In-Game Ads Could Reach $2 Bil.

NEW YORK Advertising within video games will approach a $2 billion business by the end of the decade, according to one of the nascent industry’s leading vendors.

During the keynote address at the second annual Advertising in Games conference in New York, Massive Inc. CEO Mitch Davis predicted that in-game ad spending would land somewhere between $1.6 billion and $1.8 billion in the U.S. by 2010, accounting for roughly 3 percent of total media spending.

While estimates on in-game advertising spending have varied widely, Davis’ pronouncement was far larger than forecasts issued by both JupiterResearch and The Yankee Group last year. “I think there has been broad acceptance of in-game advertising as a new medium,” said Davis, whose remarks came almost a year to the day after his company launched what it dubbed as the first dynamic in-game advertising network—which allows advertisers to swap ads in and out of video games which are played using an Internet connection.

To date, Massive has signed deals with 38 publishers, runs ads in 60 different game titles and has served ads in over 65 million game sessions since launch, according to Davis.

“We’ve passed the tipping point, to use a cliche, where [in-game advertising] is less about experimenting and more about building it into business,” he said. “We’ve had lots of repeat customers.”

Those customers include the majority of the major film and entertainment studios, according to Davis, as well as brands such as Coca-Cola, Subway, Honda, and Gillette. Davis said that Massive was benefiting from an “overwhelming trend away from mass marketing” that is making the medium’s men 18-34-dominated audience more attractive to more brands, even sometimes slow-moving packaged-goods advertisers.

“If you look at companies like Unilever and Procter & Gamble, it took them five to six years before they spent a dollar online,” he said. “Now they are moving quickly into games.”

Of course, Massive is not without its competitors in this burgeoning market. DoubleFusion has already run dynamic video game ads in several countries, and will soon launch ads in several U.S.-based titles. Another company, IGA, has run campaigns for brands such as Red Bull through its network.