgate-Palmolive's Mennen Speed Stick, already an NBA sponsor, into EA's NBA Live. "Colgate likes it as a first effort and wants us to extend what we are doing."

"Unlike traditional marketing vehicles, our consumers virtually live in these games for an extended period," said Barney Waters, director of marketing at Puma North America in Westford, Mass. Nick Kang, the star of Activision's True Crime: Streets of LA, can be outfitted in Puma clothes from virtual stores in the game.

EA posted revenue of $2.5 billion in 2002, according to its SEC filing. Activision, which is neck and neck with Take 2 Interactive for the No. 2 spot, had revenue of $864 million.