Game on for Brands

Visitors to the sprawling Consumer Electronics Show in Las Vegas last week encountered innumerable come-ons from electronics and tech companies. One of the more unusual came from Intel, which at 15 locations throughout the show invited attendees to “check in” using mobile social network Foursquare and earn one of four virtual Intel CES badges, which would enter them into a contest for an Intel-powered netbook.

The program is a foray into the growing world of social gaming, where users go to great lengths to earn make-believe badges, carry out faux assassinations and tend to digital crops. Brands hope they can curry favor with users by bringing something of value to the games, whether that’s creating their own virtual goods or underwriting an added game level in exchange for video views.

“I like the idea of a mission,” said Bryan Rhoads, senior digital strategist at Intel’s social media center of excellence. “[It’s almost] a scavenger hunt for techie and geeky things. We fit in by having fun and … hopefully moving people along in their CES experience.”

In the past year, the social gaming industry has exploded. Market leader Zynga, maker of the wildly popular Facebook-centric games FarmVille and Mafia Wars, boasts 100 million players per month. Gaming giant Electronic Arts snapped up Zynga rival Playfish last November for $300 million. Both companies have shown a knack for hooking consumers on games that tie into their social networks. What’s more, they’ve expanded the market as games like FarmVille and PetVille attract diverse audiences outside the young male gamer stereotype.

“Networked gaming is a major part of the future of entertainment,” said Ian Schafer, CEO of digital shop Deep Focus.

Social gaming companies have shown some people are willing to pay real money for virtual items. Their success can be summed up in a statistic bandied by Zynga investor Fred Wilson: the company sells more virtual tractors per day than real tractors are sold in the U.S. in a year. That’s helped Zynga record an estimated $250 million in revenue in 2009 and recently close a  $180 million investment round. And it accomplished that with a mere 3 percent of users paying.

That leaves the door open to a substantial ad business, but social gaming companies have seen less success here than with selling virtual goods. Advertising is a tougher route. Zynga was singed by posts in TechCrunch pointing out dubious practices of luring users into unwanted subscriptions by accepting marketing offers in exchange for virtual goods. Zynga vowed to reform its ad practices.

Last month, gWallet, a social gaming ad company formed by Gurbaksh Chahal, wrapped up campaigns with 10 major brands, including Coca-Cola, Nestle and Kmart, to run video ads in social games like FooPets and Mob Science. Users could watch the ads in exchange for points or virtual goods. But while such an approach holds promise, others bet the answer lies in integrating brands into the experience through branded virtual goods.

This takes a page from console games. The difference, said Nir Eyal, CEO of branded virtual goods company AdNectar, is social gaming doesn’t require the lead time of getting a brand put into an Xbox title — and the pass-along quality of the social experience means added impressions. AdNectar ran a campaign for Nestle in December that saw 1 million virtual cookies shared from Facebook social gaming apps, with broadcasts in the news feed exponentially expanding the campaign’s reach. “Display advertising is just not … the right medium for gaming,” said Eyal.

This has led to experimentation from emerging gaming properties. Foursquare now has 200,000 users in less than a year of operation, a number expected to grow since it expanded beyond the iPhone and added services beyond major cities.